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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): JUNE 3, 1997
FRONTIER INSURANCE GROUP, INC.
(Exact name of registrant as specified in charter)
DELAWARE 0-15022 14-1681606
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
195 LAKE LOUISE MARIE ROAD, ROCK HILL, NEW YORK 12775-8000
(Address of principal executive Offices) (Zip Code)
Registrant's telephone number, including area code: (914) 796-2100
NOT APPLICABLE
(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On June 3, 1996, Frontier Insurance Group, Inc. ("Registrant"),
acquired all of the issued and outstanding capital stock of Lyndon Property
Insurance Company (the direct or indirect parent company of Gulfco Life
Insurance Company, Lyndon Life Insurance Company, Lyndon-DFS Warranty Services,
Inc., Lyndon General Agency of Texas, Inc., Twin Mercury Life Insurance Company
and Lyndon Southern Insurance Company and, together with such subsidiaries,
"Lyndon") from Mercury Finance Company ("Mercury"), a publicly traded Delaware
corporation, for $92,000,000, pursuant to a stock purchase agreement dated March
28, 1997. The $92,000,000 purchase price was negotiated by the parties following
a bidding process conducted by Mercury and supervised by Salomon Brothers, Inc.,
Mercury's investment banker with respect to the sale of Lyndon. $62,000,000 of
the $92,000,000 purchase price was provided by funds drawn from a credit
facility obtained by Registrant on June 3, 1997 (see "Item 5. Other Events"
below) and the balance from Registrant's internal funds.
Lyndon specializes in financial and specialty niche markets and
provides insurance programs for credit-related insurance, residual value,
extended service contracts, and collateral protection coverages. Lyndon's
operations will remain headquartered in St. Louis, Missouri, under the direction
of Roland Anderson, its Chief Executive Officer.
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ITEM 5. ACQUISITION OR DISPOSITION OF ASSETS.
On June 3, 1997, Registrant obtained a five-year $100,000,000
revolving loan credit facility from Deutsche Bank AG, New York Branch and/or
Cayman Islands Branch, from which it borrowed $62,000,000 at an initial floating
interest rate of 6.14%, based upon Eurodollar interest rates, payable quarterly,
to fund a portion of the $92,000,000 purchase price for Lyndon (see "Item 2.
Acquisition or Disposition of Assets" above).
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired.
It is impracticable to provide the required financial statements for
the acquired business at the date of filing of this Form 8-K. Such financial
statements will be filed as soon as practicable, but no later than 60 days
following the date this Form 8-K is required to be filed.
(b) Pro Forma Financial Information.
It is impracticable to provide the required pro forma financial
information for the acquired business at the date of filing of this Form 8-K.
Such pro forma financial information will be filed as soon as practicable, but
no later than 60 days following the date this Form 8-K is required to be filed.
(c) Exhibits.
10.15(a) Stock Purchase Agreement dated March 28, 1997 between Mercury
Finance Company and Registrant.
10.15(b) First Amendment to Stock Purchase Agreement dated May 29,
1997.
10.15(c) Second Amendment to Stock Purchase Agreement dated June 3,
1997.
10.16 Credit Agreement dated June 3, 1997 between Registrant and
Deutsche Bank AG, New York Branch and/or Cayman Islands
Branch, individually and as administrative agent.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
FRONTIER INSURANCE GROUP, INC.
(Registrant)
By: /s/ Mark H. Mishler
--------------------------------
Mark H. Mishler
Vice President/Chief Financial Officer
(Principal Financial and Accounting
Officer and Duly Authorized Officer)
Dated: June 17, 1997
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EXHIBIT INDEX
Exhibit
10.15(a) Stock Purchase Agreement dated March 28,
1997 between Mercury Finance Company and
Frontier Insurance Group, Inc.
10.15(b) First Amendment to Stock Purchase Agreement
dated May 29, 1997.
10.15(c) Second Amendment to Stock Purchase Agreement
dated June 3, 1997.
10.16 Credit Agreement dated June 3, 1997 between Frontier
Insurance Group, Inc. and Deutsche Bank AG, New
York Branch and/or Cayman Islands Branch, individually
and as administrative agent.
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STOCK PURCHASE AGREEMENT
BETWEEN
MERCURY FINANCE COMPANY
AND
FRONTIER INSURANCE GROUP, INC.
MARCH 28, 1997
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TABLE OF CONTENTS
ARTICLE I
TRANSACTION
1.1. Purchase and Sale of Stock ............................................ 1
1.2. Consideration ......................................................... 1
1.3. No Assumption of Seller's Liabilities ................................. 1
ARTICLE II
THE CLOSING AND TRANSFER OF STOCK
2.1. The Closing ........................................................... 2
2.2. Deliveries at the Closing ............................................. 2
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
3.1. Due Organization ...................................................... 3
3.2. Capitalization; Ownership of Company and Subsidiaries ................. 4
3.3. Authorization of Transaction .......................................... 4
3.4. Consents and Approvals; No Violations ................................. 5
3.5. SAP Financial Statements .............................................. 5
3.6. Assets ................................................................ 5
3.7. Investments ........................................................... 6
3.8. Events Subsequent to Balance Sheet Date ............................... 6
3.9. Tax Matters ........................................................... 6
3.10. Legal Compliance ...................................................... 6
3.11. Reserves .............................................................. 7
3.12. Intellectual Property ................................................. 7
3.13. Contracts ............................................................. 7
3.14. Legal Proceedings ..................................................... 8
3.15. Employee Plans ........................................................ 8
3.16. Certain Business Relationships with the Company ....................... 9
3.17. Sales Practices ....................................................... 9
3.18. Brokers' Fees ......................................................... 9
3.19. Insurance ............................................................. 9
3.20. Disclaimer ............................................................ 9
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
4.1. Organization of Buyer ................................................ 10
4.2. Authorization of Transaction ......................................... 10
4.3. Consents and Approvals; No Violations ................................ 10
4.4. Acquisition of Stock for Investment .................................. 10
4.5. Buyer's Business Investigation ....................................... 11
4.6. Financing ............................................................ 11
4.7. Brokers' Fees ........................................................ 11
ARTICLE V
COVENANTS OF SELLER
5.1. Interim Conduct of Business .......................................... 11
5.2. Access ............................................................... 12
5.3. Consummation ......................................................... 12
5.4. HSR Consent .......................................................... 13
5.5. Other Actions ........................................................ 13
5.6. Outstanding Claims ................................................... 13
ARTICLE VI
COVENANTS OF BUYER
6.1. Consummation ......................................................... 13
6.2. HSR Consent .......................................................... 13
6.3. Other Actions ........................................................ 13
6.4. Records and Documents ................................................ 14
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
7.1. Accuracy of Warranties and Performance of Covenants .................. 14
7.2. No Pending Action .................................................... 14
7.3. HSR .................................................................. 14
7.4. Insurance Approvals .................................................. 14
7.5. Termination of Tax Sharing Agreement ................................. 14
7.6. Surplus As Regards Policyholders and Stockholder's Equity ............ 14
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ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
8.1. Accuracy of Warranties and Performance of Covenants .................. 15
8.2. No Pending Action .................................................... 15
8.3. HSR .................................................................. 15
8.4. Insurance Approvals .................................................. 15
ARTICLE IX
SURVIVAL AND INDEMNIFICATION
9.1. Survival ............................................................. 15
9.2. Indemnification ...................................................... 16
9.3. General Provisions Relating to Indemnification ....................... 16
ARTICLE X
TERMINATION
10.1. Termination or Abandonment .......................................... 17
10.2. Effect of Termination ............................................... 18
ARTICLE XI
CERTAIN EMPLOYEE BENEFITS MATTERS
11.1. Transfer of ERISA Plans ............................................. 18
11.2. Continuation of Employee Benefit Plans .............................. 18
ARTICLE XII
OTHER AGREEMENTS
12.1. Assistance with A.M. Best ........................................... 19
12.2. Non-competition ..................................................... 19
12.3. Continuation of Relationship ........................................ 19
12.4. Delivery of Financial Statements .................................... 19
12.5. Reconciliation of Intercompany Accounts ............................. 20
12.6. Taxes ............................................................... 20
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ARTICLE XIII
GENERAL PROVISIONS
13.1. Amendments and Waiver ............................................... 21
13.2. Notices ............................................................. 21
13.3. Expenses ............................................................ 22
13.4. Counterparts ........................................................ 22
13.5. Successors and Assigns; Beneficiaries ............................... 22
13.6. Entire Agreement .................................................... 22
13.7. Announcements ....................................................... 22
13.8. Partial Invalidity .................................................. 22
13.9. Governing Law ....................................................... 23
SCHEDULES
SCHEDULE 3.0 PERSONS WITH KNOWLEDGE
SCHEDULE 3.2 OWNERSHIP OF COMPANY AND SUBSIDIARIES
SCHEDULE 3.4 CONSENTS AND APPROVALS; NO VIOLATIONS
SCHEDULE 3.5 SAP FINANCIAL STATEMENTS
SCHEDULE 3.6 ASSETS
SCHEDULE 3.8 EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END
SCHEDULE 3.9 TAX MATTERS
SCHEDULE 3.10 LEGAL COMPLIANCE
SCHEDULE 3.12 INTELLECTUAL PROPERTY
SCHEDULE 3.13 CONTRACTS
SCHEDULE 3.14 LEGAL PROCEEDINGS
SCHEDULE 3.15 EMPLOYEE PLANS
SCHEDULE 3.19 INSURANCE
SCHEDULE 5.1 INTERIM CONDUCT OF BUSINESS
ANNEX A TAX DISAFFILIATION AGREEMENT
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, is made and entered into this 28th day of
March, 1997 (the "AGREEMENT"), by and between Mercury Finance Company, a
Delaware corporation ("SELLER") and Frontier Insurance Group, Inc., a Delaware
corporation ("BUYER").
WHEREAS, Lyndon Property Insurance Company, a Missouri corporation (the
"COMPANY"), directly and through subsidiaries, is engaged in the business of
providing insurance, warranty administration and related products and services
(the "BUSINESS"); and
WHEREAS, the authorized capital stock of the Company consists solely of
4,000 shares of common stock, par value $1,000 per share, all of which shares
are issued and outstanding (collectively, the "STOCK"); and
WHEREAS, all of the Stock is owned both of record and beneficially solely
by Seller; and
WHEREAS, Buyer desires to purchase the Stock from Seller and Seller desires
to sell the Stock to Buyer upon the terms and subject to the conditions set
forth herein.
NOW, THEREFORE, in consideration of the premises, the representations,
warranties, covenants and agreements herein contained, and for other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, Seller and Buyer agree as follows:
ARTICLE I
TRANSACTION
1.1. PURCHASE AND SALE OF STOCK. Subject to the terms and conditions set
forth in this Agreement, at the Closing (as hereinafter defined) Seller will
sell, convey, assign, transfer and deliver to Buyer, and Buyer will purchase,
acquire and accept from Seller, the Stock, for the consideration specified below
in this Article I.
1.2. CONSIDERATION. The aggregate consideration for the Stock (the
"AGGREGATE CONSIDERATION") shall be Ninety-Two Million Dollars ($92,000,000).
1.3. NO ASSUMPTION OF SELLER'S LIABILITIES. It is understood that none of
Buyer, the Company or any Subsidiary (as hereinafter defined) is assuming any
liability of Seller as a result of this Agreement, except as may be expressly
set forth herein.
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ARTICLE II
THE CLOSING AND TRANSFER OF STOCK
2.1. THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") shall take place at the offices of McDermott, Will &
Emery, counsel to the Seller, 227 W. Monroe Street, Chicago, Illinois 60606,
commencing at 9:00 a.m. local time on the third business day following the date
on which the last of the conditions to Closing in Articles VII and VIII have
been fulfilled or waived in accordance with this Agreement or such other date as
the parties may mutually determine (the "CLOSING DATE").
2.2. DELIVERIES AT THE CLOSING.
(a) Deliveries by Seller. At the Closing, Seller will execute, acknowledge
(if appropriate), and deliver to Buyer:
(i) certificates for the Stock with duly executed stock
powers to effect the transfer of ownership of the Stock to Buyer;
(ii) a copy of all charter documents of the Company and of
each Subsidiary certified by the Secretary of State of its jurisdiction of
incorporation as of a recent date;
(iii) certificates of the Secretary of the Company and of
each Subsidiary certifying copies of the By-laws, minute books and stock
record books of the Company and each such Subsidiary as of the Closing
Date;
(iv) the officer's certificate specified in Section 7.1;
(v) the draft financial statements of the Company and its
Subsidiaries for the year ended December 31, 1996 prepared in all material
respects in accordance with SAP and GAAP;
(vi) resignations of non-employee directors;
(vii) opinions of counsel to Seller opining as to the
matters set forth in Section 3.1(a), the record ownership of the Stock and
the record ownership of the capital stock of the Subsidiaries as set forth
on Section 3.2 of the Disclosure Schedule including Buyer's title to the
Stock, the due authorization and enforceability of this Agreement and the
transactions contemplated hereby and the matters set forth in the first
sentence of Section 3.4; and
(viii) all other documents, instruments and writings
required to be delivered by Seller at or prior to the Closing Date pursuant
to this Agreement.
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(b) Deliveries by Buyer. At the Closing, Buyer will execute, acknowledge
(if appropriate), and deliver to the Company:
(i) the Aggregate Consideration by wire transfer of
immediately available funds to an account designated by Seller;
(ii) the officer's certificate specified in Section 8.1;
and
(iii) all other documents, instruments and writings
required to be delivered by Buyer at or prior to the Closing Date pursuant
to this Agreement.
(c) Deliveries by the Parties. At the Closing, Buyer and Seller will enter
into and deliver the Tax Disaffiliation Agreement attached hereto as Annex A.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as of the date hereof as set
forth below. For purposes of this Agreement, the phrase "TO THE KNOWLEDGE OF
SELLER," "TO THE KNOWLEDGE OF THE COMPANY AND/OR A SUBSIDIARY," or other
language of similar effect, shall mean to the actual knowledge of the persons
listed on Schedule 3.0, after reasonable inquiry.
3.1. DUE ORGANIZATION.
(a) The Company and each of the Subsidiaries is a corporation validly
existing and in corporate good standing under the laws of its state of
incorporation, and has all requisite power and authority, corporate and
governmental, to own, lease and operate their respective assets and to carry on
the Business as now conducted, except where the failures to have such power or
authority would not in the aggregate have a material adverse effect on the
business, operations or financial condition of the Business taken as a whole (a
"MATERIAL ADVERSE EFFECT").
(b) The Company and each Subsidiary is duly qualified or licensed to do
business as a foreign corporation and is in good standing in all jurisdictions
in which the ownership, leasing or operation of its assets or the conduct of the
Business requires such qualification, except where the failures to be so
qualified or licensed would not in the aggregate have a Material Adverse Effect.
(c) Seller is validly existing and in good standing under the laws of the
State of Delaware.
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3.2. CAPITALIZATION; OWNERSHIP OF COMPANY AND SUBSIDIARIES.
(a) The aggregate authorized capital stock of the Company consists of 4,000
shares of common stock, par value $1,000 per share, all of which shares are
issued and outstanding. The Stock is the only issued and outstanding capital
stock of the Company.
(b) Section 3.2 of the Disclosure Schedule sets forth each direct and
indirect subsidiary of the Company (the "SUBSIDIARIES"), its jurisdiction of
incorporation, the authorized capital stock of each Subsidiary, and the issued
and outstanding capital stock of each Subsidiary. Except as set forth in Section
3.2 of the Disclosure Schedule, none of the issued and outstanding capital stock
of any Subsidiary is owned (beneficially or legally) by persons other than the
Company or another Subsidiary.
(c) All the outstanding shares of Stock and of the capital stock of the
Subsidiaries have been duly authorized, validly issued, fully paid and
nonassessable, with no preemptive rights of third parties attaching thereto.
Except as set forth in Section 3.2 of the Disclosure Schedule, there are no
outstanding options, rights, warrants, conversion rights or other agreements or
commitments to which the Company or a Subsidiary is a party or by which they are
bound, providing for the issuance of additional capital stock or for any other
adjustment, purchase or transfer affecting the ownership interests in the
Company or a Subsidiary.
(d) Seller owns (beneficially and of record) all of the Stock. Seller has
good title to all of the Stock, and has the right, power and capacity to sell,
assign and transfer the same to Buyer, without the consent of any other person,
free and clear of all liens or encumbrances. Seller has not entered into any
contract, agreement or arrangement with respect to the disposition or voting of
the Stock. Upon completion of the transactions contemplated hereby, Buyer will
have good title to the Stock free and clear of all liens or encumbrances, except
those created by or on behalf of Buyer.
3.3. AUTHORIZATION OF TRANSACTION. Seller has full corporate power and
authority to execute and deliver this Agreement and the other documents to be
executed and delivered by it at Closing (collectively, the "TRANSACTION
DOCUMENTS") and to perform its obligations hereunder and thereunder. All acts or
proceedings required to be taken by Seller to authorize the execution, delivery
and performance of the Transaction Documents and all transactions contemplated
thereby have been duly and properly taken. This Agreement has been, and the
documents to be delivered at Closing will be, duly executed and delivered by
Seller and, assuming this Agreement has been duly authorized, executed and
delivered by Buyer, constitute lawful, valid and legally binding obligations of
Seller, enforceable in accordance with their terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights and remedies.
3.4. CONSENTS AND APPROVALS; NO VIOLATIONS. Except for (a) applicable
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR ACT"), and (b)
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filings and/or notices and related approvals required under the insurance laws
of the jurisdictions set forth in Section 3.4 of the Disclosure Schedule (the
"SELLER INSURANCE FILINGS"), no filing with, and no permit, authorization,
consent or approval of, any public body or authority, domestic or foreign, is
necessary for the consummation by Seller of the transactions contemplated by
this Agreement. Neither the execution and delivery of this Agreement by Seller
nor the consummation by Seller of the transactions contemplated hereby nor
compliance by Seller with any of the provisions hereof will (a) conflict with
or result in any breach of any provision of the certificate of incorporation
of Seller, the Company or a Subsidiary, (b) except as set forth in Section
3.4 of the Disclosure Schedule, result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation or acceleration under
any of the terms, conditions or provisions) of any indenture, license,
contract, agreement or other instrument or obligation to which the Company, a
Subsidiary or Seller is a party or by which any of them or any of their
properties or assets may be bound or (c) assuming that the filings and consents
contemplated hereby are duly and timely made, violate any order, writ,
injunction, decree, statute, treaty, rule or regulation applicable to the
Company, any Subsidiary or Seller or any of their properties or assets, except
in the case of (b) or (c) for violations, breaches or defaults which, in the
aggregate, would not have a Material Adverse Effect.
3.5. SAP FINANCIAL STATEMENTS. The Annual Convention Statement for the
years ended December 31, 1995 and 1996 (collectively, the "ANNUAL STATEMENTS")
of the Company and each Subsidiary listed on Section 3.5 of the Disclosure
Schedule (collectively, the "INSURANCE SUBSIDIARIES"), as filed with the
insurance department reflected thereon has been delivered to or made available
for Buyer. Each Annual Statement was prepared in all material respects in
accordance with statutory accounting practices prescribed or permitted by the
applicable insurance regulator of the state in which filed ("SAP") and presents
fairly the statutory financial condition, assets, liabilities, surplus and other
funds of the Company as of such date and the statutory results of operations and
cash flows of the Company for the periods therein specified. The Annual
Statement for the year ended December 31, 1995 has been audited by KPMG Peat
Marwick LLP as indicated by its report thereon. December 31, 1996 is referred to
herein as the "BALANCE SHEET DATE" and the SAP balance sheets of the Company and
the Subsidiaries as of December 31, 1996 referred to herein are collectively
referred to as the "MOST RECENT BALANCE SHEET."
3.6. ASSETS. The Company and each Subsidiary has good title to, or a valid
leasehold interest in, the properties and assets used by them, reflected on the
Most Recent Balance Sheet or acquired after the date thereof, free and clear of
any and all liens and encumbrances, except for (a) liens or encumbrances for
current Taxes (as hereinafter defined) not yet due and payable, (b) liens or
encumbrances which would not, in the aggregate, have a Material Adverse Effect,
(c) mechanics', carriers', workers' and other similar liens or encumbrances
arising or incurred in the ordinary course of business, (d) in the case of
properties or assets acquired after the Balance Sheet Date, liens or
encumbrances securing all or part of the purchase price thereof and (e) liens
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or encumbrances set forth in Section 3.6 to the Disclosure Schedule, except for
properties and assets disposed of in the ordinary course of business since the
Balance Sheet Date.
3.7. INVESTMENTS. The Company is in possession of all documentation
reasonably necessary to evidence ownership of its invested assets reflected on
the Most Recent Balance Sheet.
3.8. EVENTS SUBSEQUENT TO BALANCE SHEET DATE. Except as provided in Section
3.8 to the Disclosure Schedule, since the Balance Sheet Date, the Business has
been operated in the ordinary course and there has not been any change in the
business, financial condition, operations or results of operations of the
Business, except such changes which, in the aggregate, are not reasonably likely
to have a Material Adverse Effect. Except as set forth in Section 3.8 of the
Disclosure Schedule, there have not occurred any of the events set forth in
Section 5.1 hereof since the Balance Sheet Date.
3.9. TAX MATTERS. Except as provided on Section 3.9 of the Disclosure
Schedule, each of Seller, the Company and the Subsidiaries has filed all Tax
returns that it was required to file, and has paid all Taxes shown thereon as
owing. All such Tax returns were completed and filed in accordance with
applicable law in all material respects. None of Seller, the Company and the
Subsidiaries has waived any statute of limitations in respect of Taxes or agreed
to any extension of time with respect to a Tax assessment or deficiency. Except
as provided on Section 3.9 of the Disclosure Schedule, none of Seller, the
Company nor any Subsidiary is subject to or, to the knowledge of Seller,
threatened with any action, suit, proceeding, investigation, audit or claim with
respect to the payment of any Tax. Except as provided on Section 3.9 of the
Disclosure Schedule, none of the Company and the Subsidiaries is a party to any
Tax allocation or sharing agreement with the Seller or its affiliates. As used
herein, "TAX" or "TAXES" means any federal, state, local, or foreign income,
gross receipts, franchise, estimated, alternative minimum, add-on minimum,
sales, use, transfer, registration, value added, excise, natural resources,
severance, stamp, occupation, premium, profit, customs, duties, real property,
personal property, capital stock, intangibles, social security, employment,
unemployment, disability, payroll, license, employee, or other tax, withholding
tax, or levy, of any kind whatsoever, including any interest, penalties, or
additions to tax in respect of the foregoing.
3.10. LEGAL COMPLIANCE. Except as provided on Section 3.10 of the
Disclosure Schedule to the knowledge of the Seller, the Business is in
compliance with all applicable laws (including rules, regulations, codes, plans,
injunctions, licensing requirements, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
agencies thereof), except where such violation or non-compliance would not
reasonably be expected to have a Material Adverse Effect.
3.11. RESERVES. The reserves for unpaid losses and loss adjustment
expenses, including IBNR, in the Annual Statements of the Company and the
Insurance Subsidiaries on the Most Recent Balance Sheet were estimated in
accordance with SAP and Seller believes such reserves are adequate for the
purposes established.
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3.12. INTELLECTUAL PROPERTY. Except as set forth on Section 3.12 to the
Disclosure Schedule, with respect to all patents, trademarks, copyrights,
registrations and licenses of the Business (the "INTELLECTUAL PROPERTY"), (a)
the Company or a Subsidiary is the owner or has the right to use the
Intellectual Property in the manner in which it is currently being used, (b) no
action, suit or proceeding is pending against the Company or, to the Seller's
knowledge, threatened with respect to the Intellectual Property (c) to the
knowledge of Seller, none of the Intellectual Property infringes upon the rights
of others or is subject to any outstanding order, decree or judgment, and (d)
there are no royalty, commission or similar arrangements, and no licenses,
sublicenses or agreements, pertaining to any of the Intellectual Property.
Notwithstanding anything contained herein to the contrary, none of the Company
or the Subsidiaries has any right to the corporate name of Seller or any
derivative thereof.
3.13. CONTRACTS. Section 3.13 of the Disclosure Schedule lists the
following contracts and other agreements to which the Company or a Subsidiary
is a party:
(a) any agreement providing for reinsurance;
(b) any agreement providing for the distribution of
insurance related products of the Company or a Subsidiary by third parties
with a remaining term of one year or greater;
(c) any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for lease
payments in excess of $100,000 per annum;
(d) any agreement (or group of related agreements) under
which the Company or a Subsidiary has created, incurred, assumed, or
guaranteed any indebtedness for borrowed money;
(e) any agreement imposing noncompetition obligations on
the Company or a Subsidiary;
(f) any defined benefit pension, profit sharing, stock
option, stock purchase, stock appreciation, deferred compensation,
severance, welfare or other plan or arrangement for the benefit of
employees of the Company or a Subsidiary;
(g) any agreement for the employment of any individual not
terminable upon ninety (90) days or less notice;
(h) any agreement not made in the ordinary course of
business; and
(i) any other agreement (or group of related agreements)
the performance of which involves consideration in excess of $250,000 per
annum.
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With respect to each such agreement, except as described on Section 3.13 of the
Disclosure Schedule (i) the agreement is a legal, valid and binding obligation
of the Company or the Subsidiary, as applicable, and (ii) to Seller's knowledge
no party is in breach or default thereunder, and no event has occurred which
with notice or lapse of time would constitute a breach or default of any such
contract, except for such as would not be reasonably expected to have a Material
Adverse Effect.
3.14. LEGAL PROCEEDINGS. (a) Except as set forth in Section 3.14 to the
Disclosure Schedule, (i) neither the Company nor a Subsidiary is engaged in or a
party to or, to the knowledge of Seller, threatened with any action, suit or
other legal proceeding involving the Company, a Subsidiary or their assets,
other than routine litigation which, in the aggregate, would not reasonably be
expected to have a Material Adverse Effect, (ii) Seller has no knowledge of any
investigation threatened by any governmental or regulatory authority with
respect to the Company, a Subsidiary, or their assets, and (iii) neither the
Company nor a Subsidiary is subject to any judgment, order, writ, injunction,
stipulation or decree of any court or any governmental agency which in the
aggregate would reasonably be expected to have a Material Adverse Effect.
(b) Except with respect to any and all actions, suits, claims or other
legal proceedings related, directly or indirectly, to accounting irregularities
of the Seller, including any and all claims and demands by creditors and
stockholders of Seller as a result of the foregoing, Seller is not subject to
or, to Seller's knowledge, threatened with any action, suit or other legal
proceeding which could be reasonably anticipated to delay or prevent
consummation of the transactions contemplated by this Agreement.
3.15. EMPLOYEE PLANS.
(a) ERISA Plans
(i) Section 3.15 to the Disclosure Schedule lists all of
the following types of plans maintained by Seller: (a) employee pension
benefit plans ("PENSION BENEFIT PLANS"), as defined in Section 3(2) of the
Employment Retirement Income Security Act of 1974, as amended ("ERISA"),
and (b) employee welfare benefit plans ("WELFARE BENEFIT PLANS"), as
defined in Section 3(1) of ERISA. True and complete copies of all Pension
Benefit Plans and Welfare Benefit Plans have been made available to Buyer.
(ii) The Seller and all entities under "common control" (as
defined in Section 4001(b)(1) of ERISA) with the Seller do not and have not
contributed to any multiemployer plan as defined in Section 3(37) of ERISA.
(b) Administration of Pension Benefit Plans
All contributions required to have been made by Seller under the terms of
any Pension Benefit Plans have been timely made, and all contributions due and
payable prior to the Closing Date with
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respect to any fiscal year of a Pension Benefit Plan ending prior to the Closing
Date have been made.
(c) Administration of Welfare Benefit Plans
With respect to the Welfare Benefit Plans, no material claims for benefits
are in dispute, and all such plans in all material respects have met all
applicable requirements, if any, of ERISA and the Code, including, but not
limited to, the requirements of the Consolidated Omnibus Budget Reconciliation
Act of 1985 ("COBRA") to provide health care continuation coverage (Section
4980B(f) of the Code).
3.16. CERTAIN BUSINESS RELATIONSHIPS WITH THE COMPANY. Except as set forth
in Section 3.16 of the Disclosure Schedule, the Seller and its Affiliates (as
hereinafter defined) (a) have not been involved in any business arrangement or
relationship with the Company or any Subsidiary within the past 12 months, (b)
do not own any asset, tangible or intangible, which is used in the business of
the Company or a Subsidiary, other than assets involved in general and
administrative activities, and (c) do not owe any amount to, or is owed any
amount by, the Company or any Subsidiary.
3.17. SALES PRACTICES. The Seller and its Affiliates are in compliance with
all applicable laws (including rules and regulations but excluding licensing
requirements) of federal, state, local and foreign governments (and all agencies
thereof) with respect to their sales practices related to the sale of Insurance
Products (as hereinafter defined) of the Business, except where such violation
or non-compliance would not reasonably be expected to have a Material Adverse
Effect.
3.18. BROKERS' FEES. Neither the Seller, the Company nor any Subsidiary has
any liability or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this Agreement
for which the Buyer, the Company or any Subsidiary will be liable.
3.19. INSURANCE. Section 3.19 of the Disclosure Schedule lists all
insurance provided by Seller's insurance carriers covering the Company, its
Subsidiaries or their respective employees or directors, other than the employee
benefit plans listed on Section 3.15 to the Disclosure Schedule.
3.20. DISCLAIMER. Seller makes no representation or warranty with regard to
any statements, oral or written, with respect to the Stock, the Business, the
Company or any Subsidiary except as expressly provided in this Agreement.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1. ORGANIZATION OF BUYER. Buyer is a corporation validly existing and in
good standing under the laws of the State of Delaware.
4.2. AUTHORIZATION OF TRANSACTION. Buyer has full corporate power and
authority to execute and deliver this Agreement and the Transaction Documents
and to perform its obligations thereunder. All acts or proceedings required to
be taken by Buyer to authorize the execution, delivery and performance of the
Transaction Documents and all transactions contemplated thereby have been duly
and properly taken. This Agreement has been, and the documents to be delivered
at Closing will be, duly executed and delivered by Buyer and, assuming this
Agreement has been duly authorized, executed and delivered by Seller,
constitutes lawful, valid and legally binding obligations of Buyer, enforceable
in accordance with their terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights and remedies.
4.3. CONSENTS AND APPROVALS; NO VIOLATIONS. Except for (a) applicable
requirements of the HSR Act, and (b) filings and/or notices and related
approvals required under the insurance laws of the jurisdictions set forth in
Section 3.4 of the Disclosure Schedule (the "BUYER INSURANCE FILINGS"), no
filing with, and no permit, authorization, consent or approval of, any public
body or authority, domestic or foreign, is necessary for the consummation by
Buyer of the transactions contemplated by this Agreement. Neither the execution
and delivery of this Agreement by Buyer nor the consummation by Buyer of the
transactions contemplated hereby nor compliance by Buyer with any of the
provisions hereof will (a) conflict with or result in any breach of any
provision of the certificate of incorporation of the Buyer, (b) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration under any of the terms, conditions or provisions) of any
indenture, license, contract, agreement or other instrument or obligation to
which the Buyer is a party or by which any of them or any of their properties or
assets may be bound or (c) assuming that the filings and consents contemplated
hereby are duly and timely made, violate any order, writ, injunction, decree,
statute, treaty, rule or regulation applicable to the Buyer or any of their
properties or assets, except in the case of (b) or (c) for violations, breaches
or defaults which, in the aggregate, would not have a Material Adverse Effect or
deprive Seller of the benefits anticipated by this Agreement.
4.4. ACQUISITION OF STOCK FOR INVESTMENT. Buyer is acquiring the Stock for
investment and not with a view toward any distribution thereof, and will dispose
of such Stock only in compliance with the Securities Act of 1933 and any
applicable state securities laws.
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4.5. BUYER'S BUSINESS INVESTIGATION. Buyer has conducted such investigation
of the Company, the Subsidiaries, and the Business as it has deemed necessary in
order to make an informed decision concerning the transactions contemplated
hereby. Buyer has reviewed all of the documents, records, reports and other
materials identified in the Disclosure Schedule hereto, and is familiar with the
content thereof. Buyer acknowledges that it has been given access to and has
visited and examined the premises of the Business and is familiar with the
condition thereof. For the purpose of conducting these investigations, Buyer has
employed the services of its own agents, representatives, experts and
consultants. All materials and information requested by Buyer have been provided
to Buyer to Buyer's satisfaction. Notwithstanding the foregoing, Buyer is
relying upon the accuracy of the representations and warranties of Seller is
entering into this Agreement and consummating the transactions contemplated
hereby.
4.6. FINANCING. Buyer has sufficient funds or available financing to fund
the consideration to be paid at Closing to Seller for the Stock.
4.7. BROKERS' FEES. Buyer has no liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which the Seller will be liable.
ARTICLE V
COVENANTS OF SELLER
5.1. INTERIM CONDUCT OF BUSINESS. Except as contemplated by this Agreement,
as set forth in Section 5.1 of the Disclosure Schedule or with the prior consent
of Buyer, from the date hereof until the Closing, Seller shall use all
reasonable efforts to operate the Business consistent with past practice and in
the ordinary course of business, or otherwise consistent with the terms of this
Agreement. Without limiting the generality of the foregoing and except as
otherwise provided in this Agreement or the transactions contemplated hereby or
as set forth in Section 5.1 to the Disclosure Schedule, the Seller will cause
the Company and each Subsidiary not to, prior to the Closing Date, without the
prior consent of Buyer, do any of the following:
(a) declare, set aside, or pay any dividend or make any
distribution with respect to its capital stock (whether in cash or in kind)
or redeem, purchase, or otherwise acquire any of its capital stock, other
than transactions solely between the Company and a Subsidiary;
(b) sell, lease, transfer, or assign any of its assets,
tangible or intangible, to any third party, other than in the ordinary
course of business or apply, utilize or otherwise dispose of any assets of
the Business to discharge any indebtedness or claims against Seller or any
of its Affiliates;
(c) impose any Lien upon any of its assets, tangible or
intangible;
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(d) change or authorize a change in the Certificate of
Incorporation or bylaws of the Company or any Subsidiary;
(e) issue, sell or otherwise dispose of any of its capital
stock, or grant any options, warrants, or other rights to purchase or
obtain (including upon conversion, exchange, or exercise) any of its
capital stock;
(f) guarantee any third party indebtedness;
(g) incur any borrowings from third parties in excess of
$100,000;
(h) enter into any agreement or transaction with Seller or
its Affiliates;
(i) merge or consolidate with any other person or entity or
acquire a material amount of assets of any other person or entity; or
(j) agree or commit to do any of the foregoing.
"AFFILIATES" for purposes of this Agreement shall mean any entity which
controls, or is controlled by, or is under common control with the Seller or the
Buyer, as the case may be.
5.2. ACCESS. (a) From the date hereof through the Closing Date, Seller
shall give Buyer and its representatives access during normal business hours and
under reasonable circumstances to all properties, records and appropriate
personnel of the Business and furnish Buyer with all financial and other
information in its possession relating to the Business and the Company as Buyer
may from time to time reasonably request.
(b) Prior to the Closing Date, Buyer and its agents shall have reasonable
access during normal business hours to the employees of the Company and its
Subsidiaries for purposes of making presentations and otherwise assuring a
smooth transition of ownership of the Company and its Subsidiaries from Seller
to Buyer; provided, however, that Buyer shall give Seller at least five (5)
business days' prior written notice of each presentation, including a written
description of the matters to be discussed at such presentation, and a
representative of the Seller, at Seller's request, shall be allowed to be
present at each such presentation.
5.3. CONSUMMATION. Subject to the terms and conditions provided herein,
Seller agrees to use all reasonable efforts to take, or cause to be taken all
actions and to do, or cause to be done all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by the Agreement in accordance with its terms; except
that this covenant shall not require Seller to make any payment (other than
filing fees) or incur any economic burden not provided for herein.
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5.4. HSR CONSENT. As promptly as possible, but in any event not later than
three (3) business days after the execution hereof, Seller shall file with the
Federal Trade Commission (the "FTC") and the Antitrust Division of the United
States Department of Justice (the "ANTITRUST DIVISION") a premerger notification
in accordance with the HSR Act with respect to the sale of the Stock pursuant to
this Agreement. Seller shall furnish promptly to the FTC and the Antitrust
Division any additional information requested by either of them pursuant to the
HSR Act in connection with such filings and shall diligently take, or cooperate
in the taking of, all steps that are necessary or desirable and proper to
expedite the termination of the waiting period under the HSR Act.
5.5. OTHER ACTIONS. As promptly as possible, Seller shall make the Seller
Insurance Filings with governmental agencies in connection with the transactions
contemplated hereby. Seller shall keep Buyer informed as to the status of
discussions with the governmental agencies.
5.6. OUTSTANDING CLAIMS. Seller shall cause the Company to prepare and
deliver prior to the Closing Date a schedule setting forth the outstanding
claims as of March 31, 1997.
ARTICLE VI
COVENANTS OF BUYER
6.1. CONSUMMATION. Subject to the terms and conditions provided herein,
Buyer agrees to use all reasonable efforts to take, or cause to be taken all
actions and to do, or cause to be done all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by the Agreement in accordance with its terms; except
that this covenant shall not require Buyer to make any payment or incur any
economic burden not provided for herein.
6.2. HSR CONSENT. As promptly as possible, but in any event not later than
three (3) business days after the execution hereof, Buyer shall file with the
FTC and the Antitrust Division, including payment of the required filing fee, a
premerger notification in accordance with the HSR Act with respect to the
purchase of the Stock pursuant to this Agreement. Buyer shall furnish promptly
to the FTC and the Antitrust Division any additional information requested by
either of them pursuant to the HSR Act in connection with such filings and shall
diligently take, or cooperate in the taking of, all steps that are necessary or
desirable and proper to expedite the termination of the waiting period under the
HSR Act.
6.3. OTHER ACTIONS. As promptly as possible, Buyer shall make the Buyer
Insurance Filings with governmental agencies in connection with the transactions
contemplated hereby. Buyer shall keep Seller informed as to the status of
discussions with the governmental agencies.
6.4. RECORDS AND DOCUMENTS. Following the Closing Date, Buyer shall grant
to Seller and its respective representatives, at Seller's reasonable request,
reasonable access to and the right to
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make copies at Seller's expense of those records and documents covering any
period prior to the Closing related to the Business as may be reasonably
necessary for litigation, preparation of financial statements, Tax returns and
audits or other business purposes. If Buyer elects to dispose of such records,
Buyer shall first give Seller sixty (60) days' written notice, during which
period Seller shall have the right to take such records without further
consideration.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligation of Buyer to consummate the transactions contemplated by this
Agreement is subject to delivery of the items specified in Sections 2.2(a) and
2.2(c) and fulfillment prior to or at the Closing of the following conditions
(unless waived in writing in the sole discretion of Buyer):
7.1. ACCURACY OF WARRANTIES AND PERFORMANCE OF COVENANTS. The
representations and warranties of Seller contained herein shall be accurate in
all material respects as if made on and as of the Closing Date, except for
changes occurring in the ordinary course of the Business. Seller shall have, in
all material respects, performed all obligations and complied with each and all
of the covenants and agreements required to be performed or complied with on or
prior to the Closing. A Certificate of the President of Seller shall be
delivered to the foregoing effect.
7.2. NO PENDING ACTION. No order of any court, administrative agency or
other governmental authority shall be pending which prohibits the carrying out
of this Agreement or any of the significant transactions contemplated hereby or
declares unlawful the transactions contemplated hereby.
7.3. HSR. The waiting period under the HSR Act required to permit the
consummation of the transactions provided for herein shall have expired or
otherwise been terminated.
7.4. INSURANCE APPROVALS. Approvals required in connection with the Buyer
Insurance Filings shall have been obtained.
7.5. TERMINATION OF TAX SHARING AGREEMENT. The Income Tax Sharing Agreement
between the Company and its subsidiaries and Seller effected as of October 20,
1995 (the "TAX SHARING AGREEMENT") shall be terminated effective as of the
Closing Date.
7.6. SURPLUS AS REGARDS POLICYHOLDERS AND STOCKHOLDER'S EQUITY. The draft
financial statements of the Company and its Subsidiaries for the year ended
December 31, 1996 prepared in accordance with SAP to be delivered pursuant to
Section 2.2(a)(v) hereof shall reflect surplus as regards policyholders of not
less than $70,500,000 and the draft consolidated financial statements of the
Company and its Subsidiaries for the year ended December 31, 1996 prepared in
accordance with GAAP to be delivered pursuant to Section 2.2(a)(v) hereof shall
reflect total
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stockholder's equity of not less than $117,500,000, excluding the effects of
purchase accounting adjustments related to the acquisition of the Company by
Seller.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligation of Seller to consummate the transactions contemplated by
this Agreement is subject to delivery of the items specified in Sections 2.2(b)
and 2.2(c) and fulfillment prior to or at the Closing of the following
conditions (unless waived in writing in the sole discretion of Seller):
8.1. ACCURACY OF WARRANTIES AND PERFORMANCE OF COVENANTS. The
representations and warranties of Buyer contained herein shall be accurate in
all material respects as if made on and as of the Closing Date. Buyer shall
have, in all material respects, performed all obligations and complied with each
and all of the covenants and agreements required to be performed or complied
with on or prior to the Closing. A Certificate of the Chief Executive Officer or
Chief Financial Officer of the Buyer shall be delivered to the foregoing effect.
8.2. NO PENDING ACTION. No order of any court, administrative agency or
other governmental authority shall be pending which prohibits the carrying out
of this Agreement or any of the significant transactions contemplated hereby or
declares unlawful the transactions contemplated hereby.
8.3. HSR. The waiting period under the HSR Act required to permit the
consummation of the transactions provided for herein shall have expired or
otherwise been terminated.
8.4. INSURANCE APPROVALS. Approvals required in connection with the Seller
Insurance Filings shall have been obtained.
ARTICLE IX
SURVIVAL AND INDEMNIFICATION
9.1. SURVIVAL. Unless otherwise specified herein, all covenants and
agreements contained herein or in any agreement or document delivered pursuant
hereto, shall survive the Closing until fully performed. All representations and
warranties contained herein or in any agreement or other document delivered
pursuant hereto shall survive the Closing for a period of eighteen (18) months
from the date hereof, after which they shall be of no further force or effect;
provided, however, that all representations and warranties set forth in Section
3.9 shall survive until the expiration of the applicable statute of limitations
and all representations and warranties set forth in Section 3.2 shall survive
indefinitely. Notwithstanding the foregoing, any claim for indemnification that
is asserted by written notice as provided in Section 9.3 within the applicable
survival period shall survive until resolved pursuant to a final non-appealable
judicial determination or otherwise.
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9.2. INDEMNIFICATION. Seller shall indemnify and hold harmless Buyer, and
Buyer shall indemnify and hold harmless Seller from and against any and all
loss, damage, cost or expense (including reasonable attorneys' fees and
expenses) caused by any misrepresentation, breach of warranty or failure to
fulfill any covenant or agreement contained herein or in any agreement or other
document delivered pursuant to the terms hereof. For purposes of the
indemnification provided by Seller pursuant to this Article IX only and for no
other purpose, the determination of whether there has been a misrepresentation
or breach of warranty shall be made without reference to the word "material" and
the words "Material Adverse Effect" contained in such representation and
warranty.
9.3. GENERAL PROVISIONS RELATING TO INDEMNIFICATION. (a) Seller shall not
be required to make any payments pursuant to this Article IX, unless and until
the aggregate amount of all claims pursuant to this Article IX shall exceed
$1,000,000 (the "THRESHOLD AMOUNT"), as to which Seller shall be responsible
only for the excess over the Threshold Amount. The maximum aggregate amount
recoverable from Seller pursuant to this Article IX shall not exceed an amount
equal to twenty-five percent (25%) of the Aggregate Consideration (the "CEILING
AMOUNT"). Notwithstanding anything contained herein to the contrary, the
Threshold Amount and Ceiling Amount shall not be applicable to claims for breach
of the representations and warranties contained in Sections 3.1(a), 3.2, 3.3,
4.1 and 4.2 and shall not be applicable to the Tax Disaffiliation Agreement;
provided, however, that the maximum aggregate amount recoverable from Seller for
breach of the representations and warranties contained in Sections 3.1(a), 3.2
and 3.3 shall not exceed the Aggregate Consideration.
(b) The party entitled to indemnification shall take all reasonable steps
to mitigate all indemnifiable liabilities and damages upon and after becoming
aware of any event which could reasonably be expected to give rise to any
liabilities and damages that are indemnifiable hereunder. No party shall be
entitled to indemnification to the extent of any available insurance, Tax or
other benefits resulting from the facts and circumstances relating to any
indemnifiable claim. To the extent that Buyer and/or the Company is entitled to
indemnification from ITT for any misrepresentation or breach of warranty
contained herein, neither Buyer nor the Company shall be entitled to
indemnification from the Seller pursuant to this Article IX.
(c) The party seeking indemnification shall give written notice to the
indemnifying party of the facts and circumstances giving rise to any claim for
indemnification as soon as reasonably possible but in any event within thirty
(30) days after it obtains knowledge of the basis for a claim for
indemnification hereunder.
(d) With respect to each third party claim subject to this Article IX (a
"THIRD PARTY CLAIM"), the party seeking indemnification (the "INDEMNIFIED
PARTY") must give prompt notice to the indemnifying party (the "INDEMNIFYING
PARTY") of the Third Party Claim. The Indemnifying Party may, at its sole cost
and expense, upon notice to the Indemnified Party within thirty (30) days after
the Indemnifying Party receives notice of the Third Party Claim, assume the
defense of the Third Party Claim, with counsel of its choice without prejudice
to the right of the
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Indemnifying Party to contest its obligation to indemnify the Indemnified Party
in respect to the claims asserted therein. The Indemnifying Party shall not
consent to a settlement of, or the entry of any judgment arising from, any Third
Party Claim, unless the Indemnified Party consents thereto, which consent shall
not be unreasonably withheld. The Indemnifying Party shall provide the
Indemnified Party with ten (10) days' prior notice before it consents to a
settlement of, or the entry of a judgment arising from, any Third Party Claim.
The Indemnified Party shall be entitled to participate in the defense of (but
not control) any Third Party Claim, the defense of which is assumed by the
Indemnifying Party, with its own counsel and at its own expense. In no event
shall the Indemnified Party consent to a settlement of, or the entry of any
judgment arising from any Third Party Claim. The parties shall cooperate in the
defense of any Third Party Claim and the relevant records of each party shall be
made available on a timely basis.
(e) After the Closing, the indemnification rights provided hereunder shall
be the exclusive remedy of Seller and Buyer with respect to any dispute arising
out of or related to this Agreement.
9.4. WARN ACT. Buyer and Seller agree that for purposes of the Worker
Adjustment and Retraining Notification Act (the "WARN ACT"), the Closing Date
shall be the "effective date" as such term is used in the WARN Act. Buyer
acknowledges and represents that it has no present intent to engage in a "mass
layoff" or "plant closing" as defined in the WARN Act with respect to the
Company or a Subsidiary. Buyer agrees that from and after the Closing Date it
shall be responsible for any notification required under the WARN Act with
respect to the Company or any Subsidiary and shall indemnify Seller and hold the
Seller harmless from and against all fines, other payments and related expenses
(including reasonable attorneys fees and expenses) which may become due under
the WARN Act with respect to the Company or a Subsidiary or actions with respect
thereto.
ARTICLE X
TERMINATION
10.1. TERMINATION OR ABANDONMENT. Notwithstanding anything contained in
this Agreement to the contrary, this Agreement may be terminated and abandoned
at any time prior to the Closing:
(a) by the mutual written consent of Seller and Buyer;
(b) by Seller or Buyer, if any court of competent
jurisdiction or governmental body, authority or agency having jurisdiction
shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other
action shall have become final and nonappealable;
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(c) by Buyer after May 31, 1997, if one or more of the
conditions to the obligation of Buyer to Close as set forth in Article VII
has not been fulfilled by the date of termination; and
(d) by Seller after May 31, 1997, if one or more of the
conditions to the obligation of Seller to Close as set forth in Article
VIII has not been fulfilled by the date of termination.
10.2. EFFECT OF TERMINATION. If any party terminates this Agreement
pursuant to Section 10.1 above, all obligations of the parties hereunder shall
terminate without any liability of any party to any other party (except for any
liability of any party then in breach); provided, however, that the provisions
of this Section 10.2 and the Confidentiality Agreement of the parties dated
February 4, 1997 (the "CONFIDENTIALITY AGREEMENT") shall survive termination of
this Agreement.
ARTICLE XI
CERTAIN EMPLOYEE BENEFITS MATTERS
11.1. TRANSFER OF ERISA PLANS. No assets or liabilities of any ERISA Plan
will be transferred pursuant to the Agreement from Seller to Buyer; except with
respect to the Buyer's liability under COBRA for "qualifying events" (as defined
in Section 4980B(f)(3) of the Code) occurring on or after the Closing;
notwithstanding the foregoing, to the extent permitted by the Code and
underlying regulations, participants in the Seller's defined contribution plan
may rollover to the Buyer's defined contribution plan (to the extent permitted
by such plan) any portion of the taxable lump sum distribution received from
Seller's plan; provided, however, that nothing contained herein shall obligate
Buyer's plan to accept a rollover in a form other than cash. Seller shall 100%
vest all participants in Seller's 401(k) plan who were employed by the Company
as of the Closing Date.
11.2. CONTINUATION OF EMPLOYEE BENEFIT PLANS. If requested by Buyer, for a
period of up to thirty (30) days following the Closing Date, Seller agrees to
maintain the employees of the Company on the Seller's employee benefit plans to
the same extent such plans are currently being provided to the Company's
employees. Buyer shall reimburse the Seller for any and all costs and expenses
related to continuing to provide the employee benefit plans to the Company's
employees as set forth above.
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ARTICLE XII
OTHER AGREEMENTS
12.1. ASSISTANCE WITH A.M. BEST. If requested by Buyer, Seller will use
commercially reasonable efforts for a period of up to 90 days following the
Closing Date to assist and cooperate with Buyer to cause A.M. Best to upgrade
its rating of the Company and its Subsidiaries. Buyer shall discharge all
out-of-pocket expenses of Seller in performing such action.
12.2. NON-COMPETITION. For a period of three (3) years from the date
hereof, Seller and its Affiliates agree not to acquire an insurance company
which directly writes credit life, credit disability, property, warranty,
involuntary unemployment and/or accidental death and dismemberment insurance
(the "INSURANCE PRODUCTS").
12.3. CONTINUATION OF RELATIONSHIP. Seller and its Affiliates agree through
December 31, 1997 and to use their commercially reasonable efforts from January
1, 1998 through December 31, 1998 to continue to sell the Insurance Products in
the same manner as is currently being done by the Seller and its Affiliates;
provided, however, that the commissions paid by the Company to the Seller and
its Affiliates are competitive with other third party providers and current
market terms and that the Company provides the type of service to the Seller and
delivers and administers the Insurance Products consistent with current market
practices. The Buyer and the Company agree to provide to Seller and its
Affiliates the type of service and to deliver and administer the Insurance
Products consistent with current market practices. Following Closing, the Buyer
and the Company agree to cede any in-force insurance policies and any new
insurance policies to be written related to Insurance Products sold by the
Seller and its Affiliates to a reinsurance captive to be formed by Seller.
12.4. DELIVERY OF FINANCIAL STATEMENTS. Within sixty (60) days after the
date that Buyer is required to file the initial current report on Form 8-K with
the Securities and Exchange Commission with respect to the transactions
contemplated hereby, Seller will deliver to Buyer audited consolidated financial
statements of the Company and its Subsidiaries for the three-year period ended
December 31, 1996, which audited financial statements shall be prepared in
accordance with generally accepted accounting principles ("GAAP") and Seller
will deliver to Buyer unaudited GAAP consolidated financial statements of the
Company and its Subsidiaries for the three months ended March 31, 1997 as soon
as they are available. Any and all costs and expenses associated with preparing
the audited GAAP consolidated financial statements of the Company and its
Subsidiaries for the two years ended December 31, 1995 shall be borne by the
Company. In addition, Seller will deliver audited financial statements of the
Company and each Insurance Subsidiary for the year ended December 31, 1996
prepared in accordance with SAP on or before June 1, 1997. Following the Closing
Date, Buyer shall cause the Company and its and Buyer's employees to assist and
cooperate with Seller and its representatives and auditors in completing the
financial statements set forth above, including, but not limited to, giving
Seller and its representatives and auditors access during normal business hours
and under reasonable
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<PAGE>
circumstances to all records of the Business and furnishing Seller and its
representatives and auditors with all financial and other information necessary
to complete such financial statements, as Seller and its representatives and
auditors may from time to time reasonably request. Seller agrees to provide
Buyer and its representatives access to the Seller's representatives and
auditors during normal business hours and under reasonable circumstances with
respect to the matters covered in this Section 12.4.
12.5. RECONCILIATION OF INTERCOMPANY ACCOUNTS. (a) Within 30 days from the
Closing Date, the Buyer and the Company agree to pay the Seller all amounts owed
to Seller by the Company related to the provision of employee benefits to the
employees of the Company through the Closing Date and for any subsequent period
and for payroll services provided by Seller to the Company through the Closing
Date.
12.6. TAXES. (a) The parties understand and agree that, up to and including
the Closing Date, the Company shall continue to make payments to the Seller as
required by the Tax Sharing Agreement, with respect to both (i) all amounts
otherwise due and payable (but which have not previously been paid) to Seller
for all Tax periods ending prior to the Closing Date and (ii) the estimated
United States federal income Tax of the Company and the Subsidiaries for the
current Tax period which will end on the Closing Date, computed in accordance
with the provisions of Section 2(c)(i) of the Tax Disaffiliation Agreement
(each, a "RELEVANT TAX PERIOD").
(b) When the United States federal Tax return for a Relevant Tax Period,
with respect to the operations of the Company and the Subsidiaries, has been
completed by Buyer and the Company and accepted by Seller, the parties will
compare the Tax amounts shown to be due and payable thereunder (the "TAXES DUE")
with the aggregate payments made by the Company to the Seller with respect
thereto under the Tax Sharing Agreement (the "ESTIMATED TAX PAYMENTS"). If the
Taxes Due exceed the Estimated Tax Payments for any such Tax return, Buyer and
the Company will promptly pay to Seller the amount of such excess. If the
Estimated Tax Payments exceed the Taxes Due for any such Tax return, Seller will
promptly pay to Buyer and the Company the amount of such excess.
(c) The parties agree that each of the 1995 and 1996 Tax returns shall be
completed, and any Tax payments required under the preceding paragraph with
respect thereto shall be made, as promptly as possible but in no event later
than sixty (60) days after the Closing Date. With respect to the 1997 Tax period
ending on the Closing Date, the parties agree that the Tax return shall be
completed, and any required payment regarding any deficiency or excess between
the Taxes Due and the Estimated Tax Payments between the parties shall be made,
as promptly as possible but in no event later than March 15, 1998.
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<PAGE>
ARTICLE XIII
GENERAL PROVISIONS
13.1. AMENDMENTS AND WAIVER. No amendment, waiver or consent with respect
to any provision of this Agreement shall in any event be effective, unless the
same shall be in writing and signed by the parties hereto, and then such
amendment, waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
13.2. NOTICES. All notices, requests, consents, demands and other
communications hereunder must be in writing and shall be personally delivered or
sent by facsimile transmission with confirming copy sent by overnight carrier
(such as Express Mail, Federal Express, etc.) and a delivery receipt obtained
and addressed to the intended recipient as follows:
(a) If to Seller:
Mercury Finance Company
100 Field Drive
Suite 340
Lake Forest, Illinois 60045
Telecopy: 847-295-8699
Attn: William A. Brandt, Jr.
and Mark E. Dapier
With copies to:
McDermott, Will & Emery
227 West Monroe Street
Chicago, IL 60606
Telecopy No.: 312-984-7700
Attn: Grant A. Bagan, P.C.
and John P. Tamisiea
(b) If to Buyer:
Frontier Insurance Group, Inc.
195 Lake Louise Marie Road
Rock Hill, New York 12775
Telecopy No.: (914) 796-1900
Attn: Walter A. Ruulen, President and
Chief Executive Officer
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<PAGE>
With copies to:
Epstein Becker & Green, P.C.
250 Park Avenue
12th Floor
New York, New York 10177
Telecopy No.: (212) 661-0989
Attn: Sidney Todres, Esq.
Any party may change its address or add or change parties for receiving notice
by written notice given to the others named above.
13.3. EXPENSES. Except as otherwise expressly provided herein, each party
to this Agreement shall pay its own costs and expenses in connection with the
transactions contemplated hereby.
13.4. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
13.5. SUCCESSORS AND ASSIGNS; BENEFICIARIES. This Agreement shall bind and
inure to the benefit of the parties named herein and their respective permitted
successors and assigns. No party may assign any rights, benefits, duties or
obligations under this Agreement without the prior written consent of the other
party. No third party shall be entitled to enforce any provision hereof and no
third party is intended to benefit from this Agreement.
13.6. ENTIRE AGREEMENT. This Agreement and the documents referred to herein
contain the entire agreement and understanding among the parties with respect to
the transactions contemplated hereby and supersede all other agreements,
understandings and undertakings among the parties on the subject matter hereof
provided that the terms of the Confidentiality Agreement shall survive until
Closing.
13.7. ANNOUNCEMENTS. No announcement of the specific terms of this
Agreement shall be made by any party without the written approval of the other
party (which approval shall not be unreasonably withheld), except for filings
required under the HSR Act and other regulatory filings and disclosures made
based upon advice of counsel. Each party shall promptly advise the other of any
such contemplated announcements.
13.8. PARTIAL INVALIDITY. In the event that any provision of this Agreement
shall be held invalid or unenforceable by any court of competent jurisdiction,
such holding shall not invalidate or render unenforceable any other provision
hereof.
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<PAGE>
13.9. GOVERNING LAW. This Agreement shall be interpreted in accordance with
the substantive laws of the State of Illinois applicable to contracts made and
to be performed wholly within said State.
* * *
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
FRONTIER INSURANCE GROUP, INC. MERCURY FINANCE COMPANY
By: By:
------------------------------ -----------------------------
Its: Its:
------------------------------ -----------------------------
<PAGE>
<PAGE>
FIRST AMENDMENT
TO THE
STOCK PURCHASE AGREEMENT
THIS FIRST AMENDMENT to the Stock Purchase Agreement dated
March 28, 1997 (the "STOCK PURCHASE AGREEMENT") by and between Mercury Finance
Company, a Delaware corporation ("SELLER") and Frontier Insurance Group, Inc., a
Delaware corporation ("BUYER"), is made and entered into this 29th day of May,
1997.
WHEREAS, Buyer and Seller have agreed to amend certain terms of
the Stock Purchase Agreement;
NOW, THEREFORE, in consideration of the premises herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Seller and Buyer agree as follows:
1. Amendment to Section 10.1. Section 10.1(c) and Section
10.1(d) are hereby amended by replacing May 31, 1997 with June 4, 1997.
2. No Other Amendment; Confirmation. Except as expressly
amended, modified and supplemented hereby, the provisions of the Stock Purchase
Agreement are and shall remain in full force and effect.
3. Counterparts. This Amendment may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
4. Governing Law. This Agreement shall be interpreted in
accordance with the substantive laws of the State of Illinois applicable to
contracts made and to be performed wholly within said state.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
FRONTIER INSURANCE GROUP, INC. MERCURY FINANCE COMPANY
By: By:
------------------------------ -----------------------------
Its: Its:
------------------------------ -----------------------------
<PAGE>
<PAGE>
SECOND AMENDMENT
TO THE
STOCK PURCHASE AGREEMENT
THIS SECOND AMENDMENT to the Stock Purchase Agreement dated March 28,
1997, as amended (the "STOCK PURCHASE AGREEMENT") by and between Mercury Finance
Company, a Delaware corporation ("SELLER") and Frontier Insurance Group, Inc., a
Delaware corporation ("BUYER"), is made and entered into this 3rd day of June,
1997.
WHEREAS, Buyer and Seller have agreed to amend certain terms of the
Stock Purchase Agreement;
NOW, THEREFORE, in consideration of the premises herein contained and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Seller and Buyer agree as follows:
1. AMENDMENT TO SECTION 2.2. Section 2.2(b)(i) is hereby amended to
read in its entirety as follows:
(i) (A) $81,629,625, representing 90% of the Aggregate
Consideration, less $1,170,375, (the "NET AMOUNT") to be paid by Buyer
to ITT Industries, Inc. under the letter agreement between Buyer and
Seller dated March 28, 1997 in accordance with Seller's instructions
thereunder, by wire transfer of immediately available funds to a
segregated bank account designated by Seller (the "SEGREGATED ACCOUNT")
and (B) $9,200,000, representing 10% of the Aggregate Consideration, by
wire transfer of immediately available funds to an account designated
by Harris Trust and Savings Bank (the "ESCROW AGENT") in writing to be
held and released pursuant to the terms of an escrow agreement by and
among Seller, Buyer and the Escrow Agent, in the form attached hereto
as Exhibit A (the "ESCROW AGREEMENT").
2. SECTION 5.7. The Stock Purchase Agreement is hereby amended by
adding the following Section 5.7:
5.7. Segregated Account. (a) Seller shall hold the funds in
the Segregated Account and shall not commingle the funds with other
assets or apply the funds to liabilities or obligations of Seller until
the earlier to occur of the Opinion Delivery Date (as defined in the
Escrow Agreement) or the date of the Additional Deposit (as defined in
the Escrow Agreement).
(b) In the event that the Opinion Delivery Date has not
occurred on or before July 14, 1997, Seller hereby agrees to deposit
immediately with the Escrow Agent the Additional Deposit (as defined in
the Escrow Agreement).
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(c) The Threshold Amount and Ceiling Amount shall not apply to
any claims for breach of this Section 5.7.
3. NO OTHER AMENDMENT; CONFIRMATION. Except as expressly amended,
modified and supplemented hereby, the provisions of the Stock Purchase
Agreement, as amended by the First Amendment to the Stock Purchase Agreement
dated May 29, 1997 by and between Seller and Buyer, are and shall remain in full
force and effect.
4. COUNTERPARTS. This Amendment may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
5. GOVERNING LAW. This Agreement shall be interpreted in accordance
with the substantive laws of the State of Illinois applicable to contracts made
and to be performed wholly within said state.
6. DEFINITIONS. All capitalized terms not defined herein shall have the
meanings ascribed to them in the Stock Purchase Agreement.
* * *
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
FRONTIER INSURANCE GROUP, INC. MERCURY FINANCE COMPANY
By: By:
------------------------------ -----------------------------
Its: Its:
------------------------------ -----------------------------
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<PAGE>
EXECUTION COPY
================================================================================
CREDIT AGREEMENT
among
FRONTIER INSURANCE GROUP, INC.,
VARIOUS LENDING INSTITUTIONS
and
DEUTSCHE BANK AG, NEW YORK BRANCH
AND/OR CAYMAN ISLANDS BRANCH,
as ADMINISTRATIVE AGENT
------------------------------------
Dated as of June 3, 1997
------------------------------------
$100,000,000
================================================================================
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
SECTION 1. Amount and Terms of Credit ............................. 1
1.01 Commitments ............................................ 1
1.02 Minimum Amount of Each Borrowing; Maximum Number of
Borrowings ............................................ 2
1.03 Notice of Borrowing of Revolving Loans ................. 2
1.04 Competitive Bid Borrowings ............................. 2
1.05 Disbursement of Funds .................................. 5
1.06 Notes; Register ........................................ 5
1.07 Conversions ............................................ 6
1.08 Pro Rata Borrowings .................................... 6
1.09 Interest ............................................... 7
1.10 Interest Periods ....................................... 8
1.11 Increased Costs, Illegality, etc ....................... 9
1.12 Compensation ........................................... 11
1.13 Change of Lending Office ............................... 11
SECTION 2. Fees; Commitments ...................................... 12
2.01 Fees ................................................... 12
2.02 Voluntary Reduction of Commitments ..................... 12
2.03 Mandatory Reduction of Commitments, etc ................ 12
SECTION 3. Payments ............................................... 12
3.01 Voluntary Prepayments .................................. 12
3.02 Mandatory Prepayments .................................. 13
3.03 Method and Place of Payment ............................ 14
3.04 Net Payments ........................................... 14
SECTION 4. Conditions Precedent ................................... 16
4.01 Conditions Precedent to Initial Borrowing Date ......... 16
4.02 Conditions Precedent to All Loans ...................... 19
SECTION 5. Representations, Warranties and Agreements ............. 20
5.01 Corporate Status ....................................... 20
5.02 Corporate Power and Authority .......................... 20
5.03 No Violation ........................................... 20
5.04 Litigation ............................................. 21
5.05 Use of Proceeds; Margin Regulations .................... 21
5.06 Governmental Approvals ................................. 21
5.07 True and Complete Disclosure ........................... 21
</TABLE>
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<TABLE>
<S> <C>
5.08 Financial Condition; Financial Statements .............. 22
5.09 Acquisition ............................................ 23
5.10 Tax Returns and Payments ............................... 23
5.11 Compliance with ERISA .................................. 23
5.12 Subsidiaries ........................................... 24
5.13 Intellectual Property, etc ............................. 24
5.15 Labor Relations; Collective Bargaining Agreements ...... 24
5.16 Indebtedness ........................................... 25
5.17 Investment Company Act ................................. 25
SECTION 6. Affirmative Covenants .................................. 25
6.01 Reporting Requirements ................................. 25
6.02 Books, Records and Inspections ......................... 29
6.03 Insurance .............................................. 29
6.04 Payment of Taxes ....................................... 29
6.05 Corporate Franchises ................................... 30
6.06 Compliance with Statutes, etc .......................... 30
6.07 Good Repair ............................................ 30
6.08 End of Fiscal Years; Fiscal Quarters ................... 30
SECTION 7. Negative Covenants ..................................... 30
7.01 Changes in Business .................................... 30
7.02 Consolidation, Merger or Sale of Assets, etc ........... 31
7.03 Liens .................................................. 32
7.04 Indebtedness ........................................... 34
7.05 Advances, Investments and Loans ........................ 35
7.06 Dividends, etc ......................................... 36
7.07 Transactions with Affiliates ........................... 38
7.08 Leverage Ratio ......................................... 38
7.09 Interest Coverage Ratio ................................ 38
7.10 Net Premiums Written to Statutory Surplus Ratio ........ 38
SECTION 8. Events of Default ...................................... 38
8.01 Payments ............................................... 38
8.02 Representations, etc ................................... 39
8.03 Covenants .............................................. 39
8.04 Default Under Other Agreements ......................... 39
8.05 Bankruptcy, etc ........................................ 39
8.06 ERISA .................................................. 40
8.07 Judgments .............................................. 40
8.08 Change of Control ...................................... 40
SECTION 9. Definitions ............................................ 41
</TABLE>
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<TABLE>
<S> <C>
SECTION 10. The Administrative Agent .............................. 56
10.01 Appointment ............................................ 56
10.02 Delegation of Duties ................................... 57
10.03 Exculpatory Provisions ................................. 57
10.04 Reliance by Administrative Agent ....................... 57
10.05 Notice of Default ...................................... 58
10.06 Non-Reliance ........................................... 58
10.07 Indemnification ........................................ 59
10.08 The Administrative Agent in its Individual Capacity .... 59
10.09 Successor Administrative Agent ......................... 59
SECTION 11. Miscellaneous .......................................... 60
11.01 Payment of Expenses, etc ............................... 60
11.02 Right of Setoff ........................................ 60
11.03 Notices ................................................ 61
11.04 Assignments and Participations ......................... 61
11.05 No Waiver; Remedies Cumulative ......................... 63
11.06 Payments Pro Rata ...................................... 63
11.07 Calculations; Computations ............................. 63
11.08 Governing Law; Submission to Jurisdiction; Venue;
Waiver of Jury Trial .................................. 64
11.09 Counterparts ........................................... 64
11.10 Effectiveness .......................................... 65
11.11 Headings Descriptive ................................... 65
11.12 Amendment or Waiver .................................... 65
11.13 Survival ............................................... 65
11.14 Domicile of Loans ...................................... 65
11.15 Confidentiality ........................................ 65
</TABLE>
ANNEX I -- Commitments
ANNEX II -- Bank Addresses
ANNEX III -- Schedule of Subsidiaries
ANNEX IV -- Existing Indebtedness
ANNEX V -- Existing Liens
ANNEX VI -- Existing Advances, Loans and Investments
EXHIBIT A-1 -- Form of Notice of Borrowing
EXHIBIT A-2 -- Form of Notice of Competitive Bid Borrowing
EXHIBIT B -- Form of Note
EXHIBIT C-1 -- Form of Opinion of Epstein, Becker & Green, P.C.
EXHIBIT C-2 -- Form of Opinion of Marvin Tepper, Esq.
EXHIBIT D -- Form of Officers' Certificate
EXHIBIT E -- Form of Assignment Agreement
iii
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CREDIT AGREEMENT, dated as of June 3, 1997, among FRONTIER
INSURANCE GROUP, INC. (the "Borrower"), a Delaware corporation, the lending
institutions listed from time to time on Annex I hereto (each a "Bank" and,
collectively, the "Banks") and DEUTSCHE BANK AG, NEW YORK BRANCH AND/OR CAYMAN
ISLANDS BRANCH, as administrative agent (in such capacity, the "Administrative
Agent"). Unless otherwise defined herein, all capitalized terms used herein and
defined in Section 9 are used herein as so defined.
W I T N E S S E T H :
WHEREAS, subject to and upon the terms and conditions set
forth herein, the Banks are willing to make available to the Borrower the credit
facilities provided for herein;
NOW, THEREFORE, IT IS AGREED:
SECTION 1. Amount and Terms of Credit.
1.011 Commitments. (a) Subject to and upon the terms and
conditions herein set forth, each Bank severally agrees to make a loan or loans
(each a "Revolving Loan" and collectively, the "Revolving Loans") to the
Borrower, which Revolving Loans (i) shall be made at any time and from time to
time on and after the Effective Date and prior to the Final Maturity Date, (ii)
may, at the option of the Borrower, be incurred and maintained as, and/or
converted into, Base Rate Loans or Eurodollar Loans, provided that all Revolving
Loans made by all Banks pursuant to the same Borrowing shall, unless otherwise
specifically provided herein, consist entirely of Revolving Loans of the same
Type, (iii) may be repaid and reborrowed in accordance with the provisions
hereof, (iv) shall not exceed for any Bank at any time outstanding that
aggregate principal amount which equals the Commitment of such Bank at such time
and (v) shall not exceed in the aggregate for all Banks at any time outstanding
that aggregate principal amount which, when added to the then aggregate
outstanding principal amount of all Competitive Bid Loans, equals the Total
Commitment at such time.
(b) Subject to and upon the terms and conditions herein set
forth, each Bank severally agrees that the Borrower may incur a loan or loans
(each a "Competitive Bid Loan" and collectively, the "Competitive Bid Loans")
pursuant to a Competitive Bid Borrowing at any time and from time to time on and
after the Effective Date and prior to the date which is the third Business Day
preceding the date which is seven days prior to the Final Maturity Date,
provided that after giving effect to any Competitive Bid Borrowing and the use
of the proceeds thereof, the aggregate outstanding principal amount of
Competitive Bid Loans, when combined
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with the then aggregate outstanding principal amount of all Revolving Loans,
shall not exceed the Total Commitment at such time.
1.012 Minimum Amount of Each Borrowing; Maximum Number of
Borrowings. The aggregate principal amount of each Borrowing hereunder shall not
be less than (i) $5,000,000, in the case of Revolving Loans, and (ii)
$5,000,000, in the case of Competitive Bid Loans, and, if in excess thereof,
shall be in an integral multiple of $1,000,000. More than one Borrowing may be
incurred on any day; provided that at no time shall there be outstanding more
than five Borrowings of Eurodollar Loans.
1.013 Notice of Borrowing of Revolving Loans. (a) Whenever the
Borrower desires to incur Revolving Loans hereunder, it shall give the
Administrative Agent at its Notice Office, (x) in the case of a Borrowing of
Eurodollar Loans, written notice (or telephonic notice promptly confirmed in
writing) of such proposed Borrowing which notice must be given prior to 12:00
Noon (New York time) at least three Business Days prior to the date of such
proposed Borrowing and (y) in the case of a Borrowing of Base Rate Loans,
written notice (or telephonic notice promptly confirmed in writing) of such
proposed Borrowing, which notice must be given prior to 11:00 A.M. (New York
time) on the date of such proposed Borrowing. Each such notice (each, a "Notice
of Borrowing"), except as otherwise expressly provided in Section 1.11, shall be
irrevocable, and, in the case of a written notice or a confirmation of
telephonic notice, shall be in the form of Exhibit A-1 hereto, appropriately
completed to specify (i) the aggregate principal amount of the Revolving Loans
to be made pursuant to such Borrowing, (ii) the date of such Borrowing (which
shall be a Business Day) and (iii) whether the respective Borrowing shall
consist of Base Rate Loans or Eurodollar Loans and, if Eurodollar Loans, the
Interest Period to be initially applicable thereto. The Administrative Agent
shall promptly give each Bank written notice (or telephonic notice promptly
confirmed in writing) of each proposed Borrowing, of such Bank's proportionate
share thereof and of the other matters covered by the Notice of Borrowing.
(b) Without in any way limiting the obligation of the Borrower
to confirm in writing any notice it may give hereunder by telephone, the
Administrative Agent may act prior to receipt of written confirmation without
liability upon the basis of such telephonic notice, believed by the
Administrative Agent in good faith to be from an Authorized Officer of the
Borrower. In each such case the Borrower hereby waives the right to dispute the
Administrative Agent's record of the terms of any such telephonic notice.
1.014 Competitive Bid Borrowings. (a) Whenever the Borrower
desires to incur a Competitive Bid Borrowing, it shall deliver to the
Administrative Agent, prior to 12:00 Noon (New York time) (x) at least four
Business Days prior to the date of such proposed Competitive Bid Borrowing, in
the case of a Spread Borrowing, and (y) at least one Business Day prior to the
date of such proposed Competitive Bid Borrowing, in the case of an Absolute Rate
Borrowing, a written notice substantially in the form of Exhibit A-2 hereto (a
"Notice of Competitive Bid Borrowing"), which notice shall specify in each case
(i) the date (which shall be a Business Day) and the aggregate amount of the
proposed Competitive Bid Borrowing, (ii)
2
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<PAGE>
the maturity date for repayment of each and every Competitive Bid Loan to be
made as part of such Competitive Bid Borrowing (which maturity date may be (A)
one, two, three or six months after the date of such Competitive Bid Borrowing,
in the case of a Spread Borrowing, and (B) between seven and 364 days,
inclusive, after the date of such Competitive Bid Borrowing, in the case of an
Absolute Rate Borrowing, provided that in no event shall the maturity date of
any Competitive Bid Borrowing be later than the third Business Day preceding the
Final Maturity Date, (iii) the interest payment date or dates relating thereto,
(iv) whether the proposed Competitive Bid Borrowing is to be an Absolute Rate
Borrowing or a Spread Borrowing, and if a Spread Borrowing, the Interest Rate
Basis, and (v) any other terms to be applicable to such Competitive Bid
Borrowing. The Administrative Agent shall promptly notify each Bidder Bank by
telephone or facsimile of each such request for a Competitive Bid Borrowing
received by it from the Borrower and of the contents of the related Notice of
Competitive Bid Borrowing.
(b) Each Bidder Bank shall, if, in its sole discretion, it
elects to do so, irrevocably offer to make one or more Competitive Bid Loans to
the Borrower as part of such proposed Competitive Bid Borrowing at a rate or
rates of interest specified by such Bidder Bank in its sole discretion and
determined by such Bidder Bank independently of each other Bidder Bank, by
notifying the Administrative Agent (which shall give prompt notice thereof to
the Borrower) before 10:00 A.M. (New York time) on the date (the "Reply Date")
which is (x) in the case of an Absolute Rate Borrowing, the date of such
proposed Competitive Bid Borrowing and (y) in the case of a Spread Borrowing,
three Business Days before the date of such proposed Competitive Bid Borrowing,
of the minimum amount and maximum amount of each Competitive Bid Loan which such
Bidder Bank would be willing to make as part of such proposed Competitive Bid
Borrowing (which amounts may, subject to the proviso to the first sentence of
Section 1.01(b), exceed such Bidder Bank's Commitment), the rate or rates of
interest therefor and such Bidder Bank's lending office with respect to such
Competitive Bid Loan; provided that if the Administrative Agent in its capacity
as a Bidder Bank shall, in its sole discretion, elect to make any such offer, it
shall notify the Borrower of such offer before 9:45 A.M. (New York time) on the
Reply Date. If any Bidder Bank shall elect not to make such an offer, such
Bidder Bank shall so notify the Administrative Agent before 10:00 A.M. (New York
time) on the Reply Date, and such Bidder Bank shall not be obligated to, and
shall not, make any Competitive Bid Loan as part of such Competitive Bid
Borrowing; provided that the failure by any Bidder Bank to give such notice
shall not cause such Bidder Bank to be obligated to make any Competitive Bid
Loan as part of such proposed Competitive Bid Borrowing.
(c) The Borrower shall, in turn, before 12:00 Noon (New York
time) on the Reply Date, either:
(i) cancel such Competitive Bid Borrowing by giving the
Administrative Agent notice to such effect, or
3
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(ii) accept one or more of the offers made by any Bidder Bank
or Bidder Banks pursuant to clause (b) above by giving notice (in
writing or by telephone confirmed in writing) to the Administrative
Agent of the amount of each Competitive Bid Loan (which amount shall be
equal to or greater than the minimum amount, and equal to or less than
the maximum amount, notified to the Borrower by the Administrative
Agent on behalf of such Bidder Bank for such Competitive Bid Borrowing
pursuant to clause (b) above) to be made by each Bidder Bank as part of
such Competitive Bid Borrowing, and reject any remaining offers made by
Bidder Banks pursuant to clause (b) above by giving the Administrative
Agent notice to that effect; provided that the acceptance of offers may
only be made on the basis of ascending Absolute Rates (in the case of
an Absolute Rate Borrowing) or Spreads (in the case of a Spread
Borrowing), in each case commencing with the lowest rate so offered;
provided further, however, if offers are made by two or more Bidder
Banks at the same rate and acceptance of all such equal offers would
result in a greater principal amount of Competitive Bid Loans being
accepted than the aggregate principal amount requested by the Borrower,
if the Borrower elects to accept any of such offers the Borrower shall
accept such offers pro rata from such Bidder Banks (on the basis of the
maximum amounts of such offers) unless any such Bidder Bank's pro rata
share would be less than the minimum amount specified by such Bidder
Bank in its offer, in which case the Borrower shall have the right to
accept one or more such equal offers in their entirety and reject the
other equal offer or offers or to allocate acceptance among all such
equal offers (but giving effect to the minimum and maximum amounts
specified for each such offer pursuant to clause (b) above), as the
Borrower may elect in its sole discretion.
(d) If the Borrower notifies the Administrative Agent that
such Competitive Bid Borrowing is cancelled pursuant to clause (c)(i) above, the
Administrative Agent shall give prompt notice thereof to the Bidder Banks and
such Competitive Bid Borrowing shall not be made.
(e) If the Borrower accepts one or more of the offers made by
any Bidder Bank or Bidder Banks pursuant to clause (c)(ii) above, the
Administrative Agent shall in turn promptly notify (x) each Bidder Bank that has
made an offer as described in clause (b) above, of the date and aggregate amount
of such Competitive Bid Borrowing and whether or not any offer or offers made by
such Bidder Bank pursuant to clause (b) above have been accepted by the Borrower
and (y) each Bidder Bank that is to make a Competitive Bid Loan as part of such
Competitive Bid Borrowing, of the amount of each Competitive Bid Loan to be made
by such Bidder Bank as part of such Competitive Bid Borrowing.
1.015 Disbursement of Funds. (a) Subject to the terms and
conditions herein set forth, no later than 11:00 A.M. (New York time) on the
date of each incurrence of Loans (1:00 P.M. (New York time) on such date in the
case of a Borrowing of Base Rate Loans or a Competitive Bid Borrowing
constituting an Absolute Rate Borrowing), each Bank will make
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available its pro rata share, if any, of each Borrowing requested to be made on
such date in the manner provided below.
(b) Each Bank shall make available all amounts it is to fund
under any Borrowing in U.S. dollars and immediately available funds to the
Administrative Agent at the Administrative Agent's Payment Office and the
Administrative Agent will make available to the Borrower by depositing to its
account at the Administrative Agent's Payment Office the aggregate of the
amounts so made available in the type of funds received. Unless the
Administrative Agent shall have been notified by any Bank prior to the date of
any such Borrowing that such Bank does not intend to make available to the
Administrative Agent its portion of the Borrowing or Borrowings to be made on
such date, the Administrative Agent may assume that such Bank has made such
amount available to the Administrative Agent on such date of Borrowing, and the
Administrative Agent, in reliance upon such assumption, may (in its sole
discretion and without any obligation to do so) make available to the Borrower a
corresponding amount. If such corresponding amount is not in fact made available
to the Administrative Agent by such Bank and the Administrative Agent has made
available same to the Borrower, the Administrative Agent shall be entitled to
recover such corresponding amount from such Bank. If such Bank does not pay such
corresponding amount forthwith upon the Administrative Agent's demand therefor,
the Administrative Agent shall promptly notify the Borrower, and the Borrower
shall immediately pay such corresponding amount to the Administrative Agent. The
Administrative Agent shall also be entitled to recover from such Bank or the
Borrower, as the case may be, interest on such corresponding amount in respect
of each day from the date such corresponding amount was made available by the
Administrative Agent to the Borrower to the date such corresponding amount is
recovered by the Administrative Agent, at a rate per annum equal to (x) if paid
by such Bank, the overnight Federal Funds Effective Rate or (y) if paid by the
Borrower, the then applicable rate of interest, calculated in accordance with
Section 1.09, for the respective Loans.
(c) Nothing in this Section 1.05 shall be deemed to relieve
any Bank from its obligation to fulfill its commitments hereunder or to
prejudice any rights which the Borrower may have against any Bank as a result of
any default by such Bank hereunder.
1.016 Notes; Register. (a) The Borrower's obligation to pay
the principal of, and interest on, the Revolving Loans made to it by each Bank
shall be evidenced by a promissory note substantially in the form of Exhibit B
hereto with blanks appropriately completed in conformity herewith (each a "Note"
and collectively, the "Notes").
(b) The Note issued to each Bank shall (i) be executed by the
Borrower, (ii) be payable to the order of such Bank and be dated the Initial
Borrowing Date, (iii) be in a stated principal amount equal to the Commitment of
such Bank and be payable in the principal amount of the Revolving Loans
evidenced thereby, (iv) mature on the Final Maturity Date, (v) bear interest as
provided in the appropriate clause of Section 1.09 in respect of the Base Rate
Loans and Eurodollar Loans, as the case may be, evidenced thereby and (vi) be
entitled to the benefits of this Agreement and the other Credit Documents.
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(c) Each Bank will record on its internal records the amount
of each Loan made by it and each payment in respect thereof and will prior to
any transfer of its Note endorse on the reverse side thereof the outstanding
principal amount of Revolving Loans evidenced thereby. Failure to make any such
notation or any error in any such notation shall not affect the Borrower's
obligations in respect of such Revolving Loans.
(d) The Administrative Agent shall maintain at its Payment
Office a register for the recordation of the names and addresses of the Banks,
the Commitments of the Banks from time to time, and the principal amount of the
Revolving Loans and Competitive Bid Loans owing to each Bank from time to time
together with the maturity and interest rates applicable to each such
Competitive Bid Loan, and other terms applicable thereto (the "Register"). The
entries in the Register shall be conclusive and binding for all purposes, absent
manifest error.
1.017 Conversions. The Borrower shall have the option to
convert on any Business Day all or a portion at least equal to $5,000,000 (and,
if in excess thereof, an integral multiple of $1,000,000) of the outstanding
principal amount of the Revolving Loans of one Type owing by the Borrower into a
Borrowing or Borrowings of the other Type of Revolving Loans; provided that (i)
no partial conversion of a Borrowing of Eurodollar Loans shall reduce the
outstanding principal amount of the Eurodollar Loans pursuant to such Borrowing
to less than $5,000,000, (ii) Base Rate Loans may only be converted into
Eurodollar Loans if no Default or Event of Default is in existence on the date
of the conversion, (iii) Borrowings of Eurodollar Loans resulting from this
Section 1.07 shall be limited in number as provided in Section 1.02 and (iv)
each such conversion shall be made pro rata among the Revolving Loans of each
Bank of the Type being converted. Each such conversion shall be effected by the
Borrower by giving the Administrative Agent at its Notice Office, prior to 12:00
Noon (New York time), at least three Business Days' (or one Business Day's in
the case of a conversion into Base Rate Loans) prior written notice (or
telephonic notice promptly confirmed in writing) (each a "Notice of Conversion")
specifying the Revolving Loans to be so converted, the Type of Revolving Loans
to be converted into and, if to be converted into a Borrowing of Eurodollar
Loans, the Interest Period to be initially applicable thereto. The
Administrative Agent shall give each Bank prompt notice of any such proposed
conversion.
1.018 Pro Rata Borrowings. All Borrowings of Revolving Loans
under this Agreement shall be loaned by the Banks pro rata on the basis of their
Commitments. It is understood that no Bank shall be responsible for any default
by any other Bank in its obligation to make Loans hereunder and that each Bank
shall be obligated to make the Loans provided to be made by it hereunder,
regardless of the failure of any other Bank to fulfill its commitments
hereunder.
1.019 Interest. (a) The unpaid principal amount of each Base
Rate Loan shall bear interest from the date of the incurrence thereof until
maturity (whether by acceleration or otherwise) at a rate per annum which shall
at all times be the Base Rate in effect from time to time.
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(b) The unpaid principal amount of each Eurodollar Loan shall
bear interest from the date of the incurrence thereof until maturity (whether by
acceleration or otherwise) at a rate per annum which shall at all times be the
Applicable Eurodollar Rate Margin plus the relevant Eurodollar Rate.
(c) The unpaid principal amount of each Competitive Bid Loan
shall bear interest from the date the proceeds thereof are made available to the
Borrower until maturity (whether by acceleration or otherwise) at the rate or
rates per annum specified by a Bidder Bank or Bidder Banks, as the case may be,
pursuant to Section 1.04(b) and accepted by the Borrower pursuant to Section
1.04(c).
(d) Overdue principal and, to the extent permitted by law,
overdue interest in respect of each Loan shall bear interest at a rate per annum
equal to the Base Rate in effect from time to time plus 2%; provided that
principal in respect of Eurodollar Loans and Competitive Bid Loans shall bear
interest after the same becomes due (whether by acceleration or otherwise) until
the end of the applicable Interest Period for such Eurodollar Loans, or the
original scheduled maturity of such Competitive Bid Loans, as the case may be,
at a per annum rate equal to 2% plus the rate of interest applicable on the due
date therefor.
(e) Interest shall accrue from and including the date of any
incurrence of a Loan to but excluding the date of any repayment thereof and
shall be payable (i) in respect of each Base Rate Loan, quarterly in arrears on
the last Business Day of each March, June, September and December, (ii) in
respect of each Competitive Bid Loan, at such times as specified in the Notice
of Competitive Bid Borrowing relating thereto, (iii) in respect of each
Eurodollar Loan, on the last day of each Interest Period applicable thereto and,
in the case of an Interest Period in excess of three months, on each date
occurring at three month intervals after the first day of such Interest Period
and (iv) in respect of each Loan, on any conversion or prepayment (on the amount
so converted or prepaid), at maturity (whether by acceleration or otherwise)
and, after such maturity, on demand.
(f) All computations of interest hereunder shall be made in
accordance with Section 11.07(b).
(g) The Administrative Agent, upon determining the interest
rate for any Borrowing of Eurodollar Loans for any Interest Period, shall
promptly notify the Borrower and the Banks thereof.
1.10 Interest Periods. At the time the Borrower gives a Notice
of Borrowing or Notice of Conversion, in respect of the making of, or conversion
into, a Borrowing of Eurodollar Loans (in the case of the initial Interest
Period applicable thereto), or prior to 12:00 Noon (New York time) on the third
Business Day prior to the expiration of an Interest Period applicable to a
Borrowing of Eurodollar Loans, it shall have the right to elect by giving the
Administrative Agent written notice (or telephonic notice promptly confirmed in
writing) of the Interest Period to be applicable to such Borrowing, which
Interest Period shall, at the option
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of the Borrower, be a one, two, three or six month period. Notwithstanding
anything to the contrary contained above:
(i) the initial Interest Period for any Borrowing of
Eurodollar Loans shall commence on the date of such Borrowing
(including the date of any conversion from a Borrowing of Base Rate
Loans) and each Interest Period occurring thereafter in respect of such
Borrowing shall commence on the day on which the next preceding
Interest Period expires;
(ii) if any Interest Period begins on a day for which there is
no numerically corresponding day in the calendar month at the end of
such Interest Period, such Interest Period shall end on the last
Business Day of such calendar month;
(iii) if any Interest Period would otherwise expire on a day
which is not a Business Day, such Interest Period shall expire on the
next succeeding Business Day, provided that if any Interest Period
would otherwise expire on a day which is not a Business Day but is a
day of the month after which no further Business Day occurs in such
month, such Interest Period shall expire on the next preceding Business
Day;
(iv) no Interest Period may be elected if it would extend
beyond the Final Maturity Date; and
(v) no Interest Period may be elected at any time when a
Default or Event of Default is then in existence.
If upon the expiration of any Interest Period, the Borrower has failed, or is
not permitted, to elect a new Interest Period to be applicable to any Borrowing
of Eurodollar Loans as provided above, the Borrower shall be deemed to have
elected to convert such Borrowing into a Borrowing of Base Rate Loans effective
as of the expiration date of such current Interest Period.
1.11 Increased Costs, Illegality, etc. (a) In the event that
(x) in the case of clause (i) below, the Administrative Agent or (y) in the case
of clauses (ii) and (iii) below, any Bank shall have determined (which
determination shall, absent manifest error, be final and conclusive and binding
upon all parties hereto):
(i) on any date for determining the Eurodollar Rate for any
Interest Period or in respect of any Spread Borrowing priced by
reference to the Eurodollar Rate that, by reason of any changes arising
after the date of this Agreement affecting the interbank Eurodollar
market, adequate and fair means do not exist for ascertaining the
applicable interest rate on the basis provided for in the definition of
Eurodollar Rate; or
(ii) at any time, that such Bank shall incur increased costs or
reductions in the amounts received or receivable hereunder with respect
to any Eurodollar Loans or
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Competitive Bid Loans because of (x) any change since the date of this
Agreement (or, in the case of any such cost or reduction with respect
to any Competitive Bid Loan, since the making of such Competitive Bid
Loan) in any applicable law, governmental rule, regulation, guideline,
order or request (whether or not having the force of law) or in the
interpretation or administration thereof and including the introduction
of any new law or governmental rule, regulation, guideline, order or
request (such as, for example, but not limited to, a change in official
reserve requirements, but, in all events, excluding reserves required
under Regulation D to the extent included in the computation of the
Eurodollar Rate) and/or (y) other circumstances affecting the interbank
Eurodollar market generally; or
(iii) at any time, that the making or continuance of any Eurodollar
Loan or Competitive Bid Loan has become unlawful by compliance by such
Bank in good faith with any law, governmental rule, regulation,
guideline or order (or would conflict with any such governmental rule,
regulation, guideline or order not having the force of law but with
which such Bank customarily complies even though the failure to comply
therewith would not be unlawful), or has become impracticable as a
result of a contingency occurring after the Effective Date which
materially and adversely affects the interbank Eurodollar market;
then, and in any such event, such Bank (or the Administrative Agent in the case
of clause (i) above to the extent applicable to Revolving Loans) shall on such
date give notice (if by telephone promptly confirmed in writing) to the Borrower
and to the Administrative Agent of such determination (which notice the
Administrative Agent shall promptly transmit to each of the other Banks).
Thereafter (x) in the case of clause (i) above, Eurodollar Loans (or Competitive
Bid Loans constituting a Spread Borrowing priced by reference to the Eurodollar
Rate) shall no longer be available until such time as the Administrative Agent
notifies the Borrower and the Banks that the circumstances giving rise to such
notice by the Administrative Agent no longer exist, and any Notice of Borrowing,
Notice of Competitive Bid Borrowing or Notice of Conversion given by the
Borrower with respect to Eurodollar Loans (or any affected Competitive Bid
Loans) which have not yet been incurred shall be deemed rescinded by the
Borrower, (y) in the case of clause (ii) above, the Borrower shall pay to such
Bank, upon written demand therefor, such additional amounts (in the form of an
increased rate of, or a different method of calculating, interest or otherwise
as such Bank in its sole discretion shall determine) as shall be required to
compensate such Bank for such increased costs or reductions in amounts
receivable hereunder (a written notice as to the additional amounts owed to such
Bank, showing in reasonable detail the basis for the calculation thereof, which
basis must be reasonable, submitted to the Borrower by such Bank shall, absent
manifest error, be final and conclusive and binding upon all parties hereto) and
(z) in the case of clause (iii) above, the Borrower shall take one of the
actions specified in Section 1.11(b) as promptly as possible and, in any event,
within the time period required by law.
(b) At any time that any Eurodollar Loan or Competitive Bid
Loan is affected by the circumstances described in Section 1.11(a)(ii) or any
Eurodollar Loan or Competitive
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Bid Loan is affected by the circumstances described in Section 1.11(a)(iii), the
Borrower may (and in the case of a Eurodollar Loan or Competitive Bid Loan
affected pursuant to Section 1.11(a)(iii) shall) either (x) if the affected
Eurodollar Loan or Competitive Bid Loan is then being made pursuant to a
Borrowing, cancel said Borrowing by giving the Administrative Agent telephonic
notice (promptly confirmed in writing) thereof on the same date that the
Borrower was notified by a Bank pursuant to Section 1.11(a)(ii) or (iii), (y) if
the affected Eurodollar Loan is then outstanding, upon at least three Business
Days' notice to the Administrative Agent, require the affected Bank to convert
each such Eurodollar Loan into a Base Rate Loan or (z) subject to the provisions
of Section 3.02(b), if the affected Competitive Bid Loan is then outstanding,
prepay such Competitive Bid Loan in full (which prepayment may be made with the
proceeds of a Revolving Loan); provided, that if more than one Bank is affected
at any time, then all affected Banks must be treated the same pursuant to this
Section 1.11(b).
(c) If any Bank shall have determined that the adoption after
the Effective Date of any applicable law, rule or regulation regarding capital
adequacy, or any change therein after the Effective Date, or any change after
the Effective Date in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by such Bank or its
parent with any request or directive made after the Effective Date regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on such Bank's or its parent's capital or assets as a consequence
of its commitments or obligations hereunder to a level below that which such
Bank or its parent could have achieved but for such adoption, change or
compliance (taking into consideration such Bank's or its parent's policies with
respect to capital adequacy), then from time to time, within 15 days after
demand by such Bank (with a copy to the Administrative Agent), the Borrower
shall pay to such Bank or its parent such additional amount or amounts as will
compensate such Bank or its parent for such reduction. Each Bank, upon
determining in good faith that any additional amounts will be payable pursuant
to this Section 1.11(c), will give prompt written notice thereof to the
Borrower, which notice shall set forth the basis of the calculation of such
additional amounts, although the failure to give any such notice shall not
release or diminish any of the Borrower's obligations to pay additional amounts
pursuant to this Section 1.11(c) upon receipt of such notice.
1.12 Compensation. The Borrower shall compensate each Bank,
upon its written request (which request shall set forth the basis for requesting
such compensation), for all reasonable losses, expenses and liabilities
(including, without limitation, any loss, expense or liability incurred by
reason of the liquidation or reemployment of deposits or other funds required by
such Bank to fund its Eurodollar Loans or Competitive Bid Loans but excluding
any loss of anticipated profit with respect to such Loans) which such Bank may
sustain: (i) if for any reason (other than a default by such Bank or the
Administrative Agent) a Borrowing of Eurodollar Loans or Competitive Bid Loans
accepted by the Borrower in accordance with Section 1.04(c)(ii) does not occur
on a date specified therefor in a Notice of Borrowing, Notice of Competitive Bid
Borrowing or Notice of Conversion (whether or not withdrawn by the Borrower or
deemed withdrawn pursuant to Section 1.11(a)); (ii) if any repayment, prepayment
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or conversion of any of its Eurodollar Loans or any repayment of Competitive Bid
Loans occurs on a date which is not the last day of an Interest Period
applicable thereto; (iii) if any prepayment of any of its Eurodollar Loans or
Competitive Bid Loans is not made on any date specified in a notice of
prepayment given by the Borrower; or (iv) as a consequence of (x) any other
default by the Borrower to repay its Eurodollar Loans or Competitive Bid Loans
when required by the terms of this Agreement or (y) an election made pursuant to
Section 1.11(b). Calculation of all amounts payable to a Bank under this Section
1.12 in respect of Eurodollar Loans or Competitive Bid Loans priced by reference
to the Eurodollar Rate shall be made as though that Bank had actually funded its
relevant Loan through the purchase of a Eurodollar deposit bearing interest at
the Eurodollar Rate in an amount equal to the amount of that Loan, having a
maturity comparable to the relevant Interest Period and through the transfer of
such Eurodollar deposit from an offshore office of that Bank or other bank to a
domestic office of that Bank in the United States of America; provided, however,
that each Bank may fund each of its Eurodollar Loans or Competitive Bid Loans in
any manner it sees fit and the foregoing assumption shall be utilized only for
the calculation of amounts payable under this Section 1.12.
1.13 Change of Lending Office. Each Bank agrees that, upon the
occurrence of any event giving rise to the operation of Section 1.11(a)(ii) or
(iii) or 3.04 with respect to such Bank, it will, if requested by the Borrower,
use reasonable efforts (subject to overall policy considerations of such Bank)
to designate another lending office for any Loans affected by such event;
provided that such designation is made on such terms that, in the opinion of
such Bank, such Bank and its lending office suffer no economic, legal or
regulatory disadvantage, with the object of avoiding the consequence of the
event giving rise to the operation of any such Section. Nothing in this Section
1.13 shall affect or postpone any of the obligations of the Borrower or the
right of any Bank provided in Section 1.11 or 3.04.
SECTION 2. Fees; Commitments.
1.021 Fees. (a) The Borrower agrees to pay to the
Administrative Agent a facility fee (the "Facility Fee") for the account of the
Banks pro rata on the basis of their respective Commitments for the period from
and including the Effective Date to but not including the date the Total
Commitment has been terminated computed at a rate per annum equal to the
Applicable Facility Fee Percentage from time to time of the Total Commitment as
in effect from time to time. Accrued Facility Fees shall be due and payable in
arrears on the last Business Day of each March, June, September and December and
on the date upon which the Total Commitment is terminated.
(b) In addition to any fees set forth herein, the Borrower
shall pay to the Administrative Agent, for the account of the Administrative
Agent, when and as due, such fees as have been, or are from time to time,
separately agreed upon.
(c) All computations of Fees shall be made in accordance with
Section 11.07(b).
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1.022 Voluntary Reduction of Commitments. Upon at least three
Business Days' prior written notice (or telephonic notice promptly confirmed in
writing) given by the Borrower to the Administrative Agent at its Notice Office
(which notice the Administrative Agent shall promptly transmit to each of the
Banks), the Borrower shall have the right, without premium or penalty, to
terminate, in whole or in part, the Total Unutilized Commitment (or to the
extent that at such time there are no Loans outstanding, to terminate the Total
Commitment), provided that (x) any partial reduction of the Total Unutilized
Commitment pursuant to this Section 2.02 shall be in the amount of at least
$15,000,000, and (y) any such termination shall apply to proportionately and
permanently reduce the Commitment of each of the Banks.
1.023 Mandatory Reduction of Commitments, etc. (a) The Total
Commitment (and the Commitment of each Bank) shall be terminated at 5:00 P.M.
(New York time) on the Expiration Date unless the Initial Borrowing Date has
occurred on or before such date.
(b) The Total Commitment shall terminate on the Final Maturity
Date.
SECTION 3. Payments.
1.031 Voluntary Prepayments. The Borrower shall have the right
to prepay Revolving Loans, without premium or penalty (except for amounts
payable pursuant to Section 1.12), in whole or in part, from time to time on the
following terms and conditions: (i) the Borrower shall give the Administrative
Agent at its Notice Office written notice (or telephonic notice promptly
confirmed in writing) of its intent to prepay the Revolving Loans, the amount of
such prepayment and (in the case of Eurodollar Loans) the specific Borrowing(s)
pursuant to which made, which notice shall be given by the Borrower no later
than 12:00 Noon (New York time) one Business Day prior to the date of such
prepayment, and which notice shall promptly be transmitted by the Administrative
Agent to each of the Banks; (ii) each partial prepayment of any Borrowing shall
be in an aggregate principal amount of at least $1,000,000, provided that no
partial prepayment of Eurodollar Loans made pursuant to a Borrowing shall reduce
the aggregate principal amount of the Loans outstanding pursuant to such
Borrowing to an amount less than $5,000,000; and (iii) each prepayment in
respect of any Revolving Loans made pursuant to a Borrowing shall be applied pro
rata among such Revolving Loans. Upon receipt of a notice of prepayment pursuant
to this Section 3.01, the Administrative Agent shall promptly notify each Bank
of the contents thereof and of such Bank's ratable share of such prepayment. The
Borrower shall have no right under this Section 3.01 to prepay any principal
amount of any Competitive Bid Loans.
1.032 Mandatory Prepayments. (a) If on any date the sum of the
outstanding principal amount of Revolving Loans and Competitive Bid Loans (all
the foregoing, collectively, the "Aggregate Loan Outstandings") exceeds the
Total Commitment as then in effect, the Borrower shall repay on such date the
principal of Revolving Loans, in an amount equal to such excess. If, after
giving effect to the prepayment of all outstanding Revolving Loans as set forth
above, the remaining Aggregate Loan Outstandings exceed the Total
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Commitment, the Borrower shall repay on such date the principal of Competitive
Bid Loans in an aggregate amount equal to such excess, provided that no
Competitive Bid Loan shall be prepaid pursuant to this sentence unless the Bank
that made same consents to such prepayment. In the absence of such consent, the
provisions of the second sentence of Section 3.02(b) shall be applicable.
(b) With respect to each prepayment of Revolving Loans
required by this Section 3.02, the Borrower may designate the Types of Revolving
Loans which are to be prepaid and the specific Borrowing(s) pursuant to which
made; provided, that (i) if any prepayment of Eurodollar Loans made pursuant to
a single Borrowing shall reduce the outstanding Revolving Loans made pursuant to
such Borrowing to an amount less than $5,000,000, such Borrowing shall be
immediately converted into Base Rate Loans; and (ii) each prepayment of any
Revolving Loans made pursuant to a Borrowing shall be applied pro rata among
such Revolving Loans. At any time that the Borrower is obligated to prepay any
Competitive Bid Loan pursuant to Section 1.11(b) or 3.02(a) on a date other than
the scheduled maturity date thereof, such prepayment shall only be made if the
respective Bank that made such Competitive Bid Loan has consented in writing (or
by telephone confirmed in writing) to the Borrower to such prepayment within 48
hours after notice (in writing or by telephone confirmed in writing) by the
Borrower to such Bank of such prepayment (it being understood that the Borrower
will give such notice and that any failure to respond to such notice will
constitute a rejection thereof; if such prepayment is not so consented to by the
respective Bank then, in the case of a prepayment otherwise required pursuant to
Section 3.02(a), the provisions of the following sentence will be applicable. At
the time any Competitive Bid Loans are otherwise required to be prepaid the
Borrower will deposit 100% of the principal amounts that otherwise would have
been paid in respect of the Competitive Bid Loans with the Administrative Agent
to be held as security for the obligations of the Borrower hereunder pursuant to
a cash collateral agreement to be entered into in form and substance reasonably
satisfactory to the Administrative Agent, with such cash collateral to be
released from such cash collateral account (and applied to repay the principal
amount of such Competitive Bid Loans) upon each occurrence thereafter of the
last day of an Interest Period applicable to the relevant Competitive Bid Loans,
with the amount to be so released and applied on the last day of each Interest
Period to be the amount of the Competitive Bid Loans to which such Interest
Period applies (or, if less, the amount remaining in such cash collateral
account). In the absence of a designation of Revolving Loans by the Borrower as
described in this Section 3.02(b), the Administrative Agent shall, subject to
the above, make such designation in its sole discretion with a view, but no
obligation, to minimize breakage costs owing under Section 1.12.
1.033 Method and Place of Payment. Except as otherwise
specifically provided herein, all payments under this Agreement and the Notes
shall be made to the Administrative Agent for the ratable account of the Banks
entitled thereto, not later than 1:00 P.M. (New York time) on the date when due
and shall be made in immediately available funds and in lawful money of the
United States of America at the Administrative Agent's Payment Office, it being
understood that written, telex or facsimile notice by the Borrower to the
Administrative Agent to make a payment from the funds in the Borrower's account
at the
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Administrative Agent's Payment Office shall constitute the making of such
payment to the extent of such funds held in such account. Any payments under
this Agreement which are made later than 1:00 P.M. (New York time) shall be
deemed to have been made on the next succeeding Business Day. Whenever any
payment to be made hereunder shall be stated to be due on a day which is not a
Business Day, the due date thereof shall be extended to the next succeeding
Business Day and, with respect to payments of principal, interest shall be
payable during such extension at the applicable rate in effect immediately prior
to such extension.
1.034 Net Payments. (a) All payments made by the Borrower
hereunder will be made without setoff or counterclaim. Except as provided in
Section 3.04(b), all such payments will be made free and clear of, and without
deduction or withholding for, any present or future taxes, levies, imposts,
duties, fees, assessments or other charges of whatever nature now or hereafter
imposed by any jurisdiction or by any political subdivision or taxing authority
thereof or therein with respect to such payments (but excluding, except as
provided in the second succeeding sentence, any tax imposed on or measured by
the net income or net profits of a Bank pursuant to the laws of the jurisdiction
in which it is organized or the jurisdiction in which the principal office or
applicable lending office of such Bank is located or any subdivision thereof or
therein) and all interest, penalties or similar liabilities with respect thereto
(all such non-excluded taxes, levies, imposts, duties, fees, assessments or
other charges being referred to collectively as "Taxes"). If any Taxes are so
levied or imposed, the Borrower agrees to pay the full amount of such Taxes, and
such additional amounts as may be necessary so that every payment of all amounts
due under this Agreement or under any Note, after withholding or deduction for
or on account of any Taxes, will not be less than the amount provided for herein
or in such Note. If any amounts are payable in respect of Taxes pursuant to the
preceding sentence, the Borrower agrees to reimburse each Bank, upon the written
request of such Bank, for taxes imposed on or measured by the net income or net
profits of such Bank arising solely from, and solely to the extent of, such
Taxes, pursuant to the laws of the jurisdiction in which it is organized or in
which the principal office or applicable lending office of such Bank is located
or under the laws of any political subdivision or taxing authority of any such
jurisdiction in which the principal office or applicable lending office of such
Bank is located and for any withholding of taxes as such Bank shall determine
are payable by, or withheld from, such Bank in respect of such amounts so paid
to or on behalf of such Bank pursuant to the preceding sentence and in respect
of any amounts paid to or on behalf of such Bank pursuant to this sentence. The
Borrower will furnish to the Administrative Agent within 45 days after the date
the payment of any Taxes is due pursuant to applicable law certified copies of
tax receipts evidencing such payment by the Borrower. The Borrower agrees to
indemnify and hold harmless each Bank, and reimburse such Bank upon its written
request, for the amount of any Taxes for which the Borrower is liable under the
preceding sentences of this Section 3.04(a) which are paid by such Bank.
(b) Notwithstanding Section 3.04(a), the Borrower shall be
entitled, to the extent it is required to do so by law, to deduct or withhold
(and shall not be required to make payments as otherwise required in Section
3.04(a) on account of such deductions or withholdings) income or other similar
taxes imposed by the United States of America from
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interest, fees or other amounts payable hereunder for the account of any Bank
other than a Bank (i) who is a U.S. Person for Federal income tax purposes or
(ii) who has the Prescribed Forms on file with the Borrower for the applicable
year to the extent deduction or withholding of such taxes is not required as a
result of the filing of such Prescribed Forms, provided that if the Borrower
shall so deduct or withhold any such taxes, it shall provide a statement to the
Administrative Agent and such Bank, setting forth the amount of such taxes so
deducted or withheld, the applicable rate and any other information or
documentation which such Bank may reasonably request for assisting such Bank to
obtain any allowable credits or deductions for the taxes so deducted or withheld
in the jurisdiction or jurisdictions in which such Bank is subject to tax.
SECTION 4. Conditions Precedent.
1.041 Conditions Precedent to Initial Borrowing Date. The
obligation of the Banks to make Loans hereunder on the Initial Borrowing Date is
subject to the satisfaction of each of the following conditions at such time:
(a) Effectiveness; Notes. On or prior to the Initial Borrowing
Date, (i) the Effective Date shall have occurred and (ii) there shall
have been delivered to the Administrative Agent for the account of each
Bank the appropriate Note executed by the Borrower, in each case, in
the amount, maturity and as otherwise provided herein.
(b) Opinion of Counsel. On the Initial Borrowing Date, the
Administrative Agent shall have received (i) an opinion, addressed to
the Administrative Agent and each of the Banks and dated the Initial
Borrowing Date, from Epstein, Becker & Green, P.C., counsel to the
Borrower, which opinion shall cover the matters covered in Exhibit C-1
hereto and (ii) an opinion, addressed to the Administrative Agent and
each of the Banks and dated the Initial Borrowing Date, from Marvin
Tepper, Esq., counsel to the Borrower, which opinion shall cover the
matters covered in Exhibit C-2 hereto.
(c) Corporate Proceedings. (i) On the Initial Borrowing Date,
the Administrative Agent shall have received from the Borrower a
certificate, dated the Initial Borrowing Date, signed by the President
or any Vice-President of the Borrower, and attested to by the Secretary
or any Assistant Secretary of the Borrower, in the form of Exhibit D
hereto with appropriate insertions, together with (x) copies of the
articles of incorporation, any certificate of designation, the by-laws,
or other organizational documents of the Borrower, (y) the resolutions,
or such other administrative approval, of the Borrower which shall be
reasonably satisfactory to the Administrative Agent and (z) a statement
that all of the applicable conditions set forth in Sections 4.01(e),
(f), (g) and (i) and 4.02(b) exist as of such date.
(ii) On the Initial Borrowing Date, all corporate and legal
proceedings and all instruments and agreements in connection with the
transactions contemplated by this
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Agreement and the other Transaction Documents shall be reasonably
satisfactory in form and substance to the Administrative Agent, and the
Administrative Agent shall have received all information and copies of
all certificates, documents and papers, including good standing
certificates and any other records of corporate proceedings and
governmental approvals, if any, which the Administrative Agent may have
reasonably requested in connection therewith, such documents and
papers, where appropriate, to be certified by proper corporate or
governmental authorities.
(d) Plans; Collective Bargaining Agreements; Existing
Indebtedness Agreements; Shareholders' Agreements; Management
Agreements; Employment Agreements; Tax Sharing Agreements. On or prior
to the Initial Borrowing Date, there shall have been delivered to the
Administrative Agent copies, certified as true and correct by an
appropriate officer of the Borrower of:
(i) any Plans, and for each Plan (x) that is a
Single-Employer Plan the most recently completed actuarial
valuation prepared therefor by such Plan's regular enrolled
actuary and the Schedule B (Actuarial Information) to the
most recent annual report (Form 5500 Series) for each Plan
most recently filed with the Internal Revenue Service and (y)
that is a Multiemployer Plan, each of the documents referred
to in clause (x) either in the possession of the Borrower or
any of its Subsidiaries or any ERISA Affiliate or reasonably
available thereto from the sponsor or trustees of such Plan;
(ii) any collective bargaining agreements or any
other similar agreement or arrangements covering the
employees of the Borrower or any of its Subsidiaries
(collectively, the "Collective Bargaining Agreements");
(iii) all agreements evidencing or relating to
Existing Indebtedness (the "Existing Indebtedness
Agreements");
(iv) all agreements entered into by the Borrower or
any of its Subsidiaries governing the terms and relative
rights of its capital stock, and any agreements entered into
by members or shareholders of the Borrower or any such
Subsidiary with respect to their capital stock (collectively,
the "Shareholders' Agreements");
(v) any agreement with respect to the management of
the Borrower or any of its Subsidiaries (collectively, the
"Management Agreements");
(vi) any material employment agreements entered into
by the Borrower or any of its Subsidiaries (collectively, the
"Employment Agreements"); and
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(vii) any tax sharing agreements to which the Borrower
or any of its Subsidiaries is a party (collectively, "Tax
Sharing Agreements").
all of which Plans, Collective Bargaining Agreements, Existing
Indebtedness Agreements, Shareholders' Agreements, Management
Agreements, Employment Agreements and Tax Sharing Agreements shall be
in form and substance reasonably satisfactory to the Administrative
Agent.
(e) Adverse Change, etc. From December 31, 1996 to the Initial
Borrowing Date, nothing shall have occurred (and neither the Banks nor
the Administrative Agent shall have become aware of any facts or
conditions not previously known) which the Administrative Agent or the
Required Banks shall reasonably determine (i) has, or is reasonably
likely to have, a material adverse effect on the rights or remedies of
the Banks or the Administrative Agent under this Agreement or any other
Credit Document, or on the ability of the Borrower to perform its
obligations to them, or (ii) has, or is reasonably likely to have, a
Material Adverse Effect.
(f) Litigation. No actions, suits or proceedings shall be
pending or, to the knowledge of the Borrower, threatened against the
Borrower on the Initial Borrowing Date (i) with respect to this
Agreement or any other Credit Document or (ii) which the Administrative
Agent or the Required Banks shall determine has, or is reasonably
likely to have, (x) a Material Adverse Effect or (y) a material adverse
effect on the rights or remedies of the Banks or Administrative Agent
hereunder or under any other Credit Document or on the ability of the
Borrower to perform its obligations to them.
(g) Approvals. On the Initial Borrowing Date, all necessary
governmental and material third party approvals in connection with the
transactions contemplated by the Credit Documents and the other
Transaction Documents and otherwise referred to herein or therein shall
have been obtained and remain in effect, and all applicable waiting
periods shall have expired without any action being taken by any
competent authority (including any court having jurisdiction) which
restrains or prevents such transactions or imposes, in the judgment of
the Required Banks or the Administrative Agent, materially adverse
conditions upon the consummation of such transactions. The
Administrative Agent shall have received copies of all governmental
approvals required in connection with the Acquisition.
(h) Fees. On or prior to the Initial Borrowing Date, the
Borrower shall have paid to the Administrative Agent and the Banks all
fees, costs and expenses agreed upon by such parties to be paid on or
prior to such date.
(i) Acquisition. On the Initial Borrowing Date, there shall
have been delivered to the Administrative Agent all Acquisition
Documents, certified as true and correct by an Authorized Officer of
the Borrower, which Acquisition Documents shall be in form and
substance reasonably satisfactory to the Administrative Agent and each
of the
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conditions precedent to the consummation of the Acquisition as set
forth in the Acquisition Documents shall have been satisfied or, if
applicable, waived to the reasonable satisfaction of the Administrative
Agent. Concurrently with the initial incurrence of Loans hereunder, the
Acquisition shall be consummated in accordance with the terms and
conditions of the respective Acquisition Documents and all applicable
laws.
(j) Financial Statements; Actuarial Reports. On or prior to
the Initial Borrowing Date, the Administrative Agent shall have
received (i) the financial statements of the Borrower and Lyndon
referred to in Sections 5.08(b), (c) and (d), (ii) an actuarial report
as of a recent date with respect to the Borrower and its Subsidiaries,
prepared by Ernst & Young, and (iii) an actuarial report as of a recent
date with respect to Lyndon and its Subsidiaries, prepared by Lyndon's
internal actuarial officer and filed with Lyndon's Applicable
Regulatory Insurance Authority, all of which shall be in form and
substance reasonably satisfactory to the Administrative Agent.
1.042 Conditions Precedent to All Loans. The obligation of the
Banks to make each Loan hereunder is subject, at the time thereof, to the
satisfaction of the following conditions:
(a) Notice of Borrowing. The Administrative Agent shall have
received a Notice of Borrowing meeting the requirements of Section 1.03
in the case of a Borrowing of Revolving Loans, or a Notice of
Competitive Bid Borrowing satisfying the requirements of Section 1.04
in the case of a Borrowing of Competitive Bid Loans.
(b) No Default; Representations and Warranties. At the time of
the making of each Loan and also after giving effect thereto, (i) there
shall exist no Default or Event of Default and (ii) all representations
and warranties contained herein or in the other Credit Documents
(except, in the case of each Loan made after the Initial Borrowing
Date, the representations and warranties contained in Section 5.04 and
Section 5.08(e)) shall be true and correct in all material respects
with the same effect as though such representations and warranties had
been made on and as of the date of such Loan, except to the extent that
such representations and warranties expressly relate to an earlier
date.
The acceptance of the benefits of each Loan shall constitute a
representation and warranty by the Borrower to each of the Banks that all of the
applicable conditions specified in Section 4.01 and/or 4.02, as the case may be,
exist as of that time. All of the certificates, legal opinions and other
documents and papers referred to in this Section 4, unless otherwise specified,
shall be delivered to the Administrative Agent for the account of each of the
Banks and, except for the Notes, in sufficient counterparts for each of the
Banks.
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SECTION 5. Representations, Warranties and Agreements. In
order to induce the Banks to enter into this Agreement and to make the Loans
provided for herein, the Borrower makes the following representations and
warranties to, and agreements with, the Banks, all of which shall survive the
execution and delivery of this Agreement and the making of the Loans (with the
making of each Loan (except as provided in Section 4.02(b)) being deemed to
constitute a representation and warranty that the matters specified in this
Section 5 are true and correct in all material respects on and as of the date of
each such Loan, unless such representation and warranty expressly indicates that
it is being made as of any specific date, in which case such representation or
warranty shall be true and correct in all material respects as of such specific
date):
1.051 Corporate Status. Each of the Borrower and its
Subsidiaries (i) is a duly organized and validly existing corporation in good
standing under the laws of the jurisdiction of its organization and has the
corporate power and authority to own its property and assets and to transact the
business in which it is engaged and presently proposes to engage and (ii) has
duly qualified and is authorized to do business and is in good standing in all
jurisdictions where it is required to be so qualified except where the failure
to be so qualified would not have a Material Adverse Effect.
1.052 Corporate Power and Authority. The Borrower has the
corporate power and authority to execute, deliver and carry out the terms and
provisions of the Credit Documents and has taken all necessary corporate action
to authorize the execution, delivery and performance of the Credit Documents.
The Borrower has duly executed and delivered each Credit Document and each
Credit Document constitutes the legal, valid and binding obligation of the
Borrower enforceable against the Borrower in accordance with its terms, except
to the extent that the enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws generally
affecting creditors' rights and by equitable principles (regardless of whether
enforcement is sought in equity or at law).
1.053 No Violation. Neither the execution, delivery and
performance by the Borrower of the Credit Documents nor compliance with the
terms and provisions thereof, nor the consummation of the transactions
contemplated therein, (i) will contravene any applicable provision of any law,
statute, rule, regulation, order, writ, injunction or decree of any court or
governmental instrumentality, (ii) will conflict or be inconsistent with or
result in any breach of, any of the terms, covenants, conditions or provisions
of, or constitute a default under, or result in the creation or imposition of
(or the obligation to create or impose) any Lien upon any of the property or
assets of the Borrower or any of its Subsidiaries pursuant to the terms of any
indenture, mortgage, deed of trust, agreement or other instrument to which the
Borrower or any of its Subsidiaries is a party or by which it or any of its
property or assets are bound or to which it may be subject or (iii) will violate
any provision of the Certificate of Incorporation or By-Laws of the Borrower or
any of its Subsidiaries.
1.054 Litigation. There are no actions, suits or proceedings
pending or threatened with respect to the Borrower or any of its Subsidiaries
that have, or are reasonably
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likely to have, (i) a Material Adverse Effect or (ii) a material adverse effect
on the rights or remedies of the Banks or the Administrative Agent or on the
ability of the Borrower to perform its obligations to them hereunder and under
the other Credit Documents.
1.055 Use of Proceeds; Margin Regulations. (a) The proceeds of
Loans may be utilized (i) to finance the Acquisition and (ii) for the general
corporate purposes of the Borrower and its Subsidiaries (including, without
limitation, for purposes of financing acquisitions and other investments
permitted under this Agreement).
(b) No part of the proceeds of any Loan will be used to
purchase or carry Margin Stock. Neither the making of any Loan hereunder, nor
the use of the proceeds thereof, will violate or be inconsistent with the
provisions of Regulation G, 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 in violation of Regulation U or to extend credit for
the purpose of purchasing or carrying any Margin Stock in violation of
Regulation U.
1.056 Governmental Approvals. No order, consent, approval,
license, authorization, or validation of, or filing, recording or registration
with, or exemption by, any foreign or domestic governmental or public body or
authority, or any subdivision thereof, is required to authorize or is required
in connection with (i) the execution, delivery and performance of any Credit
Document or (ii) the legality, validity, binding effect or enforceability of any
Credit Document.
1.057 True and Complete Disclosure. All factual information
(taken as a whole) heretofore or contemporaneously furnished by or on behalf of
the Borrower or any of its Subsidiaries in writing to the Administrative Agent
or any Bank for purposes of or in connection with this Agreement or any
transaction contemplated herein is, and all other such factual information
(taken as a whole) hereafter furnished by or on behalf of the Borrower or any
such Subsidiary in writing to any Bank will be, true and accurate in all
material respects on the date as of which such information is dated or certified
and not incomplete by omitting to state any material fact necessary to make such
information (taken as a whole) not misleading at such time in light of the
circumstances under which such information was provided. The projections and pro
forma financial information prepared by the Borrower which are contained in such
materials are based on good faith estimates and assumptions believed by such
Persons to be reasonable at the time made, it being recognized by the Banks that
such projections as to future events are not to be viewed as facts and that
actual results during the period or periods covered by any such projections may
differ materially from the projected results. As of the Initial Borrowing Date,
there is no fact known to the Borrower which has, or is likely to have, a
Material Adverse Effect which has not theretofore been disclosed to the Banks or
to the Administrative Agent on behalf of the Banks.
1.058 Financial Condition; Financial Statements. (a) On and as
of the Initial Borrowing Date (i) the sum of the assets, at a fair valuation, of
the Borrower will exceed its debts, (ii) the Borrower will not have incurred or
intended to, or believe that it will, incur debts
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beyond its ability to pay such debts as such debts mature and (iii) the Borrower
will have sufficient capital with which to conduct its business. For purposes of
this Section 5.08, "debt" means any liability on a claim, and "claim" means (x)
right to payment whether or not such a right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured or unsecured or (y) right to an equitable remedy for
breach of performance if such breach gives rise to a payment, whether or not
such right to an equitable remedy is reduced to judgment, fixed, contingent,
matured, unmatured, disputed, undisputed, secured or unsecured.
(b) The consolidated statement of financial condition of the
Borrower and its Subsidiaries at December 31, 1996, and the related consolidated
statements of income and cash flows for the fiscal year ended as of said date,
which have been examined by Ernst & Young, independent certified public
accountants, copies of which have heretofore been furnished to the
Administrative Agent, present fairly the financial position of the Borrower and
its Subsidiaries at the date of said statements and the results for the fiscal
year covered thereby. Such financial statements have been prepared in accordance
with GAAP consistently applied except to the extent provided in the notes to
said financial statements.
(c) The unaudited Annual Statement of Lyndon and its
Subsidiaries at December 31, 1996, a copy of which has heretofore been furnished
to the Administrative Agent, presents fairly the financial position of Lyndon
and its Subsidiaries at the date of said statement and the results for the
fiscal year covered thereby. Such financial statement has been prepared in
accordance with SAP consistently applied except to the extent provided in the
notes to said financial statement.
(d) The pro forma (after giving effect to the Acquisition and
the related financings to the Acquisition and the related financings thereof)
consolidated balance sheet of the Borrower and its Subsidiaries as of March 31,
1997, a copy of which has heretofore been furnished to the Administrative Agent,
presents a good faith estimate of the consolidated pro forma financial condition
of the Borrower and its Subsidiaries after giving effect to the Acquisition and
the related financings thereof at the date thereof).
(e) Nothing has occurred since December 31, 1996 that has had
or is reasonably likely to have a Material Adverse Effect.
(f) Except as fully reflected in the financial statements and
the notes thereto described in Section 5.08(b) and (c), there were as of the
Initial Borrowing Date (after giving effect to the Loans made on such date), no
material Contingent Obligations, contingent liability or liability for taxes, or
any long-term lease or unusual forward or long-term commitment, including,
without limitation, interest rate or foreign currency swap or exchange
transaction with respect to the Borrower or any of its Subsidiaries which,
either individually or in aggregate, would be material to the Borrower and its
Subsidiaries taken as a whole, as the case may be, except as incurred by the
Borrower and its Subsidiaries in the ordinary course of business consistent with
past practices subsequent to December 31, 1996.
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1.059 Acquisition. On and as of the Initial Borrowing Date,
(i) all consents and approvals of, and filings and registrations with, and all
other actions in respect of, all governmental agencies, authorities or
instrumentalities required in order to make or consummate the Acquisition, or
otherwise required in connection with the Acquisition, have been obtained,
given, filed or taken and are in full force and effect (or effective judicial
relief with respect thereto has been obtained) and (ii) concurrently with the
initial incurrence of Loans hereunder, the Acquisition has been consummated in
accordance with the respective Acquisition Documents and in compliance with all
applicable laws. All representations and warranties of the Borrower and Mercury
set forth in any of the Acquisition Documents were true and correct in all
material respects as of the time such representations and warranties were made
and are true and correct in all material respects as of the Initial Borrowing
Date as if such representations and warranties were made on and as of such date,
unless stated to relate to a specific earlier date, in which case such
representations and warranties shall be true and correct in all material
respects as of such earlier date.
5.10 Tax Returns and Payments. Each of the Borrower and each
of its Subsidiaries has filed all federal income tax returns and all other
material tax returns, domestic and foreign, required to be filed by it and has
paid all material taxes and assessments payable by it which have become due,
other than those not yet delinquent and except for those contested in good
faith. The Borrower and each of its Subsidiaries have paid, or have provided
adequate reserves (in the good faith judgment of the management of the Borrower)
for the payment of, all federal, state and foreign income taxes applicable for
all prior fiscal years and for the current fiscal year to the date hereof.
5.11 Compliance with ERISA. Each Plan is in substantial
compliance with ERISA and the Code; no ERISA Event has occurred or is reasonably
expected to occur with respect to any Plan; Schedule B (Actuarial Information)
to the most recent annual report (Form 5500 Series) for each Plan, copies of
which have been filed with the Internal Revenue Service and furnished to the
Banks, is complete and accurate and fairly presents the funding status of such
Plan, and since the date of such Schedule B there has been no change in such
funding status; neither the Borrower nor any of its ERISA Affiliates has
incurred or is reasonably expected to incur any Withdrawal Liability to any
Multiemployer Plan; neither the Borrower nor any of its ERISA Affiliates has
been notified by the sponsor of a Multiemployer Plan that such Multiemployer
Plan is in reorganization or has been terminated, within the meaning of Title IV
of ERISA, and no Multiemployer Plan is reasonably expected to be in
reorganization or to be terminated, within the meaning of Title IV of ERISA;
none of the Borrower nor any of its Subsidiaries has or has had an obligation to
provide post-retirement welfare benefits; no Prohibited Transaction has
occurred; none of the Borrower nor any of its ERISA Affiliates has received
notification concerning the imposition of liability under Section 4069 of ERISA;
and no Plan has an Unfunded Current Liability.
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5.12 Subsidiaries. Annex III hereto lists each Subsidiary of
the Borrower (and the direct and indirect ownership interest of the Borrower
therein), in each case existing on the Effective Date. The Borrower will at all
times own directly or indirectly the percentages specified in said Annex III of
the outstanding capital stock of all of said entities except to the extent
otherwise permitted pursuant to Section 7.02.
5.13 Intellectual Property, etc. The Borrower and each of its
Subsidiaries have obtained all material patents, trademarks, servicemarks, trade
names, copyrights, licenses and other rights, free from burdensome restrictions,
that are necessary for the operation of their businesses taken as a whole as
presently conducted and as proposed to be conducted.
5.14 Compliance with Statutes. Each of the Borrower and its
Subsidiaries is in compliance with all applicable statutes, regulations and
orders of, and all applicable restrictions imposed by, all governmental bodies,
domestic or foreign, in respect of the conduct of its business and the ownership
of its property (including applicable statutes, regulations, orders and
restrictions relating to environmental standards and controls), except such
noncompliance as is not likely to, in the aggregate, have a Material Adverse
Effect.
5.15 Labor Relations; Collective Bargaining Agreements. There
is (i) no significant unfair labor practice complaint pending against the
Borrower or any of its Subsidiaries or, to the best knowledge of the Borrower,
threatened against any of them, before the National Labor Relations Board, and
no significant grievance or significant arbitration proceeding arising out of or
under any collective bargaining agreement is now pending against the Borrower or
any of its Subsidiaries or, to the best knowledge of the Borrower, threatened
against any of them, (ii) no significant strike, labor dispute, slowdown or
stoppage is pending against the Borrower or any of its Subsidiaries or, to the
best knowledge of the Borrower, threatened against the Borrower or any of its
Subsidiaries and (iii) to the best knowledge of the Borrower, no union
representation question exists with respect to the employees of the Borrower or
any of its Subsidiaries, except (with respect to any matter specified in clause
(i), (ii) or (iii) above, either individually or in the aggregate) such as is
not reasonably likely to have a Material Adverse Effect.
5.16 Indebtedness. Annex IV sets forth a true and complete
list of all Indebtedness of the Borrower and each of its Subsidiaries (after
giving effect to the Acquisition) which was incurred prior to, and is to remain
outstanding after, the Initial Borrowing Date (collectively, the "Existing
Indebtedness"), in each case showing the aggregate principal amount thereof and
the name of the respective borrower and any other entity which directly or
indirectly guaranteed such debt.
5.17 Investment Company Act. Neither the Borrower nor any of
its Subsidiaries is an "investment company" or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
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SECTION 6. Affirmative Covenants. The Borrower hereby
covenants and agrees that on the Effective Date and thereafter so long as this
Agreement is in effect and until such time as the Total Commitment has been
terminated, no Notes are outstanding and the Loans, together with interest, Fees
and all other Obligations hereunder, have been paid in full:
1.061 Reporting Requirements. The Borrower will furnish to the
Administrative Agent (which will promptly following receipt thereof furnish to
each of the Banks):
(a) Annual Financial Statements. (i) As soon as
available and in any event within 90 days after the close of each
fiscal year of the Borrower, the consolidated and consolidating balance
sheets of the Borrower and its Subsidiaries as at the end of such
fiscal year and the related consolidated and consolidating statements
of income, of stockholder's equity and of cash flows for such fiscal
year; in each case setting forth comparative figures for the preceding
fiscal year, and, in the case of such consolidated financial
statements, examined by independent certified public accountants of
recognized national standing whose opinion shall not be qualified as to
the scope of audit or as to the status of the Borrower or any of its
Subsidiaries as a going concern, together with a certificate of such
accounting firm stating that in the course of its regular audit of the
business of the Borrower and its Subsidiaries, which audit was
conducted in accordance with generally accepted auditing standards,
nothing came to the attention of such accounting firm which would lead
it to believe that any Default or Event of Default resulting from a
failure to comply with the covenants set forth in Section 7.08, 7.09
and/or 7.10 has occurred and is continuing or if in the opinion of such
accounting firm such a Default or Event of Default has occurred and is
continuing, a statement as to the nature thereof.
(ii) As soon as available and in any event within 60 days
after the close of each fiscal year of the Borrower, the Annual
Statement and the "Statement of Actuarial Opinion" of each Regulated
Insurance Company (prepared in accordance with SAP) for such fiscal
year and as filed with the Applicable Regulatory Insurance Authority,
together with the opinion thereon of the Chief Financial Officer or
other Authorized Officer of the Borrower stating that such Annual
Statement presents the financial condition and results of operations of
such Regulated Insurance Company in accordance with SAP.
(iii) As soon as available and in any event within 120 days
after the close of each fiscal year of the Borrower, a copy of the
"Management Discussion and Analysis" for each Regulated Insurance
Company (prepared in accordance with SAP) for such fiscal year and as
filed with the Applicable Regulatory Insurance Authority in compliance
with the requirements thereof (or a report containing equivalent
information for any Regulated Insurance Company not so required to file
the foregoing with the Applicable Regulatory Insurance Authority).
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(b) Quarterly Financial Statements. (i) As soon as
available and in any event within 45 days after the close of each of
the first three quarterly accounting periods in each fiscal year of the
Borrower, the consolidated and consolidating balance sheets of the
Borrower and its Subsidiaries as at the end of such quarterly period
and the related consolidated and consolidating statements of income, of
stockholder's equity and of cash flows for such quarterly period and
for the elapsed portion of the fiscal year ended with the last day of
such quarterly period; in each case setting forth comparative figures
for the related periods in the prior fiscal year, and all of which
shall be certified by the Chief Financial Officer or other Authorized
Officer of the Borrower, subject to changes resulting from normal
year-end audit adjustments.
(ii) As soon as available and in any event within 45 days
after the close of each of the first three quarterly accounting periods
in each fiscal year of the Borrower, quarterly financial statements of
each Regulated Insurance Company (prepared in accordance with SAP) for
such fiscal period and as filed with the Applicable Regulatory
Insurance Authority, together with (x) the opinion thereon of the Chief
Financial Officer or other Authorized Officer of the Borrower stating
that such financial statements present the financial condition and
results of operations of each Regulated Insurance Company in accordance
with SAP, and (y) to the extent not otherwise contained in such
quarterly financial statements, a report certified by the Chief
Financial Officer or other Authorized Officer of the Borrower setting
forth, in a format satisfactory to the Administrative Agent, the
statutory carrying value (determined in accordance with SAP) and the
fair market value of the investment portfolio of each Regulated
Insurance Company as of the last day of such fiscal quarter.
(c) Financial Plans, etc. Not more than 60 days after
the commencement of each fiscal year of the Borrower, a financial plan
of the Borrower and its Subsidiaries in reasonable detail for such
fiscal year and the following fiscal year, as customarily prepared by
management for its internal use, setting forth, with appropriate
discussion, the principal assumptions upon which such plans are based.
Together with each delivery of financial statements pursuant to Section
6.01(a)(i), a comparison of the financial results (other than in
respect of the balance sheet included therein) against the financial
plans required to be submitted pursuant to this clause (c) shall be
presented.
(d) Officer's Certificates. At the time of the
delivery of the financial statements provided for in Sections
6.01(a)(i) and (ii), (b)(i) and (ii), a certificate of the Chief
Financial Officer or other Authorized Officer of the Borrower to the
effect that no Default or Event of Default exists or, if any Default or
Event of Default does exist, specifying the nature and extent thereof,
which certificate shall set forth the calculations required to
establish whether the Borrower and its Subsidiaries were in compliance
with the provisions of Sections 7.08, 7.09 and 7.10 as at the end of
such fiscal year or quarter, as the case may be.
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(e) Notice of Default or Litigation. Promptly, and in
any event within three Business Days after the Borrower or any of its
Subsidiaries obtains knowledge thereof, notice of (x) the occurrence of
any event which constitutes a Default or Event of Default, which notice
shall specify the nature thereof, the period of existence thereof and
what action the Borrower proposes to take with respect thereto and (y)
any litigation or governmental or regulatory proceeding pending against
the Borrower or any of its Subsidiaries which is likely to have a
Material Adverse Effect or a material adverse effect on the ability of
the Borrower to perform its obligations hereunder or under any other
Credit Document.
(f) Auditors' Reports. Promptly upon receipt thereof,
a copy of each other report or "management letter" submitted to the
Borrower or any of its Subsidiaries by their independent accountants or
independent actuaries in connection with any annual, interim or special
audit made by them of the books of the Borrower or any of its
Subsidiaries.
(g) Other Regulatory Statements and Reports.
Promptly, and without duplication in respect of any other reporting
requirement, (A) after their becoming available, copies of any
statutory financial statements that the Borrower or any Regulated
Insurance Company that is a Material Subsidiary periodically files with
the Applicable Regulatory Insurance Authority (including all exhibits
and schedules thereto), (B) after receipt thereof, copies of all
regular and periodic reports of reviews or examinations (including,
without limitation, triennial examinations and risk adjusted capital
reports) of any Regulated Insurance Company that is a Material
Subsidiary, delivered to such Person by any Applicable Regulatory
Insurance Authority, (C) after receipt thereof, written notice of any
assertion by any Applicable Regulatory Insurance Authority, as to a
violation of any Legal Requirement by any Regulated Insurance Company
which is likely to have a Material Adverse Effect or a material adverse
effect on the ability of the Borrower to perform its obligations
hereunder or under any other Credit Document, (D) after receipt
thereof, a copy of the final report to each Regulated Insurance Company
from the NAIC for each fiscal year, as to such Regulated Insurance
Company's compliance or noncompliance with each of the NAIC Tests, (E)
after receipt thereof, a copy of any rating analysis by Moody's, S&P
and/or D&P for each Regulated Insurance Company for each fiscal year,
(F) after receipt thereof, a copy of any notice of termination,
cancellation or recapture of the Centre Re Agreement, (G) and in any
event within three Business Days after receipt thereof, copies of any
notice of actual suspension, termination or revocation of any license
of any Regulated Insurance Company that is a Material Subsidiary by any
Applicable Regulatory Insurance Authority (other than any termination
voluntarily effected by such Regulated Insurance Company), including
any request by an Applicable Regulatory Insurance Authority which
commits a Regulated Insurance Company to take or refrain from taking
any material action or which otherwise materially affects the authority
of such Regulated Insurance Company to conduct its business, and (H)
and in any event within three Business Days after the Borrower or any
of its Subsidiaries obtains
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knowledge thereof, notice of any actual changes in the insurance laws
enacted in any state in which any Regulated Insurance Company is
domiciled which could have a Material Adverse Effect or a material
adverse effect on the ability of the Borrower to perform its
obligations under any Credit Document.
(h) ERISA, etc. Promptly (i) and in any event within
15 days after the Borrower or any Subsidiary knows or has reason to
know that any ERISA Event has occurred that could reasonably be
expected to result in liability of the Borrower or Subsidiary or any of
their respective ERISA Affiliates that would, if paid in full,
constitute a Material Adverse Effect, a certificate of the chief
financial officer of the Borrower describing such ERISA Event and the
action, if any, that the Borrower, such Subsidiary or other ERISA
Affiliate is required or proposes to take, together with any notices
required or proposed to be given to or filed with or by the Borrower or
such Subsidiary or such ERISA Affiliate, the PBGC, a Plan participant
or the Plan Administrator with respect thereto; (ii) after receipt
thereof by the Borrower or any Subsidiary or any of their respective
ERISA Affiliates, copies of each notice from the PBGC stating its
intention to terminate any Plan or to have a trustee appointed to
administer any Plan; (iii) and in any event within 30 days after the
filing thereof with the Internal Revenue Service, copies of each
Schedule B (Actuarial Information) to the annual report (Form 5500
Series) with respect to each Plan; (iv) and in any event within 10
Business Days after receipt thereof by the Borrower or any Subsidiary
from the sponsor of a Multiemployer Plan, copies of each notice so
received concerning (A) the imposition of Withdrawal Liability by any
Multiemployer Plan, (B) the reorganization, partition, declaration of
insolvency or termination, within the meaning of Title IV of ERISA, of
any Multiemployer Plan or (C) the amount of liability incurred, or that
may be incurred, by the Borrower or any Subsidiary or any of their
respective ERISA Affiliates in connection with any event described in
clause (A) or (B); (v) and in any event within 15 days after the
Borrower or any Subsidiary knows or has reason to know that any
Prohibited Transaction that is reasonably likely to result in a
material liability of the Borrower or any Subsidiary has occurred, a
statement of the Chief Financial Officer of the Borrower describing
such Prohibited Transaction and the action, if any, that the Borrower,
its Subsidiary or other ERISA Affiliate is required or proposes to take
with respect thereto; and (vi) and in any event within 15 days after
receipt thereof by the Borrower or any Subsidiary, copies of each
notice concerning the imposition of any material liability under
Section 4069 or 4212 of ERISA.
(i) Other Information. Promptly upon transmission thereof,
copies of any filings and registrations with, and reports to, the SEC
by the Borrower or any of its Subsidiaries (other than any registration
statement on Form S-8) and copies of all financial statements, proxy
statements, notices and reports as the Borrower or any of its
Subsidiaries shall send to analysts generally or to the holders (other
than the Borrower and its Subsidiaries) of their capital stock or of
any publicly issued Indebtedness in their capacity as such holders (in
each case to the extent not theretofore delivered to the Banks pursuant
to this Agreement) and, with reasonable promptness,
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such other information or documents (financial or otherwise) as the
Administrative Agent on its own behalf or on behalf of the Required
Banks may reasonably request from time to time.
1.062 Books, Records and Inspections. The Borrower will, and
will cause each of its Subsidiaries to, permit, upon at least two Business Days'
notice to the Chief Financial Officer or any other Authorized Officer of the
Borrower, officers and designated representatives of the Administrative Agent or
any Bank to visit and inspect any of the properties or assets of the Borrower
and any of its Subsidiaries in whomsoever's possession (but only to the extent
the Borrower or such Subsidiary has the right to do so to the extent in the
possession of another Person), and to examine the books of account of the
Borrower and any of its Subsidiaries and discuss the affairs, finances and
accounts of the Borrower and of any of its Subsidiaries with, and be advised as
to the same by, its and their officers and independent accountants and
independent actuaries, if any, all at such reasonable times and intervals and to
such reasonable extent as the Administrative Agent or any Bank may request.
1.063 Insurance. The Borrower will, and will cause each of its
Subsidiaries to, at all times maintain in full force and effect insurance in
such amounts, covering such risks and liabilities and with such deductibles or
self-insured retentions as are in accordance with normal industry practice.
1.064 Payment of Taxes. The Borrower will pay and discharge,
and will cause each of its Subsidiaries to pay and discharge, all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits, or upon any properties belonging to it, prior to the date on
which penalties attach thereto, and all lawful claims (other than claims
relating to the adjustment or settling, in the ordinary course of business, of
claims in respect of insurance policies or reinsurance contracts) which, if
unpaid, might become a Lien or charge upon any properties of the Borrower or any
of its Subsidiaries; provided that neither the Borrower nor any Subsidiary shall
be required to pay any such tax, assessment, charge, levy or claim which is
being contested in good faith and by proper proceedings if it has maintained
adequate reserves (in the good faith judgment of the management of the Borrower)
with respect thereto in accordance with GAAP.
1.065 Corporate Franchises. The Borrower will do, and will
cause each Material Subsidiary to do, or cause to be done, all things necessary
to preserve and keep in full force and effect its corporate existence, rights
and authority; provided that any transaction permitted by Section 7.02 will not
constitute a breach of this Section 6.05.
1.066 Compliance with Statutes, etc. The Borrower will, and
will cause each Subsidiary to, comply with all applicable statutes, regulations
and orders of, and all applicable restrictions imposed by, all governmental
bodies, domestic or foreign, in respect of the conduct of its business and the
ownership of its property (including applicable statutes, regulations, orders
and restrictions relating to environmental standards and controls) other than
those the
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non-compliance with which would not have a Material Adverse Effect or a material
adverse effect on the ability of the Borrower to perform its obligations under
any Credit Document.
1.067 Good Repair. The Borrower will, and will cause each of
its Material Subsidiaries to, ensure that its material properties and equipment
used or useful in its business in whomsoever's possession they may be, are kept
in good repair, working order and condition, normal wear and tear excepted, and
that from time to time there are made in such properties and equipment all
needful and proper repairs, renewals, replacements, extensions, additions,
betterments and improvements thereto, to the extent and in the manner customary
for companies in similar businesses.
1.068 End of Fiscal Years; Fiscal Quarters. The Borrower will,
for financial reporting purposes, cause (i) each of its, and each of its
Subsidiaries' fiscal years to end on December 31 of each year and (ii) each of
its, and each of its Subsidiaries', fiscal quarters to end on March 31, June 30,
September 30 and December 31 of each year.
SECTION 7. Negative Covenants. The Borrower hereby covenants
and agrees that on the Effective Date and thereafter for so long as this
Agreement is in effect and until such time as the Total Commitment has been
terminated, no Notes remain outstanding and the Loans, together with interest,
Fees and all other Obligations incurred hereunder are paid in full:
1.071 Changes in Business. The Borrower will not (x) engage in
any business other than the ownership of the capital stock of, and the provision
of management and other services to, its Subsidiaries, including incidental and
related activities, and (y) permit its Subsidiaries to substantively alter their
business activities taken as a whole from the insurance business activities
(including incidental or related activities) conducted by its Subsidiaries
(after giving effect to the Acquisition) on the Effective Date.
1.072 Consolidation, Merger or Sale of Assets, etc. The
Borrower will not, and will not permit any Subsidiary to, wind up, liquidate or
dissolve its affairs, or enter into any transaction of merger or consolidation
or sell or otherwise dispose of any of its property or assets (but excluding any
sale or disposition of property or assets in the ordinary course of business),
or purchase, lease or otherwise acquire (in one transaction or a series of
related transactions) all or any part of the property or assets of any Person
(excluding any purchases, leases or other acquisitions of property or assets in,
and for use in, the ordinary course of business) or agree to do any of the
foregoing at any future time, except that the following shall be permitted:
(a) Capital Expenditures by the Borrower and its Subsidiaries
in the ordinary course of business;
(b) the investments, acquisitions and transfers or
dispositions of property permitted pursuant to Section 7.05;
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(c) the merger or consolidation of any Wholly-Owned Subsidiary
of the Borrower with or into another Wholly-Owned Subsidiary of the
Borrower, provided that no such merger or consolidation shall be
permitted between a Regulated Insurance Company and a Non-Regulated
Insurance Company;
(d) any Regulated Insurance Company may enter into any
Insurance Contract or Reinsurance Agreement in the ordinary course of
business in accordance with its normal underwriting, indemnity and
retention policies, provided that no Regulated Insurance Company shall
enter into any Surplus Relief Reinsurance Transaction;
(e) the Borrower or any of its Subsidiaries may enter into
leases of property or assets in the ordinary course of business not
otherwise in violation of this Agreement;
(f) the Borrower or any of its Subsidiaries may sell assets
(including, without limitation, the stock of a Subsidiary), so long as
(i) no Default or Event of Default exists at such time or would exist
immediately after giving effect thereto, (ii) such sale is for fair
market value (as determined in good faith by management of the
Borrower) and (iii) the market value of all assets sold pursuant to
this Section 7.02(f) in any fiscal year shall not exceed 15% of the
Borrower's Consolidated Net Worth as of the last day of the immediately
preceding fiscal year; and
(g) so long as no Default or Event of Default exists or would
result therefrom, the Borrower and its Subsidiaries may acquire assets,
the capital stock of, or other ownership interests in, any Person (any
such acquisition permitted by this clause (g), a "Permitted
Acquisition"), so long as (i) after giving effect to any such
acquisition, the Borrower and its Subsidiaries shall be in compliance
with Section 7.01 hereof, and (ii) the Borrower shall have determined,
with respect to such acquisition, that, on a Pro Forma Basis, the
Borrower and its Subsidiaries would have been in compliance with
Sections 7.08, 7.09 and 7.10 of this Agreement.
1.073 Liens. The Borrower will not, and will not permit any of
its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or
with respect to any property or assets of any kind (real or personal, tangible
or intangible) of the Borrower or any such Subsidiary whether now owned or
hereafter acquired, or sell any such property or assets subject to an
understanding or agreement, contingent or otherwise, to repurchase such property
or assets (including sales of accounts receivable or notes with recourse to the
Borrower or any of its Subsidiaries) or assign any right to receive income, or
file or permit the filing of any financing statement under the UCC or any other
similar notice of Lien under any similar recording or notice statute, except:
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(a) Liens for taxes not yet due or Liens for taxes being
contested in good faith and by appropriate proceedings for which
adequate reserves (in the good faith judgment of the management of the
Borrower) have been established;
(b) Liens in respect of property or assets of any of the
Borrower's Subsidiaries imposed by law which were incurred in the
ordinary course of business, such as carriers', warehousemen's and
mechanics' Liens and other similar Liens arising in the ordinary course
of business, and (x) which do not in the aggregate materially detract
from the value of such property or assets or materially impair the use
thereof in the operation of the business of the Borrower or any
Subsidiary and (y) which are being contested in good faith by
appropriate proceedings, which proceedings have the effect of
preventing the forfeiture or sale of the property or asset subject to
such Lien;
(c) Liens in existence on the Effective Date which are listed,
and the property subject thereto on the Effective Date described, in
Annex V, without giving effect to any extensions or renewals thereof
(provided that the securities subject to any such Lien may be replaced
by other securities of no greater principal amount);
(d) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section 8.07;
(e) Liens (other than any Lien imposed by ERISA) incurred or
deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social
security, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds, Reinsurance
Agreements, Retrocession Agreements and other similar obligations
incurred in the ordinary course of business (exclusive of obligations
in respect of the payment for borrowed money);
(f) leases or subleases granted to others not interfering in
any material respect with the business of the Borrower or any of its
Subsidiaries and any interest or title of a lessor under any lease not
in violation of this Agreement;
(g) easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the ordinary conduct of the
business of the Borrower or any of its Subsidiaries;
(h) Liens arising from UCC financing statements regarding
leases not in violation of this Agreement;
(i) Liens incurred in the ordinary course of business by a
Subsidiary of the Borrower on securities to secure repurchase and
reverse repurchase obligations in respect of such securities;
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(j) Liens on pledges or deposits of cash or securities made by
any Regulated Insurance Company as a condition to obtaining or
maintaining any licenses issued to it by any Applicable Regulatory
Insurance Authority;
(k) Liens arising pursuant to purchase money mortgages,
Capital Leases or security interests securing Indebtedness representing
the purchase price (or financing of the purchase price within 90 days
after the respective purchase) of assets acquired after the Effective
Date, provided that (i) any such Liens attach only to the assets so
purchased, (ii) the Indebtedness secured by any such Lien does not
exceed 100% nor is less than 70%, of the lesser of the fair market
value or the purchase price of the property being purchased at the time
of the incurrence of such Indebtedness and (iii) the Indebtedness
secured thereby is permitted to be incurred pursuant to Section
7.04(c);
(l) Liens on assets acquired (or owned by a Subsidiary
acquired) after the Effective Date securing Indebtedness permitted
under Section 7.04(i), provided that at the time of such acquisition
the value of the assets subject to such Liens does not exceed 15% of
the total value of the assets so acquired, or of the assets of the
Subsidiary so acquired, as the case may be; and
(m) additional Liens incurred by the Borrower and its
Subsidiaries so long as the value of the property subject to such
Liens, and the Indebtedness and other obligations secured thereby, do
not exceed $1,000,000.
1.074 Indebtedness. The Borrower will not, and will not permit
any of its Subsidiaries to, contract, create, incur, assume or suffer to exist
any Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement and the
other Credit Documents;
(b) Indebtedness owing by (i) any Wholly-Owned Subsidiary of
the Borrower to another Wholly-Owned Subsidiary of the Borrower
provided that no loans or advances should be permitted by this clause
(b) between a Regulated Insurance Company and a Non-Regulated Insurance
Company; (ii) any Regulated Insurance Company to the Borrower; and
(iii) any Non-Regulated Insurance Company to the Borrower (but only to
the extent otherwise permitted by Section 7.05(f));
(c) Capitalized Lease Obligations and Indebtedness of the
Borrower and its Subsidiaries incurred pursuant to purchase money
Liens, provided that the sum of (i) the aggregate Capitalized Lease
Obligations plus (ii) the aggregate principal amount of such purchase
money Indebtedness outstanding at any time shall not exceed 10% of the
Borrower's Consolidated Net Worth at such time;
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(d) Indebtedness in existence on the Effective Date and listed
on Annex IV, without giving effect to any subsequent extension, renewal
or refinancing thereof;
(e) obligations of a Regulated Insurance Company with respect
to letters of credit issued under letter of credit facilities and (i)
securing obligations under Reinsurance Agreements entered into in the
ordinary course of business of any such Regulated Insurance Company or
(ii) issued in lieu of deposits to satisfy Legal Requirements, in any
case to the extent such letters of credit are not drawn upon or, if and
to the extent drawn upon, such drawing is reimbursed no later than 10
days following receipt by such Regulated Insurance Company of notice of
payment on such letter of credit;
(f) Indebtedness of the Borrower and Regulated Insurance
Companies under Interest Rate Agreements entered into in the ordinary
course of business consistent with past practices;
(g) Indebtedness consisting of currency hedging arrangements
entered into by any Regulated Insurance Company in respect of its (i)
assets or (ii) obligations, as the case may be, denominated in a
foreign currency to the extent in excess of its (iii) obligations or
(iv) assets, respectively, denominated in such foreign currency;
(h) Indebtedness of Regulated Insurance Companies consisting
of agreements to sell and repurchase securities so long as (x) the
maturity of any such repurchase obligation is not more than one year
from the date of commencement of such repurchase transaction and (y)
the underlying security is one that Regulated Insurance Companies are
permitted to hold at such time under Section 7.05(a);
(i) Indebtedness of a Subsidiary acquired after the Effective
Date (or Indebtedness assumed at the time of an acquisition of an asset
securing such Indebtedness), provided that (i) such Indebtedness was
not incurred in connection with or in anticipation of such acquisition
and (ii) at the time of such acquisition such Indebtedness does not
exceed 15% of the total value of the assets of the Subsidiary so
acquired, or of the asset so acquired, as the case may be; and
(j) additional Indebtedness of the Borrower not otherwise
permitted hereunder, so long as the aggregate outstanding principal
amount of such Indebtedness does not exceed $1,000,000 at any time.
1.075 Advances, Investments and Loans. The Borrower will not,
and will not permit any of its Subsidiaries to, lend money or credit or make
advances to any Person, or purchase or acquire any stock, obligations or
securities of, or any other interest in, or make any capital contribution to,
any Person, except:
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(a) the Borrower and its Subsidiaries may make investments in
accordance with the Borrower's Investment Policy and Objectives dated
February 25, 1997 (in the form delivered to the Administrative Agent
prior to the Effective Date, the "Investment Policy"), provided that
although the Borrower and its Subsidiaries may invest up to 50% of
their investment portfolio in mortgaged backed securities such as
pass-throughs and collateralized mortgage obligations as provided in
the Investment Policy, no more than 20% of such investments (or 10% of
the entire investment portfolio) may be in the form of such investments
which do not consist of PAC, pass-through and sequential investments
(it being understood and agreed that the Investment Policy may be
changed by the Borrower from time to time so long as ten Business Days
prior written notice thereof is given to the Administrative Agent
(which shall forward such notice to the Banks) and neither the
Administrative Agent nor the Required Banks reasonably object to such
change by notice to the Borrower within such ten Business Day period);
(b) the Borrower and its Subsidiaries may acquire and hold
receivables owing to them in the ordinary course of business and
payable or dischargeable in accordance with customary trade terms;
(c) loans and advances constituting intercompany Indebtedness
permitted under Section 7.04(b) shall be permitted;
(d) loans and advances (x) to employees for business-related
travel expenses, moving and relocation expenses and other similar
expenses, in each case incurred in the ordinary course of business and
(y) otherwise to employees in an aggregate principal amount not to
exceed $1,000,000 at any time outstanding, shall be permitted;
(e) the transactions described in Section 7.02 shall be
permitted;
(f) the Borrower may make investments in, or loans or advances
to, Wholly-Owned Subsidiaries;
(g) the Borrower and its Subsidiaries may make other
investments pursuant to commitments in effect as of the Effective Date
and described (as to matter and amount) on Annex VI;
(h) investments acquired by the Borrower or any of its
Subsidiaries (x) in exchange for any other investment held by the
Borrower or any such Subsidiary in connection with or as a result of a
bankruptcy, workout, reorganization or recapitalization of the issuer
of such other investment or (y) as a result of a foreclosure by the
Borrower or any of its Subsidiaries with respect to any secured
investment or other transfer of title with respect to any secured
investment in default;
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(i) investments of the Borrower and Regulated Insurance
Companies in Interest Rate Agreements as permitted by Section 7.04(f);
(j) the Borrower and its Subsidiaries may hold their
investment in their headquarters located at 195 Lake Louise Marie Road,
Rock Hill, New York; and
(k) the Borrower and its Subsidiaries may make investments in
addition to the investments permitted by the foregoing clauses of this
Section 7.05 in an aggregate amount for the Borrower and all such
Subsidiaries not to exceed 15% of the Borrower's Consolidated Net
Worth.
1.076 Dividends, etc. (a) The Borrower will not, and will not
permit any of its Subsidiaries to, declare or pay any dividends (other than
dividends payable solely in common stock of such Person) or return any capital
to, its stockholders or authorize or make any other distribution, payment or
delivery of property or cash to its stockholders as such, or redeem, retire,
purchase or otherwise acquire, directly or indirectly, for a consideration, any
shares of any class of its capital stock now or hereafter outstanding (or any
warrants for or options or stock appreciation rights in respect of any of such
shares), or set aside any funds for any of the foregoing purposes, or permit any
of its Subsidiaries to purchase or otherwise acquire for consideration any
shares of any class of the capital stock of the Borrower or any other
Subsidiary, as the case may be, now or hereafter outstanding (or any options or
warrants or stock appreciation rights issued by such Person with respect to its
capital stock) (all of the foregoing "Dividends"), except that:
(i) any Subsidiary of the Borrower may pay Dividends to
its shareholders, provided that if such Subsidiary is not a
Wholly-Owned Subsidiary, then any such Dividends must be paid
proportionately to all shareholders of such Subsidiary;
(ii) so long as no Default or Event of Default exists or
would result therefrom, Frontier Financing Trust may pay regularly
scheduled dividends on its 6-1/4% Convertible Trust Originated
Preferred Securities, provided that the aggregate amount of such
dividends in any fiscal year of the Borrower shall not exceed
$10,800,000;
(iii) so long as no Default or Event of Default exists or
would result therefrom, the Borrower may pay cash dividends on its
common stock and/or its preferred stock so long as the aggregate amount
of Dividends made in any fiscal year pursuant to this clause (iii) does
not exceed the sum of (x) 5% of the Borrower's Consolidated Net Worth
as of the last day of the most recently ended fiscal year plus (y) any
amount that would have been permitted to be paid pursuant to Section
7.06(a)(ii) above in such year but is not so paid because some or all
of the Convertible Preferred Securities referred to in such Section
have been converted to common stock of the Borrower; and
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(iv) the Borrower may repurchase its common stock and/or
options or warrants to purchase its common stock from directors, former
directors, management or former management of the Borrower and its
Subsidiaries in accordance with arrangements made with such directors
or management, provided that (x) no Default or Event of Default exists
at the time of any such purchase or would result therefrom and (y) the
aggregate amount expended by the Borrower pursuant to this clause (iv)
at any time, when added to the aggregate amount theretofore expended
pursuant to this clause (iv) after the Effective Date, shall not exceed
7.5% of the Borrower's Consolidated Net Worth as of the last day of the
most recently ended fiscal year.
(b) The Borrower will not, and will not permit any of its
Subsidiaries to, create or otherwise cause or suffer to exist any encumbrance or
restriction which prohibits or otherwise restricts (A) the ability of any
Subsidiary to (a) pay dividends or make other distributions or pay any
Indebtedness owed to the Borrower or any Subsidiary, (b) make loans or advances
to the Borrower or any Subsidiary, (c) transfer any of its properties or assets
to the Borrower or any Subsidiary or (d) guarantee the Obligations or (B) the
ability of the Borrower or any Subsidiary of the Borrower to create, incur,
assume or suffer to exist any Lien upon its property or assets to secure the
Obligations, other than prohibitions or restrictions existing under or by reason
of (i) this Agreement and the other Credit Documents, (ii) Legal Requirements,
(iii) customary non-assignment provisions entered into in the ordinary course of
business and consistent with past practices, (iv) purchase money obligations for
property acquired in the ordinary course of business, so long as such
obligations are permitted under this Agreement, (v) any restriction or
encumbrance with respect to a Subsidiary of the Borrower imposed pursuant to an
agreement which has been entered into for the sale or disposition of all or
substantially all of the capital stock or assets of such Subsidiary, so long as
such sale or disposition is permitted under this Agreement, and (vi) Liens
permitted under Section 7.03 and any documents or instruments governing the
terms of any Indebtedness or other obligations secured by any such Liens,
provided that such prohibitions or restrictions apply only to the assets subject
to such Liens.
1.077 Transactions with Affiliates. The Borrower will not, and
will not permit any Subsidiary to, enter into any transaction or series of
transactions with any Affiliate (other than the Borrower or any Wholly-Owned
Subsidiary of the Borrower) other than in the ordinary course of business and on
terms and conditions substantially as favorable to the Borrower or such
Subsidiary as would be obtainable by the Borrower or such Subsidiary at the time
in a comparable arm's-length transaction with a Person other than an Affiliate.
1.078 Leverage Ratio. The Borrower will not permit the ratio
of (i) Consolidated Indebtedness to (ii) Total Capitalization at any time to be
greater than 0.35:1.00.
1.079 Interest Coverage Ratio. The Borrower will not permit
the Interest Coverage Ratio for any Test Period to be less than 8:1.
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7.10 Net Premiums Written to Statutory Surplus Ratio. The Borrower will not
permit the ratio of Net Premiums Written for any Test Period to Statutory
Surplus as of the last day of such Test Period, for all Regulated Insurance
Companies on a combined basis, to exceed 2.0:1.0.
SECTION 8. Events of Default. Upon the occurrence of any of
the following specified events (each an "Event of Default"):
1.081 Payments. The Borrower shall (i) default in the payment
when due of any principal of the Loans or (ii) default, and such default shall
continue for five or more Business Days, in the payment when due of any interest
on the Loans or any Fees or any other amounts owing hereunder or under any other
Credit Document; or
1.082 Representations, etc. Any representation, warranty or
statement made by the Borrower herein or in any other Credit Document or in any
statement or certificate delivered or required to be delivered pursuant hereto
or thereto shall prove to be untrue in any material respect on the date as of
which made or deemed made; or
1.083 Covenants. The Borrower shall (i) default in the due
performance or observance by it of any term, covenant or agreement contained in
Sections 6.08 or 7, or (ii) default in the due performance or observance by it
of any term, covenant or agreement (other than those referred to in Section
8.01, 8.02 or clause (i) of this Section 8.03) contained in this Agreement and
such default shall continue unremedied for a period of at least 30 days after
notice by the Administrative Agent or the Required Banks; or
1.084 Default Under Other Agreements. (a) The Borrower or any
of its Subsidiaries shall (i) default in any payment with respect to any
Indebtedness (other than the Obligations), and such default shall continue after
the applicable grace period, if any, specified in the agreement or instrument
relating to such Indebtedness, or (ii) default in the observance or performance
of any agreement or condition relating to any such Indebtedness or contained in
any instrument or agreement evidencing, securing or relating thereto (and all
grace periods applicable to such observance, performance or condition shall have
expired), or any other event shall occur or condition exist, the effect of which
default or other event or condition is to permit or, with the giving of notice
or lapse of time (or both), would permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or holders) to
cause any such Indebtedness to become due prior to its stated maturity or to
terminate its commitment; or (b) any such Indebtedness of the Borrower or any of
its Subsidiaries shall be declared to be due and payable, or shall be required
to be prepaid (other than by a regularly scheduled required prepayment or
redemption), prior to the stated maturity thereof, provided that it shall not
constitute an Event of Default pursuant to this Section 8.04 unless the
aggregate amount of all Indebtedness referred to in clauses (a) and (b) above
exceeds $5,000,000 at any one time; or
1.085 Bankruptcy, etc. The Borrower or any of its Material
Subsidiaries shall commence a voluntary case concerning itself under Title 11 of
the United States Code entitled
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"Bankruptcy," as now or hereafter in effect, or any successor thereto (the
"Bankruptcy Code"); or an involuntary case is commenced against the Borrower or
any of its Material Subsidiaries and the petition is not controverted within 10
days, or is not dismissed within 60 days, after commencement of the case; or a
custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge
of, all or substantially all of the property of the Borrower or any of its
Material Subsidiaries; or the Borrower or any of its Material Subsidiaries
commences (including by way of applying for or consenting to the appointment of,
or the taking of possession by, a rehabilitator, receiver, custodian, trustee,
conservator or liquidator (collectively, a "conservator") of itself or all or
any substantial portion of its property) any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency, liquidation, rehabilitation, conservatorship or similar law of any
jurisdiction whether now or hereafter in effect relating to the Borrower or any
of its Material Subsidiaries; or any such proceeding is commenced against the
Borrower or any of its Material Subsidiaries to the extent such proceeding is
consented to by such Person or remains undismissed for a period of 60 days; or
the Borrower or any of its Material Subsidiaries is adjudicated insolvent or
bankrupt; or any order of relief or other order approving any such case or
proceeding is entered; or the Borrower or any of its Material Subsidiaries
suffers any appointment of any conservator or the like for it or any substantial
part of its property which continues undischarged or unstayed for a period of 60
days; or the Borrower or any of its Material Subsidiaries makes a general
assignment for the benefit of creditors; or any corporate action is taken by the
Borrower or any of its Material Subsidiaries for the purpose of effecting any of
the foregoing; or
1.086 ERISA. (a) Any Plan shall fail to maintain the minimum
funding standard required by Section 412 of the Code for any plan year or part
thereof or a waiver of such standard or extension of any amortization period is
sought or granted under Section 412 of the Code or security shall be provided to
induce the issuance of such waiver or extension, (b) any Plan is or shall have
been terminated or the subject of termination proceedings under ERISA or an
event has occurred entitling the PBGC to terminate a Plan under Section 4042(a)
of ERISA, (c) any Plan shall have an Unfunded Current Liability or (d) the
Borrower or any ERISA Affiliate has incurred or is likely to incur a liability
to or on account of a termination of or a withdrawal from a Plan under Section
515, 4062, 4063, 4064, 4201 or 4204 of ERISA; and there shall result from any
such event or events described in the preceding clauses of this Section 8.06 the
imposition of a Lien upon the assets of the Borrower or any Subsidiary or any
ERISA Affiliate, the granting of a security interest, or a liability or a
material risk of incurring a liability to the PBGC or a Plan or a trustee
appointed under ERISA or a penalty under Section 4971 or 4975 of the Code or
Section 409, 502(i) or 502(l) of ERISA, any of which, individually or in the
aggregate, would or is reasonably likely to have a Material Adverse Effect; or
1.087 Judgments. One or more judgments or decrees shall be
entered against the Borrower and/or any of its Subsidiaries involving a
liability (not paid or fully covered by insurance) of $5,000,000 or more in the
aggregate for all such judgments and decrees for the Borrower and its
Subsidiaries) and any such judgments or decrees shall not have been vacated,
discharged or stayed or bonded pending appeal within 30 days from the entry
thereof; or
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1.088 Change of Control. A Change of Control shall occur;
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Administrative Agent shall, upon the written
request of the Required Banks, by written notice to the Borrower, take any or
all of the following actions, without prejudice to the rights of the
Administrative Agent or any Bank to enforce its claims against the Borrower,
except as otherwise specifically provided for in this Agreement (provided that
if an Event of Default specified in Section 8.05 shall occur with respect to the
Borrower, the result which would occur upon the giving of written notice by the
Administrative Agent as specified in clauses (i) and (ii) below shall occur
automatically without the giving of any such notice): (i) declare the Total
Commitment terminated, whereupon the Commitment of each Bank shall forthwith
terminate immediately; and/or (ii) declare the principal of and any accrued
interest in respect of all Loans and all Obligations owing hereunder and under
the other Credit Documents to be, whereupon the same shall become, forthwith due
and payable without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrower.
SECTION 9. Definitions. As used herein, the following terms
shall have the meanings herein specified unless the context otherwise requires.
Defined terms in this Agreement shall include in the singular number the plural
and in the plural the singular:
"Absolute Rate" shall mean an interest rate (rounded to the
nearest .0001) expressed as a decimal.
"Absolute Rate Borrowing" shall mean a Competitive Bid
Borrowing with respect to which the Borrower has requested that the Banks offer
to make Competitive Bid Loans at Absolute Rates.
"Acquisition" shall mean the acquisition by the Borrower of
Lyndon pursuant to the Acquisition Documents.
"Acquisition Agreement" shall mean the Stock Purchase
Agreement, dated March 28, 1997, between the Borrower and Mercury Finance
Company.
"Acquisition Documents" shall mean the Acquisition Agreement
and any other document or instrument governing or relating to the Acquisition.
"Adjusted Total Commitment" shall mean at any time the Total
Commitment less the aggregate Commitments of all Defaulting Banks.
"Administrative Agent" shall have the meaning provided in the
first paragraph of this Agreement and shall include any successor to the
Administrative Agent appointed pursuant to Section 10.09.
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"Affiliate" shall mean, with respect to any Person, any other
Person directly or indirectly controlling (including but not limited to all
directors and officers of such Person), controlled by, or under direct or
indirect common control with such Person. A Person shall be deemed to control a
corporation if such Person possesses, directly or indirectly, the power (i) to
vote 10% or more of the securities having ordinary voting power for the election
of directors of such corporation or (ii) to direct or cause the direction of the
management and policies of such corporation, whether through the ownership of
voting securities, by contract or otherwise.
"Aggregate Loan Outstandings" shall have the meaning provided
in Section 3.02(a).
"Agreement" shall mean this Credit Agreement, as the same may
be from time to time further modified, amended and/or supplemented.
"Annual Statement" shall mean the annual financial return
required to be filed by any Regulated Insurance Company with the Applicable
Regulatory Insurance Authority.
"Applicable Credit Rating" shall mean the implied credit
rating, if any, assigned by S&P to the senior unsecured long-term debt of the
Borrower. If such rating shall be changed by S&P, such change shall be effective
as of the Business Day following such change. In the event that at any time S&P
does not assign an implied credit rating to the Borrower's senior unsecured
long-term debt, then a Category D Period shall be deemed to be in effect.
"Applicable Eurodollar Rate Margin" shall mean, for any day,
the rate per annum set forth below opposite the Applicable Rating Period then in
effect:
Applicable Rating Applicable Eurodollar
Period Rate Margin
----------------- ---------------
Category A Period 0.170%
Category B Period 0.200%
Category C Period 0.225%
Category D Period 0.275%
"Applicable Facility Fee Percentage" shall mean, for any day,
the percentage set forth below opposite the Applicable Rating Period then in
effect:
Applicable Rating Applicable Facility
Period Fee Percentage
----------------- ---------------
Category A Period 0.080%
Category B Period 0.100%
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Category C Period 0.125%
Category D Period 0.200%
"Applicable Rating Period" shall mean, subject to the terms
and conditions set forth below in this definition, the period set forth below
then in effect:
Applicable Rating
Period Criteria
- ----------------- ---------
Category A Period The Applicable Credit Rating is A+ or better.
Category B Period The Applicable Credit Rating is A- or better,
but a Category A Period is not in effect.
Category C Period The Applicable Credit Rating is BBB or better,
but neither a Category A Period nor a Category
B Period is in effect.
Category D Period The Applicable Credit Rating is below BBB, or
there is no Applicable Credit Rating.
"Applicable Regulatory Insurance Authority" shall mean, when
used with respect to any Regulated Insurance Company, the Superintendent of
Insurance, insurance commission or similar administrative authority or agency
located in (x) each state in which such Regulated Insurance Company is domiciled
or incorporated or (y) to the extent asserting regulatory jurisdiction over such
Regulated Insurance Company, the Superintendent of Insurance or insurance
commission in each state in which such Regulated Insurance Company is licensed,
and shall include any U.S. Federal insurance regulatory department, authority or
agency that may be created and that asserts regulatory jurisdiction over such
Regulated Insurance Company.
"Assignment Agreement" shall mean an Assignment Agreement
substantially in the form of Exhibit E hereto.
"Authorized Officer" shall mean any senior officer of the
Borrower or a Regulated Insurance Company, as the case may be, designated as
such in writing to the Administrative Agent by the Borrower to the extent
acceptable to the Administrative Agent.
"Bank" shall have the meaning provided in the first paragraph
of this Agreement.
"Bank Default" shall mean (i) the refusal (which has not been
retracted) of a Bank to make available its portion of any incurrence of Loans or
(ii) a Bank having notified the
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Administrative Agent and/or the Borrower that it does not intend to comply with
the obligations under Section 1.01.
"Bankruptcy Code" shall have the meaning provided in Section
8.05.
"Base Rate" at any time shall mean the higher of (i) the rate
which is 1/2 of 1% in excess of the Federal Funds Effective Rate and (iii) the
Prime Lending Rate.
"Base Rate Loans" shall mean each Revolving Loan bearing
interest at the rates provided in Section 1.09(a).
"Bidder Bank" shall mean each Bank that has notified in
writing (and has not withdrawn such notice) the Administrative Agent that it
desires to participate generally in the bidding arrangements relating to
Competitive Bid Borrowings.
"Borrower" shall have the meaning provided in the first
paragraph of this Agreement.
"Borrowing" shall mean (i) the incurrence of one Type of
Revolving Loan by the Borrower from all of the Banks on a pro rata basis on a
given date (or resulting from conversions on a given date), having in the case
of Eurodollar Loans the same Interest Period, provided that Base Rate Loans
incurred pursuant to Section 1.11(b) shall be considered part of any related
Borrowing of Eurodollar Loans, or (ii) a Competitive Bid Borrowing.
"Business Day" shall mean (i) for all purposes other than as
covered by clause (ii) below, any day excluding Saturday, Sunday and any day
which shall be in the City of New York a legal holiday or a day on which banking
institutions are authorized by law or other governmental actions to close and
(ii) with respect to all notices and determinations in connection with, and
payments of principal and interest on, Eurodollar Loans, any day which is a
Business Day described in clause (i) and which is also a day for trading by and
between banks in U.S. dollar deposits in the interbank Eurodollar market.
"Capital Expenditures" shall mean, with respect to any
Person, all expenditures by such Person and its Subsidiaries which would be
capitalized in accordance with GAAP, including all such expenditures with
respect to fixed or capital assets (including, without limitation, expenditures
for maintenance and repairs which should be capitalized in accordance with GAAP)
and the amount of all Capitalized Lease Obligations incurred by such Person and
its Subsidiaries.
"Capital Lease" as applied to any Person shall mean any lease
of any property (whether real, personal or mixed) by that Person as lessee
which, in conformity with GAAP, is accounted for as a capital lease on the
balance sheet of that Person.
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"Capitalized Lease Obligations" shall mean all obligations
under Capital Leases of the Borrower or any of its Subsidiaries in each case
taken at the amount thereof accounted for as liabilities in accordance with
GAAP.
"Cash Flow" shall mean, for any period, the sum (without
duplication) of (i) the maximum aggregate amount available under applicable law
to be paid during such period to the Borrower as dividends by the Regulated
Insurance Companies plus (ii) payments received during such period by the
Borrower from Tax Sharing Agreements plus (iii) investment income, including
interest income and other dividend income (not included in the preceding
clauses) of the Borrower during such period plus (iv) all management fees,
investment banking fees and servicing fees paid to the Borrower from all
Subsidiaries during such period less (a) cash operating expenses of the Borrower
during such period and (b) taxes paid by the Borrower during such period.
"Centre Re Agreement" shall mean the Coinsured Aggregate
Excess of Loss Reinsurance Agreement, dated January 1, 1995, among Frontier
Insurance Company, Frontier Pacific Insurance Company and Centre Reinsurance
Company of New York.
"Change of Control" shall mean (i) any "Person" or "group"
(as such terms are used in Sections 13(d) and 14(d) of the 1934 Act), is or
shall become the "beneficial owner" (as defined in Rules 13(d)-3 and 13(d)-5
under the 1934 Act), directly or indirectly, of 20% or more on a fully diluted
basis of the voting and economic interests of the Borrower or (ii) the Board of
Directors of the Borrower shall cease to consist of a majority of Continuing
Directors.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time and the regulations promulgated and the rulings issued
thereunder. Section references to the Code are to the Code, as in effect at the
Effective Date and any subsequent provisions of the Code, amendatory thereof,
supplemental thereto or substituted therefor.
"Collective Bargaining Agreement" shall have the meaning
provided in Section 4.01(d).
"Commitment" shall mean, with respect to each Bank, the
amount set forth opposite such Bank's name in Annex I hereto, as the same may be
(x) reduced from time to time pursuant to Section 2.02, 2.03 and/or 8 or (y)
adjusted from time to time as a result of assignments to or from such Bank
pursuant to Section 11.04.
"Competitive Bid Borrowing" shall mean a Borrowing of
Competitive Bid Loans pursuant to Section 1.04.
"Competitive Bid Loan" shall have the meaning provided in
Section 1.01(b).
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"Consolidated Indebtedness" shall mean, at any time, the
Loans and all other Indebtedness for borrowed money of or guaranteed by the
Borrower at such time determined in accordance with GAAP (but excluding the
Convertible Debentures).
"Consolidated Net Income" shall mean for any Person, for any
period, the net income (or loss) of such Person and its Subsidiaries on a
consolidated basis for such period taken as a single accounting period
determined in conformity with GAAP, provided that there shall be excluded (i)
the income (or loss) of any entity (other than a Subsidiary of such first
Person) in which any other Person (other than such first Person or any of its
Subsidiaries) has a joint interest, except to the extent of the amount of
dividends or other distributions actually paid to such first Person or any of
its Subsidiaries by such entity during such period, (ii) the income (or loss) of
any entity accrued prior to the date it becomes a Subsidiary of such first
Person or is merged into or consolidated with such first Person or any of its
Subsidiaries or on which its assets are acquired by such first Person or any of
its Subsidiaries and (iii) the income of any Subsidiary of such first Person to
the extent that the declaration or payment of dividends or similar distributions
by that Subsidiary of that income is not at the time permitted by operation of
the terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Subsidiary.
"Consolidated Net Worth" shall mean at any time for the
determination thereof all amounts which, in conformity with GAAP, would be
included under the caption "total shareholders' equity" (or any like caption) on
a consolidated balance sheet of the Borrower and its Subsidiaries as at such
date, but excluding in any event any adjustment resulting from the application
with SFAS 115.
"Contingent Obligations" shall mean as to any Person any
obligation of such Person guaranteeing or intended to guarantee any
Indebtedness, leases, dividends or other obligations ("primary obligations") of
any other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent, (a) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (b) to advance or
supply funds (i) for the purchase or payment of any such primary obligation or
(ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (c) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation, (d) otherwise to assure or hold
harmless the owner of such primary obligation against loss in respect thereof,
provided however that the term Contingent Obligation shall not include (x)
endorsements of instruments for deposit or collection in the ordinary course of
business or (y) obligations of any Regulated Insurance Company under Insurance
Contracts, surety bonds, Reinsurance Agreements or Retrocession Agreements. The
amount of any Contingent Obligation shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in
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respect thereof (assuming such Person is required to perform thereunder) as
determined by such Person in good faith.
"Continuing Directors" shall mean the directors of the
Borrower on the Effective Date and each other director, if such director's
nomination for election to the Board of Directors of the Borrower is recommended
by a majority of the then Continuing Directors.
"Convertible Debentures" shall mean the Convertible
Debentures issued by the Borrower to Frontier Financing Trust in connection with
the issuance by Frontier Financing Trust of its 6-1/4% Convertible Trust
Originated Preferred Securities.
"Credit Documents" shall mean this Agreement and the Notes.
"D&P" shall mean Duff & Phelps and its successors.
"Default" shall mean any event, act or condition which with
notice or lapse of time, or both, would constitute an Event of Default.
"Defaulting Bank" shall mean any Bank with respect to which a
Bank Default is in effect.
"Dividends" shall have the meaning provided in Section
7.06(a).
"Effective Date" shall have the meaning provided in Section
11.10.
"Eligible Transferee" shall mean and include a commercial
bank, financial institution or other "accredited investor" (as defined in SEC
Regulation D) having combined capital and surplus of at least $500,000,000.
"Employment Agreements" shall have the meaning provided in
Section 4.01(d).
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder. Section references to ERISA are to ERISA, as in
effect at the Effective Date and any subsequent provisions of ERISA, amendatory
thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" of any Person shall mean any other Person
that is a member of such Person's controlled group, or under common control with
such Person, (i) within the meaning of Section 414(b) or (c) of the Code or (ii)
solely for purposes of those sections of the Code or ERISA to which Section
414(m) or (o) of the Code applies, pursuant to such Section 414(m) or (o).
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"ERISA Event" with respect to any Person shall mean (a) the
occurrence of a Reportable Event; (b) the provision by the administrator of any
Plan of a notice of intent to terminate such Plan, pursuant to Section
4041(a)(2) of ERISA (including any such notice with respect to a Plan amendment
referred to in Section 4041(e) of ERISA); (c) the cessation of operations at a
facility of the Borrower or any ERISA Affiliate in the circumstances described
in Section 4062(e) of ERISA; (d) the withdrawal by the Borrower or any ERISA
Affiliate from a multiple employer plan during a plan year for which it was a
substantial employer, as defined in Section 4001(a)(2) of ERISA; (e) the failure
by the Borrower or any ERISA Affiliate to make a payment to a Plan required
under Section 302(f)(l) of ERISA; (f) the adoption of an amendment to a Plan
requiring the provision of security to such Plan, pursuant to Section 307 of
ERISA; or (g) the institution by the PBGC of proceedings to terminate a Plan,
pursuant to Section 4042 of ERISA, other than subsection (a)(4) thereof.
"Eurodollar Loans" shall mean each Loan bearing interest at
the rates provided in Section 1.09(b).
"Eurodollar Rate" shall mean with respect to each Interest
Period, (i) the arithmetic average (rounded to the nearest 1/100 of 1%) of the
offered quotations to first-class banks in the interbank Eurodollar market by
the Administrative Agent for dollar deposits of amounts in same day funds
comparable to the outstanding principal amount of the Eurodollar Loan of the
Administrative Agent for which an interest rate is then being determined (or in
the case of a Competitive Bid Loan that is a Spread Borrowing priced by
reference to the Eurodollar Rate, the arithmetic average (rounded to the nearest
1/100 of 1%) of the offered rates for deposits in U.S. dollars for the
applicable Interest Period (or the period closest to such applicable Interest
Period) which appear on the Reuters Screen LIBO Page) with maturities comparable
to such Interest Period, determined as of 10:00 A.M. (New York time) on the date
which is two Business Days prior to the commencement of such Interest Period,
divided (and rounded upward to the next whole multiple of 1/16 of 1%) by (ii) a
percentage equal to 100% minus the then stated maximum rate of all reserve
requirements (including, without limitation, any marginal, emergency,
supplemental, special or other reserves) applicable to any member bank of the
Federal Reserve System in respect of Eurocurrency liabilities as defined in
Regulation D (or any successor category of liabilities under Regulation D).
"Event of Default" shall have the meaning provided in Section
8.
"Existing Indebtedness" shall have the meaning provided in
Section 5.16.
"Existing Indebtedness Agreements" shall have the meaning
provided in Section 4.01(d).
"Expiration Date" shall mean June 10, 1997.
"Facility Fees" shall have the meaning provided in Section
2.01(a).
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"Federal Funds Effective Rate" shall mean, for any period, a
fluctuating interest rate equal for each day during such period to the weighted
average of the rates on overnight Federal Funds transactions with members of the
Federal Reserve System arranged by Federal Funds brokers, as published for such
day (or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations for such day
on such transactions received by the Administrative Agent from three Federal
Funds brokers of recognized standing selected by the Administrative Agent.
"Fees" shall mean all amounts payable pursuant to, or referred
to in, Section 2.01.
"Final Maturity Date" shall mean June 2, 2002.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as in effect on the date of this Agreement; it
being understood and agreed that determinations in accordance with GAAP for
purposes of Section 7, including defined terms as used therein, are subject (to
the extent provided therein) to Section 11.07(a).
"Indebtedness" of any Person shall mean without duplication
(i) all indebtedness of such Person for borrowed money, (ii) the deferred
purchase price of assets or services which in accordance with GAAP would be
shown on the liability side of the balance sheet of such Person, (iii) the face
amount of all letters of credit issued for the account of such Person and,
without duplication, all drafts drawn thereunder, (iv) all Indebtedness of a
second Person secured by any Lien on any property owned by such first Person,
whether or not such indebtedness has been assumed, (v) all Capitalized Lease
Obligations of such Person, (vi) all obligations of such Person to pay a
specified purchase price for goods or services whether or not delivered or
accepted, i.e., take-or-pay and similar obligations, (vii) all net obligations
of such Person under Interest Rate Agreements marked to market value and (viii)
all Contingent Obligations of such Person, provided that Indebtedness shall not
include trade payables and accrued expenses, in each case arising in the
ordinary course of business.
"Initial Borrowing Date" shall mean the date, on or after the
Effective Date, upon which the initial Borrowing of Loans occurs.
"Insurance Business" shall mean one or more aspects of the
business of selling, issuing, underwriting or administering insurance or
reinsurance.
"Insurance Contract" shall mean any insurance contract or
policy issued by a Regulated Insurance Company but shall not include any
Reinsurance Agreement.
"Interest Coverage Ratio" shall mean, for any period, the
ratio of (x) Cash Flow for such period to (y) Interest Expense for such period.
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"Interest Expense" shall mean, for any period, the sum of (i)
all interest payments on the Loans made during such period, plus (ii) all
Facility Fees paid during such period, plus (iii) all interest payments on other
Indebtedness of the Borrower and its Subsidiaries made during such period,
excluding interest payments on the Convertible Debentures.
"Interest Period" shall mean (x) with respect to any
Eurodollar Loan, the interest period applicable thereto, as determined pursuant
to Section 1.10 and (y) with respect to any Competitive Bid Loan, the period
beginning on the date of incurrence thereof and ending on the stated maturity
thereof.
"Interest Rate Agreement" shall mean any interest rate swap
agreement, any interest rate cap agreement, any interest rate collar agreement
or other similar agreement or arrangement designed to protect against
fluctuations in interest rates.
"Interest Rate Basis" shall mean the Eurodollar Rate and/or
such other basis for determining an interest rate as the Borrower and the
Administrative Agent may agree upon from time to time.
"Legal Requirements" shall mean all applicable laws, rules,
orders and regulations made by any legislature or government or any governmental
body or regulatory authority (including, without limitation, any Applicable
Regulatory Insurance Authority) having jurisdiction over the Borrower or a
Subsidiary of the Borrower.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement or any
lease in the nature thereof).
"Loan" shall mean any Revolving Loan or Competitive Bid Loan.
"Lyndon" shall mean Lyndon Property Insurance Company, a
Missouri corporation.
"Management Agreements" shall have the meaning provided in
Section 4.01(d).
"Margin Stock" shall have the meaning provided in Regulation
U.
"Material Adverse Effect" shall mean a material adverse effect
on the business, property, assets, operations, financial condition (determined
pursuant to GAAP or SAP) or prospects of the Borrower and its Subsidiaries taken
as a whole.
"Material Subsidiary" shall mean (i) any Regulated Insurance
Company and (ii) any other Subsidiary of the Borrower that (x) has assets at
such time comprising 5% or
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more of the consolidated assets of the Borrower and its Subsidiaries or (y) had
net income in the then most recently completed fiscal year of the Borrower
comprising 5% or more of the Consolidated Net Income of the Borrower and its
Subsidiaries for such fiscal year.
"Mercury" shall mean Mercury Finance Company, a Delaware
corporation.
"Moody's" shall mean Moody's Investors Services and its
successors.
"Multiemployer Plan" shall mean a Plan that is a
"multiemployer plan" as defined in Section 4001(a)(3) of ERISA.
"NAIC" shall mean the National Association of Insurance
Commissioners or any successor organization thereto.
"NAIC Tests" shall mean the ratio and other financial
measurements developed by the NAIC under its Insurance Regulatory Information
System.
"Net Premiums Written" shall mean, for any period, for any
Regulated Insurance Company, the aggregate amount of premiums written by such
Regulated Insurance Company during such period, determined in accordance with
SAP (consistent with the determination thereof on the Effective Date).
"1934 Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Non-Defaulting Bank" shall mean each Bank other than a
Defaulting Bank.
"Non-Regulated Insurance Company" shall mean each Subsidiary
of the Borrower which is not a Regulated Insurance Company provided each
Non-Regulated Insurance Company must be a direct Subsidiary of the Borrower or
of another Non- Regulated Insurance Company.
"Note" shall have the meaning provided in Section 1.06(a).
"Notice of Borrowing" shall have the meaning provided in
Section 1.03.
"Notice of Competitive Bid Borrowing" shall have the meaning
provided in Section 1.04.
"Notice of Conversion" shall have the meaning provided in
Section 1.07.
"Notice Office" shall mean the office of the Administrative
Agent at 31 West 52nd Street, New York, NY 10019, Attention: John Quinn, with a
copy to Deutsche Morgan Grenfell Inc. at 31 West 52nd Street, New York, NY
10019, Attention: Susan Maros, or such other office as the Administrative Agent
may designate to the Borrower from time to time.
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"Obligations" shall mean all amounts, direct or indirect,
contingent or absolute, of every type or description, and at any time existing,
owing to the Administrative Agent or any Bank pursuant to the terms of this
Agreement or any other Credit Document.
"Payment Office" shall mean the office of the Administrative
Agent at 31 West 52nd Street, New York, NY 10019, Attention: John Quinn, with a
copy to Deutsche Morgan Grenfell Inc. at 31 West 52nd Street, New York, NY
10019, Attention: Susan Maros, or such other office as the Administrative Agent
may designate to the Borrower from time to time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA, or any successor thereto.
"Permitted Acquisition" shall have the meaning provided in
Section 7.02(g).
"Person" shall mean any individual, partnership, joint
venture, firm, corporation, limited liability company, association, trust or
other enterprise or any government or political subdivision or any agency,
department or instrumentality thereof.
"Plan" shall mean any multiemployer or single-employer plan
as defined in Section 4001 of ERISA which is required to be contributed to
pursuant to collective bargaining agreements or otherwise maintained by, or at
any time during the five calendar years preceding the Effective Date was
required to be contributed to pursuant to collective bargaining agreements or
otherwise maintained by, the Borrower or any ERISA Affiliate.
"Prescribed Forms" shall mean such duly executed form(s) or
statement(s), and in such number of copies, which may, from time to time, be
prescribed by law and which, pursuant to applicable provisions of (a) an income
tax treaty between the United States and the country of residence of the Bank
providing the form(s) or statement(s), (b) the Code, or (c) any applicable rule
or regulation under the Code, permit the Borrower to make payments hereunder for
the account of such Bank free of deduction or withholding of income or similar
taxes.
"Prime Lending Rate" shall mean the rate which the
Administrative Agent announces from time to time as its prime lending rate, the
Prime Lending Rate to change when and as such prime lending rate changes. The
Prime Lending Rate is a reference rate and does not necessarily represent the
lowest or best rate actually charged to any customer. The Administrative Agent
may make commercial loans or other loans at rates of interest at, above or below
the Prime Lending Rate.
"Pro Forma Basis" shall mean, with respect to each Permitted
Acquisition in connection with which any calculation of compliance with any
financial covenant or financial term is required, the calculation thereof on a
pro forma basis, for the Test Period ended on the last day of the most recently
ended fiscal quarter, determined as if (x) such Permitted Acquisition, each
other Permitted Acquisition effected by the Borrower and its Subsidiaries after
the first day of such Test Period and any increase in Consolidated Indebtedness
after the
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first day of such Test Period had occurred on the first day of such Test Period,
and (y) with respect to any such increase in Consolidated Indebtedness, such
Consolidated Indebtedness had remained outstanding at all times during such Test
Period.
"Prohibited Transaction" shall mean a transaction with
respect to a Plan that is prohibited under Section 4975 of the Code or Section
406 of ERISA and not exempt under Section 4975 of the Code or Section 408 of
ERISA.
"Register" shall have the meaning provided in Section 1.06(d).
"Regulated Insurance Company" shall mean any Subsidiary,
whether now owned or hereafter acquired or created, that is authorized or
admitted to carry on or transact Insurance Business in any jurisdiction and is
regulated by the Superintendent of Insurance, insurance commission or other
Applicable Regulatory Insurance Authority. No Regulated Insurance Company may be
a Subsidiary of a Non-Regulated Insurance Company.
"Regulation D" shall mean Regulation D of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof establishing reserve requirements.
"Regulation U" shall mean Regulation U of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof establishing margin requirements.
"Reinsurance Agreement" shall mean any agreement, contract,
treaty or other arrangement whereby one or more insurers, as reinsurers, assume
liabilities under insurance policies or agreements issued by another insurance
or reinsurance company or companies.
"Reply Date" shall have the meaning provided in Section
1.04(b).
"Reportable Event" shall mean an event described in Section
4043(c) of ERISA with respect to a Plan as to which the 30 day notice
requirement has not been waived by the PBGC.
"Required Banks" shall mean Non-Defaulting Banks whose
outstanding Commitments (or, if after the Total Commitment has been terminated,
outstanding Loans) constitute at least 51% of the Adjusted Total Commitment (or,
if after the Total Revolving Commitment has been terminated, the total
outstanding Loans of Non-Defaulting Banks).
"Retrocession Agreement" shall mean any agreement, contract,
treaty or other arrangement whereby one or more insurers or reinsurers, as
retrocessionaires, assume liabilities of reinsurers under a Reinsurance
Agreement or other retrocessionaires under another Retrocession Agreement.
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"Reuters Screen" shall mean, when used in connection with any
designated page in determining the applicable Eurodollar Rate for an Interest
Period for a Competitive Bid Borrowing that is a Spread Borrowing priced by
reference to the Eurodollar Rate, the display page so designated on the Reuter
Monitor Money Rates Service (or such other page as may replace that page on that
service for the purpose of displaying comparable rates).
"Revolving Loan" shall have the meaning provided in Section
1.01(a).
"SAP" shall mean, with respect to any Regulated Insurance
Company, the accounting procedures and practices prescribed or permitted by the
Applicable Regulatory Insurance Authority of the primary regulatory jurisdiction
to which such Regulated Insurance Company is subject or the state in which such
Regulated Insurance Company is domiciled; it being understood and agreed that
determinations in accordance with SAP for purposes of Section 7, including
defined terms as used therein, are subject (to the extent provided therein) to
Section 11.07(a).
"S&P" shall mean Standard & Poor's Corporation and its
successors.
"SEC" shall mean the United States Securities and Exchange
Commission, or any successor thereto.
"SEC Regulation D" shall mean Regulation D as promulgated
under the Securities Act of 1933, as amended, as the same may be in effect from
time to time.
"Shareholders' Agreements" shall have the meaning provided in
Section 4.01(d).
"Single-Employer Plan" shall mean a Plan that is a
single-employer plan as defined in Section 4001(15) of ERISA.
"Spread" shall mean a percentage per annum in excess of, or
less than, an Interest Rate Basis.
"Spread Borrowing" shall mean a Competitive Bid Borrowing
with respect to which the Borrower has requested the Banks to make Competitive
Bid Loans at a Spread over or under a specified Interest Rate Basis.
"Statutory Surplus" shall mean as at any time for any
Regulated Insurance Company the regulatory capital for such entity determined in
accordance with SAP, but determined in a manner consistent with the
determination thereof on the Effective Date by the Applicable Regulatory
Insurance Authority for such Company.
"Subsidiary" of any Person shall mean and include (i) any
corporation more than 50% of whose stock of any class or classes having by the
terms thereof ordinary voting
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power to elect a majority of the directors of such corporation (irrespective of
whether or not at the time stock of any 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 owned by such Person directly or indirectly through
Subsidiaries and (ii) any partnership, association, joint venture or other
entity in which such Person directly or indirectly through Subsidiaries, has
more than a 50% equity interest at the time. Unless otherwise expressly
provided, all references herein to "Subsidiary" shall mean a Subsidiary of the
Borrower.
"Surplus Relief Reinsurance Transaction" shall mean any
"financing-type" Reinsurance Agreement in which a Regulated Insurance Company
cedes business, which Reinsurance Agreement does not involve actual transfer of
risk, and is deemed not to qualify as reinsurance, under GAAP at the time such
Agreement is entered into.
"Tax Sharing Agreements" shall have the meaning provided in
Section 4.01(d).
"Taxes" shall have the meaning provided in Section 3.04(a).
"Test Period" shall mean (a) for purposes of Section 7.09
(including references to Section 7.09 in other Sections of this Agreement), (i)
for any determination made on and prior to the last day of the fiscal quarter
ending on June 30, 1998, the period from the first day of the fiscal quarter
ending on September 30, 1997 to the last day of the fiscal quarter of the
Borrower then last ended, provided that the first Test Period shall end on the
last day of the fiscal quarter ending on September 30, 1997, and (ii) for any
determination made thereafter, the four consecutive fiscal quarters of the
Borrower then last ended and (b) for purposes of Section 7.10 (including
references to Section 7.10 in other Sections of this Agreement), each period of
four consecutive fiscal quarters of the Borrower than last ended, in each case
taken as one accounting period.
"Total Capitalization" shall mean, at any time, the sum of
Consolidated Indebtedness of the Borrower at such time plus Consolidated Net
Worth of the Borrower at such time.
"Total Commitment" shall mean the sum of the Commitments of
each Bank.
"Total Unutilized Commitment" shall mean at any time for the
determination thereof, the Total Commitment less the aggregate outstanding
principal amount of all Loans at such time.
"Transaction Documents" shall mean and include the Acquisition
Documents and the Credit Documents.
"Type" shall mean any type of Loan determined with respect to
the interest option applicable thereto, i.e., a Base Rate Loan or Eurodollar
Loan.
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"UCC" shall mean the Uniform Commercial Code.
"Unfunded Current Liability" of any Plan shall mean the
amount, if any, by which the actuarial present value of the accumulated plan
benefits under the Plan as of the close of its most recent plan year exceeds the
fair market value of the assets allocable thereto, each determined in accordance
with Statement of Financial Accounting Standards No. 35, based upon the
actuarial assumptions used by the Plan's actuary in the most recent annual
valuation of the Plan.
"Wholly-Owned Subsidiary" of any Person shall mean any
Subsidiary of such Person to the extent all of the capital stock or other
ownership interests in such Subsidiary, other than directors' qualifying shares,
is owned directly or indirectly by such Person.
"Withdrawal Liability" has the meaning specified in Part I of
Subtitle E of Part IV of ERISA.
"Written" or "in writing" shall mean any form of written
communication or a communication by means of telex, facsimile transmission,
telegraph or cable.
SECTION 10. The Administrative Agent.
1.101 Appointment. Each Bank hereby irrevocably designates and
appoints Deutsche Bank AG, New York Branch and/or Cayman Islands Branch as
Administrative Agent to act as specified herein and in the other Credit
Documents, and each such Bank hereby irrevocably authorizes Deutsche Bank AG,
New York Branch and/or Cayman Islands Branch as the Administrative Agent for
such Bank, to take such action on its behalf under the provisions of this
Agreement and the other Credit Documents and to exercise such powers and perform
such duties as are expressly delegated to the Administrative Agent by the terms
of this Agreement and the other Credit Documents, together with such other
powers as are reasonably incidental thereto. The Administrative Agent agrees to
act as such upon the express conditions contained in this Section 10.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Administrative Agent shall not have any duties or responsibilities, except those
expressly set forth herein or in the other Credit Documents, nor any fiduciary
relationship with any Bank, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or otherwise exist against the Administrative Agent. The provisions of
this Section 10 are solely for the benefit of the Administrative Agent and the
Banks, and the Borrower shall not have any rights as a third party beneficiary
of any of the provisions hereof. In performing its functions and duties under
this Agreement, the Administrative Agent shall act solely as agent of the Banks
and does not assume and shall not be deemed to have assumed any obligation or
relationship of agency or trust with or for any Credit Party.
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1.102 Delegation of Duties. The Administrative Agent may
execute any of its duties under this Agreement or any other Credit Document by
or through agents or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Administrative
Agent shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care except to the extent
otherwise required by Section 10.03.
1.103 Exculpatory Provisions. Neither the Administrative
Agent nor any of its officers, directors, employees, agents, attorneys-in-fact
or affiliates shall be (i) liable to any of the Banks for any action lawfully
taken or omitted to be taken by it or such Person under or in connection with
this Agreement (except for its or such Person's own gross negligence or willful
misconduct) or (ii) responsible in any manner to any of the Banks for any
recitals, statements, representations or warranties made by the Borrower or any
Subsidiary or any of their respective officers contained in this Agreement, any
other Credit Document or in any certificate, report, statement or other document
referred to or provided for in, or received by the Administrative Agent under or
in connection with, this Agreement or any other Credit Document or for any
failure of the Borrower or any Subsidiary or any of their respective officers to
perform its obligations hereunder or thereunder. The Administrative Agent shall
not be under any obligation to any Bank to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement, or to inspect the properties, books or records of the
Borrower or any Subsidiary. The Administrative Agent shall not be responsible to
any Bank for the effectiveness, genuineness, validity, enforceability,
collectibility or sufficiency of this Agreement or any Credit Document or for
any representations, warranties, recitals or statements made herein or therein
or made in any written or oral statement or in any financial or other
statements, instruments, reports, certificates or any other documents in
connection herewith or therewith furnished or made by the Administrative Agent
to the Banks or by or on behalf of the Borrower to the Administrative Agent or
any Bank or be required to ascertain or inquire as to the performance or
observance of any of the terms, conditions, provisions, covenants or agreements
contained herein or therein or as to the use of the proceeds of the Loans or of
the existence or possible existence of any Default or Event of Default.
1.104 Reliance by Administrative Agent. The Administrative
Agent shall be entitled to rely, and shall be fully protected in relying, upon
any note, writing, resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, facsimile transmission, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Borrower), independent accountants and other experts
selected by the Administrative Agent. The Administrative Agent shall be fully
justified in failing or refusing to take any action under this Agreement or any
other Credit Document unless it shall first receive such advice or concurrence
of the Required Banks as it deems appropriate or it shall first be indemnified
to its satisfaction by the Banks against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such action.
The Administrative Agent shall
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in all cases be fully protected in acting, or in refraining from acting, under
this Agreement and the other Credit Documents in accordance with a request of
the Required Banks, and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Banks.
1.105 Notice of Default. The Administrative Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless the Administrative Agent has received notice from a
Bank or the Borrower or any other Credit Party referring to this Agreement,
describing such Default or Event of Default and stating that such notice is a
"notice of default". In the event that the Administrative Agent receives such a
notice, the Administrative Agent shall give prompt notice thereof to the Banks.
The Administrative Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the Required Banks, provided
that unless and until the Administrative Agent shall have received such
directions, the Administrative Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable in the best interests of the Banks.
1.106 Non-Reliance. Each Bank expressly acknowledges that
neither the Administrative Agent nor any of its officers, directors, employees,
agents, attorneys-in-fact or affiliates have made any representations or
warranties to it and that no act by the Administrative Agent hereinafter taken,
including any review of the affairs of the Borrower or any Subsidiary, shall be
deemed to constitute any representation or warranty by the Administrative Agent
to any Bank. Each Bank represents to the Administrative Agent that it has,
independently and without reliance upon the Administrative Agent or any other
Bank, and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, assets,
operations, property, financial and other conditions, prospects and
creditworthiness of the Borrower and its Subsidiaries and made its own decision
to make its Loans hereunder and enter into this Agreement. Each Bank also
represents that it will, independently and without reliance upon the
Administrative Agent or any other Bank, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement, and to make such investigation as it deems necessary to inform
itself as to the business, assets, operations, property, financial and other
conditions, prospects and creditworthiness of the Borrower and its Subsidiaries.
The Administrative Agent shall not have any duty or responsibility to provide
any Bank with any credit or other information concerning the business,
operations, assets, property, financial and other conditions, prospects or
creditworthiness of the Borrower or any Subsidiary which may come into the
possession of the Administrative Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates.
1.107 Indemnification. The Banks agree to indemnify the
Administrative Agent in its capacity as such ratably according to their
respective Loans and unutilized Commitments, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, reasonable expenses or disbursements of any kind whatsoever which may at
any time (including, without limitation, at any time following the payment of
the
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Obligations) be imposed on, incurred by or asserted against the Administrative
Agent in its capacity as such in any way relating to or arising out of this
Agreement or any other Credit Document, or any documents contemplated by or
referred to herein or the transactions contemplated hereby or any action taken
or omitted to be taken by the Administrative Agent under or in connection with
any of the foregoing, but only to the extent that any of the foregoing is not
paid by the Borrower or any of its Subsidiaries, provided that no Bank shall be
liable to the Administrative Agent for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting solely from the Administrative
Agent's gross negligence or willful misconduct. If any indemnity furnished to
the Administrative Agent for any purpose shall, in the opinion of the
Administrative Agent, be insufficient or become impaired, the Administrative
Agent may call for additional indemnity and cease, or not commence, to do the
acts indemnified against until such additional indemnity is furnished. The
agreements in this Section 10.07 shall survive the payment of all Obligations.
1.108 The Administrative Agent in its Individual Capacity.
The Administrative Agent and its affiliates may make loans to, accept deposits
from and generally engage in any kind of business with the Borrower and its
Subsidiaries as though not acting as Administrative Agent hereunder. With
respect to the Loans made by it and all Obligations owing to it, the
Administrative Agent shall have the same rights and powers under this Agreement
as any Bank and may exercise the same as though it were not the Administrative
Agent, and the terms "Bank" and "Banks" shall include the Administrative Agent
in its individual capacity.
1.109 Successor Administrative Agent. The Administrative Agent
may resign as the Administrative Agent upon 20 days' notice to the Banks and the
Borrower. The Required Banks shall appoint from among the Banks a successor
Administrative Agent for the Banks, whereupon such successor agent shall succeed
to the rights, powers and duties of the Administrative Agent, and the term
"Administrative Agent" shall include such successor agent effective upon its
appointment, and the resigning Administrative Agent's rights, powers and duties
as the Administrative Agent shall be terminated, without any other or further
act or deed on the part of such former Administrative Agent or any of the
parties to this Agreement. After the retiring Administrative Agent's resignation
hereunder as the Administrative Agent, the provisions of this Section 10 shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Administrative Agent under this Agreement.
SECTION 11. Miscellaneous.
1.111 Payment of Expenses, etc. The Borrower agrees to: (i)
whether or not the transactions herein contemplated are consummated, pay all
reasonable out-of-pocket costs and expenses of the Administrative Agent in
connection with the negotiation, preparation, syndication, execution and
delivery of the Credit Documents and the documents and instruments referred to
therein and any amendment, waiver or consent relating thereto (including,
without limitation, the reasonable fees and disbursements of White & Case) and
of the Administrative
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Agent and each of the Banks in connection with the enforcement of the Credit
Documents and the documents and instruments referred to therein (including,
without limitation, the reasonable fees and disbursements of counsel for the
Administrative Agent and for each of the Banks); (ii) pay and hold each of the
Banks harmless from and against any and all present and future stamp and other
similar taxes with respect to the foregoing matters and save each of the Banks
harmless from and against any and all liabilities with respect to or resulting
from any delay or omission (other than to the extent attributable to such Bank)
to pay such taxes; and (iii) indemnify each Bank, its officers, directors,
employees, representatives and agents (collectively, the "Indemnitees") from and
hold each of them harmless against any and all losses, liabilities, claims,
damages or expenses incurred by any of them as a result of, or arising out of,
or in any way related to, or by reason of, any investigation, litigation or
other proceeding (whether or not any Bank is a party thereto) related to the
entering into and/or performance of any Credit Document or the use of the
proceeds of any Loans hereunder or the Acquisition or the consummation of any
transactions contemplated in any Credit Document, including, without limitation,
the reasonable fees and disbursements of counsel incurred in connection with any
such investigation, litigation or other proceeding (but excluding any such
losses, liabilities, claims, damages or expenses to the extent incurred by
reason of the gross negligence or willful misconduct of the Person to be
indemnified or of any other Indemnitee who is such Person or an affiliate of
such Person).
1.112 Right of Setoff. In addition to any rights now or
hereafter granted under applicable law or otherwise, and not by way of
limitation of any such rights, upon the occurrence of an Event of Default, each
Bank is hereby authorized at any time or from time to time, without presentment,
demand, protest or other notice of any kind to the Borrower or to any other
Person, any such notice being hereby expressly waived, to set off and to
appropriate and apply any and all deposits (general or special) and any other
Indebtedness at any time held or owing by such Bank (including, without
limitation, by branches and agencies of such Bank wherever located) to or for
the credit or the account of the Borrower against and on account of the
Obligations and liabilities of the Borrower to such Bank under this Agreement or
under any of the other Credit Documents, including, without limitation, all
interests in Obligations of the Borrower purchased by such Bank pursuant to
Section 11.06(b), and all other claims of any nature or description arising out
of or connected with this Agreement or any other Credit Document, irrespective
of whether or not such Bank shall have made any demand hereunder and although
said Obligations, liabilities or claims, or any of them, shall be contingent or
unmatured.
1.113 Notices. Except as otherwise expressly provided herein,
all notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, telecopier or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or delivered, if to the Borrower, at
the address specified opposite its signature below; if to any Bank, at its
address specified for such Bank on Annex II hereto; or, at such other address as
shall be designated by any party in a written notice to the other parties
hereto. All such notices and communications shall be mailed, telegraphed,
telexed, telecopied, or cabled or sent by overnight courier, and shall be
effective when received.
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<PAGE>
1.114 Assignments and Participations. (a) This Agreement shall
be binding upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto, provided that the Borrower may not
assign or transfer any of its rights or obligations hereunder without the prior
written consent of all the Banks. Each Bank may at any time grant participations
in any of its rights hereunder or under any of the Notes to another financial
institution, provided that in the case of any such participation, (i) the
participant shall not have any rights under this Agreement or any of the other
Credit Documents, including rights of consent, approval or waiver (the
participant's rights against such Bank in respect of such participation to be
those set forth in the agreement executed by such Bank in favor of the
participant relating thereto), (ii) such Bank's obligations under this Agreement
(including, without limitation, its Commitment) shall remain unchanged, (iii)
such Bank shall remain solely responsible to the other parties hereto for the
performance of such obligations, (iv) such Bank shall remain the holder of any
such Note for all purposes of this Agreement and (v) the Borrower, the
Administrative Agent and the other Banks shall continue to deal solely and
directly with the respective Bank in connection with such Bank's rights and
obligations under this Agreement, and all amounts payable by the Borrower
hereunder shall be determined as if such Bank had not sold such participation,
except that the participant shall be entitled to the benefits of Sections 1.11,
1.12 and 3.04 of this Agreement to the extent that such Bank would be entitled
to such benefits if the participation had not been entered into or sold, and,
provided further, that no Bank shall transfer, grant or assign any participation
under which the participant shall have rights to approve any amendment to or
waiver of this Agreement or any other Credit Document except to the extent such
amendment or waiver would (x) extend the final scheduled maturity of the
Revolving Loans in which such participant is participating, or reduce the rate
or extend the time of payment of interest or Fees thereon (except in connection
with a waiver of the applicability of any post-default increase in interest
rates), or reduce the principal amount thereof, or increase such participant's
participating interest in any Commitment over the amount thereof then in effect
(it being understood that a waiver of any Default or Event of Default or of a
mandatory reduction in the Total Commitment, or a mandatory prepayment, shall
not constitute a change in the terms of any Commitment), or (y) consent to the
assignment or transfer by the Borrower of any of its rights and obligations
under this Agreement.
(b) Notwithstanding the foregoing, with the consent of the
Borrower and the Administrative Agent (each such consent not to be unreasonably
withheld), (x) any Bank may assign all or any portion of its Loans and/or
Commitments and its rights and obligations hereunder to another Bank, and (y)
any Bank may assign all or a portion of its Loans and/or Commitments and its
rights and obligations hereunder to one or more Eligible Transferees. No
assignment pursuant to the immediately preceding sentence shall to the extent
such assignment represents an assignment to an institution other than one or
more Banks hereunder, be in an aggregate amount less than $5,000,000 unless the
entire Commitments and Loans of the assigning Bank is so assigned. If any Bank
so sells or assigns all or a part of its rights hereunder or under the Notes,
any reference in this Agreement or the Notes to such assigning Bank shall
thereafter refer to such Bank and to the respective assignee to the extent of
their respective interests and the respective assignee shall have, to the extent
of such assignment
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<PAGE>
(unless otherwise provided therein), the same rights and benefits as it would if
it were such assigning Bank. Each assignment pursuant to this Section 11.04(b)
shall be effected by the assigning Bank and the assignee Bank executing an
Assignment Agreement (appropriately completed). In the event of any such
assignment to a lender not previously a Bank hereunder, either the assigning or
the assignee Bank shall pay to the Administrative Agent a nonrefundable
assignment fee of $3,000, and at the time of any assignment pursuant to this
Section 11.04(b), (i) Annex I shall be deemed to be amended to reflect the
Commitment of the respective assignee (which shall result in a direct reduction
to the Commitment of the assigning Bank) and of the other Banks, and (ii) if any
such assignment occurs after the Initial Borrowing Date, the Borrower will issue
new Notes to the respective assignee and to the assigning Bank in conformity
with the requirements of Section 1.06. Each Bank and the Borrower agree to
execute such documents (including, without limitation, amendments to this
Agreement and the other Credit Documents) as shall be necessary to effect the
foregoing. Nothing in this clause (b) shall prevent or prohibit any Bank from
pledging its Notes or Loans to a Federal Reserve Bank in support of borrowings
made by such Bank from such Federal Reserve Bank.
(c) Notwithstanding any other provisions of this Section
11.04, no transfer or assignment of the interests or obligations of any Bank
hereunder or any grant of participations therein shall be permitted if such
transfer, assignment or grant would require the Borrower to file a registration
statement with the SEC or to qualify the Loans under the "Blue Sky" laws of any
State.
(d) Each Bank initially party to this Agreement hereby
represents, and each Person that becomes a Bank pursuant to an assignment
permitted by clause (b) above will upon its becoming party to this Agreement
represent, that it is a commercial lender, other financial institution or other
"accredited investor" (as defined in SEC Regulation D) which makes loans in the
ordinary course of its business or is acquiring the Loans without a view to
distribution of the Loans within the meaning of the federal securities laws, and
that it will make or acquire Loans for its own account in the ordinary course of
such business, provided that, subject to the preceding clauses (a) through (c),
the disposition of any promissory notes or other evidences of or interests in
Indebtedness held by such Bank shall at all times be within its exclusive
control.
1.115 No Waiver; Remedies Cumulative. No failure or delay on
the part of the Administrative Agent or any Bank in exercising any right, power
or privilege hereunder or under any other Credit Document and no course of
dealing between the Borrower and the Administrative Agent or any Bank shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder or under any other Credit Document preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege hereunder or thereunder. The rights and remedies herein expressly
provided are cumulative and not exclusive of any rights or remedies which the
Administrative Agent or any Bank would otherwise have. No notice to or demand on
the Borrower in any case shall entitle the Borrower to any other or further
notice or demand in similar or other circumstances or
60
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<PAGE>
constitute a waiver of the rights of the Administrative Agent or the Banks to
any other or further action in any circumstances without notice or demand.
1.116 Payments Pro Rata. (a) The Administrative Agent agrees
that promptly after its receipt of each payment from or on behalf of the
Borrower in respect of any Obligations, it shall distribute such payment to the
Banks (other than any Bank that has expressly waived its right to receive its
pro rata share thereof) pro rata based upon their respective shares, if any, of
the Obligations with respect to which such payment was received.
(b) Each of the Banks agrees that, if it should receive any
amount hereunder (whether by voluntary payment, by realization upon security, by
the exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or
otherwise) which is applicable to the payment of the principal of, or interest
on, the Loans or Fees, of a sum which with respect to the related sum or sums
received by other Banks is in a greater proportion than the total of such
Obligation then owed and due to such Bank bears to the total of such Obligation
then owed and due to all of the Banks immediately prior to such receipt, then
such Bank receiving such excess payment shall purchase for cash without recourse
or warranty from the other Banks an interest in the Obligations to such Banks in
such amount as shall result in a proportional participation by all of the Banks
in such amount, provided that if all or any portion of such excess amount is
thereafter recovered from such Bank, such purchase shall be rescinded and the
purchase price restored to the extent of such recovery, but without interest.
1.117 Calculations; Computations. (a) The financial statements
to be furnished to the Banks pursuant hereto shall be made and prepared in
accordance with GAAP or SAP consistently applied throughout the periods involved
(except as set forth in the notes thereto or as otherwise disclosed in writing
by the Borrower to the Banks), provided that except as otherwise specifically
provided herein, all computations determining compliance with Section 7,
including definitions used therein, shall utilize accounting principles and
policies in effect at the time of the preparation of, and in conformity with
those used to prepare, the December 31, 1996 historical financial statements of
the Borrower delivered to the Banks pursuant to Section 5.08(b). At any time the
computations determining compliance with Section 7 utilize accounting principles
different from those utilized in the financial statements furnished to the Banks
pursuant to Section 6.01, such financial statements shall be accompanied by
reconciliation work-sheets.
(b) All computations of interest on Loans and Fees hereunder
shall be made on the actual number of days elapsed over a year of 360 days.
1.118 Governing Law; Submission to Jurisdiction; Venue;
Waiver of Jury Trial. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE
CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW
YORK. Any legal action or proceeding with respect to this Agreement or any other
Credit Document may
61
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<PAGE>
be brought in the courts of the State of New York or of the United States for
the Southern District of New York, and, by execution and delivery of this
Agreement, the Borrower hereby irrevocably accepts for itself and in respect of
its property, generally and unconditionally, the jurisdiction of the aforesaid
courts. The Borrower hereby further irrevocably consents to the service of
process out of any of the afore-mentioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to the Borrower, at its address for notices pursuant to Section
11.03, such service to become effective 30 days after such mailing. Nothing
herein shall affect the right of the Administrative Agent or any Bank to serve
process in any other manner permitted by law or to commence legal proceedings or
otherwise proceed against the Borrower in any other jurisdiction.
(b) The Borrower hereby irrevocably waives any objection
which it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with this
Agreement or any other Credit Document brought in the courts referred to in
clause (a) above and hereby further irrevocably waives and agrees not to plead
or claim in any such court that any such action or proceeding brought in any
such court has been brought in an inconvenient forum.
(c) Each of the parties to this Agreement hereby irrevocably
waives all right to a trial by jury in any action, proceeding or counterclaim
arising out of or relating to this Agreement, the other Credit Documents or the
transactions contemplated hereby or thereby.
1.119 Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument. A set of
counterparts executed by all the parties hereto shall be lodged with the
Borrower and the Administrative Agent.
11.10 Effectiveness. This Agreement shall become effective on
the date (the "Effective Date") on which the Borrower and each of the Banks
shall have signed a copy hereof (whether the same or different copies) and shall
have delivered the same to the Administrative Agent at the Notice Office of the
Administrative Agent or, in the case of the Banks, shall have given to the
Administrative Agent telephonic (confirmed in writing), written telex or
facsimile transmission notice (actually received) at such office that the same
has been signed and mailed to it.
11.11 Headings Descriptive. The headings of the several
sections and subsections of this Agreement are inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Agreement.
11.12 Amendment or Waiver. Neither this Agreement nor any
other Credit Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination is
in writing signed by the Borrower and
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<PAGE>
the Required Banks, provided that no such change, waiver, discharge or
termination shall, without the consent of each Bank (other than a Defaulting
Bank) directly affected thereby, (i) extend the final maturity date applicable
to reduce the rate or extend the time of payment of interest (other than as a
result of waiving the applicability of any post-default increase in interest
rates) or Fees thereon, or reduce the principal amount thereof, or increase the
Commitment of any Bank over the amount thereof then in effect (it being
understood that a waiver of any Default or Event of Default or of a mandatory
prepayment or a mandatory reduction in the Total Commitment shall not constitute
a change in the terms of any Commitment), (ii) reduce the percentage specified
in, or otherwise modify, the definition of Required Banks or (iii) consent to
the assignment or transfer by the Borrower of any of its rights and obligations
under this Agreement. No provision of Section 10 may be amended without the
consent of the Administrative Agent.
11.13 Survival. All indemnities set forth herein including,
without limitation, in Section 1.11, 1.12, 3.04, 10.07 or 11.01 shall survive
the execution and delivery of this Agreement and the making and repayment of the
Loans.
11.14 Domicile of Loans. Each Bank may transfer and carry its
Loans at, to or for the account of any branch office, subsidiary or affiliate of
such Bank, provided that the Borrower shall not be responsible for costs arising
under Section 1.11 or 3.04 resulting from any such transfer (other than a
transfer pursuant to Section 1.13) to the extent not otherwise applicable to
such Bank prior to such transfer.
11.15 Confidentiality. Subject to Section 11.04, the Banks
shall hold all non-public information obtained pursuant to the requirements of
this Agreement which has been identified as such by the Borrower in accordance
with such Bank's customary procedure for handling confidential information of
this nature and in accordance with safe and sound banking practices and in any
event may make disclosure reasonably required by any bona fide transferee or
participant in connection with the contemplated transfer of any Loans or
participation therein (provided that each such prospective transferee and/or
participant shall execute an agreement for the benefit of the Borrower with such
prospective transferor Bank containing provisions substantially identical to
those contained in this Section 11.15) or as required or requested by any
governmental agency or representative thereof or pursuant to legal process,
provided that, unless specifically prohibited by applicable law or court order,
each Bank shall notify the Borrower of any request by any governmental agency or
representative thereof (other than any such request in connection with an
examination of the financial condition of such Bank by such governmental agency)
for disclosure of any such non-public information prior to disclosure of such
information, and provided further, that in no event shall any Bank be obligated
or required to return any materials furnished by the Borrower or any Subsidiary.
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Agreement to be duly executed and delivered as of the date
first above written.
Address:
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<PAGE>
195 Lake Louise Marie Road FRONTIER INSURANCE GROUP, INC.
Rock Hill, NY 12775-8000
Attention: Mark H. Mishler
Telephone: (914) 796-2100
Telecopy: (914) 796-1904 By:
-------------------------------
Title:
DEUTSCHE BANK AG, NEW YORK BRANCH,
AND/OR CAYMAN ISLANDS BRANCH
Individually and as Administrative
Agent
By:
-------------------------------
Title:
DEUTSCHE BANK AG, NEW YORK BRANCH,
AND/OR CAYMAN ISLANDS BRANCH
Individually and as Administrative
Agent
By:
-------------------------------
Title:
64
<PAGE>
<PAGE>
ANNEX I
COMMITMENTS
Bank Commitments
---- -----------
Deutsche Bank AG, New York $100,000,000
Branch and/or Cayman Islands Branch ------------
Total: $100,000,000
============
<PAGE>
<PAGE>
ANNEX II
BANK ADDRESSES
Deutsche Bank AG,
New York Branch and/or Cayman Islands Branch
31 West 52nd Street
New York, NY 10019
with a copy to:
Deutsche Morgan Grenfell Inc.
31 West 52nd Street
New York, NY 10019
<PAGE>
<PAGE>
ANNEX III
SCHEDULE OF SUBSIDIARIES
NAME STATE OF JURISDICTION OF
- ---- INCORPORATION OR ORGANIZATION
-----------------------------
Frontier Insurance Company New York
Medical Professional Liability Agency, Ltd. New York
Pioneer Claim Management, Inc. New York
Frontier Pacific Insurance Company California
SDIA, Inc. California
Spencer Douglass and Associates of Nevada Nevada
Spencer Douglass Insurance Associates, Inc. Arizona
of Arizona
United Capitol Holding Company Delaware
United Capitol Insurance Company Wisconsin
Olympic Underwriting Managers, Inc. Delaware
Fischer Underwriting Group, Inc. New Jersey
Regency Financial Corp. Delaware
Regency Insurance Company North Carolina
Emrol Installment Premium Discount, Inc. North Carolina
Frontier Financing Trust Delaware
<PAGE>
<PAGE>
ANNEX IV
EXISTING INDEBTEDNESS
Frontier Insurance Group, Inc. issued 6 1/4% Convertible Subordinated
Debentures, Due 2026, to Frontier Financing Trust in the aggregate principal
amount of $177,835,100 (and, in connection with the issuance of such debentures,
executed guarantee agreements with respect to the common and preferred
securities issued by the Frontier Financing Trust).
<PAGE>
<PAGE>
ANNEX V
EXISTING LIENS
In April 1993, the Borrower put into service and began to occupy its
new home office facility. The cost of the facility's construction was financed
internally by the Borrower. However, to receive favorable tax status, title to
the facility resides with the County of Sullivan Industrial Development Agency
("IDA") which, in turn, issued to the Borrower its twenty-year bonds with a face
value equal to the total cost of the facility. Under the provisions of related
agreements, title to the facility reverts to the Borrower on maturity of the
bonds, or sooner for a nominal fee, should the Borrower so desire. As of
December 31, 1996, the outstanding, par value of the IDA bonds was $24,574,000.
<PAGE>
<PAGE>
ANNEX VI
EXISTING ADVANCES, LOANS AND INVESTMENTS
<TABLE>
<CAPTION>
Investment Amount Type Purpose
--------- ------ ---- -------
<S> <C> <C> <C>
The Western Systems Approx. $8,800,000 25% Equity Ownership To fund, with other
Corp. investors, The Western
Systems Corp.'s
$40,250,000 acquisition of
the assets of American
County Insurance Company.
</TABLE>
<PAGE>
<PAGE>
EXHIBIT A-1
FORM OF NOTICE OF BORROWING
Deutsche Bank AG, New York Branch and/or Cayman Islands Branch,
as Administrative Agent for the Banks party
to the Credit Agreement referred
to below
31 West 52nd Street
New York, New York 10019
Attention:
------------------------
Gentlemen:
The undersigned refers to the Credit Agreement, dated as of
June 3, 1997 (as amended, modified or supplemented from time to time, the
"Credit Agreement," the terms defined therein being used herein as therein
defined), among the undersigned, certain Banks from time to time party thereto
and you, as Administrative Agent for such Banks, and hereby gives you notice,
irrevocably, pursuant to Section 1.03 of the Credit Agreement, that the
undersigned hereby requests a Borrowing of Revolving Loans under the Credit
Agreement, and in that connection sets forth below the information relating to
such Borrowing (the "Proposed Borrowing") as required by Section 1.03 of the
Credit Agreement.
(i) The Business Day of the Proposed Borrowing is ____________ , 19 __.
(ii) The aggregate principal amount of the Proposed Borrowing is $____.
(iii) The Proposed Borrowing is to consist of [Base Rate Loans]
[Eurodollar Loans].
[(iv) The initial Interest Period for the Proposed Borrowing is
_______ months.](1)
The undersigned hereby certifies that the following statements are true
on the date hereof, and will be true on the date of the Proposed Borrowing:
- ----------------
(1) To be included for a Proposed Borrowing of Eurodollar Loans.
<PAGE>
<PAGE>
EXHIBIT A-1
Page 2
(A) the representations and warranties contained in the Credit
Agreement or the other Credit Documents are and will be true and correct in
all material respects, before and after giving effect to the Proposed
Borrowing and to the application of the proceeds thereof, as though made on
and as of such date, unless stated to relate to a specific earlier date, in
which case such representations and warranties shall be true and correct in
all material respects as of such earlier date; and
(B) no Default or Event of Default has occurred and is continuing, or
would result from such Proposed Borrowing or from the application of the
proceeds thereof.
Very truly yours,
FRONTIER INSURANCE GROUP, INC.
By
-----------------------------
Title:
<PAGE>
<PAGE>
EXHIBIT A-2
FORM OF NOTICE OF COMPETITIVE BID BORROWING
Deutsche Bank AG, New York Branch and/or Cayman Islands Branch,
as Administrative Agent for the Banks party
to the Credit Agreement referred
to below
31 West 52nd Street
New York, New York 10019
Attention: ____________________________
Gentlemen:
The undersigned refers to the Credit Agreement, dated as of
June 3, 1997 (as amended, modified or supplemented from time to time, the
"Credit Agreement," the terms defined therein being used herein as therein
defined), among the undersigned, certain Banks from time to time party thereto
and you, as Administrative Agent for such Banks, and hereby gives you notice,
irrevocably, pursuant to Section 1.04 of the Credit Agreement, that the
undersigned hereby requests a Competitive Bid Borrowing under the Credit
Agreement, and in connection therewith sets forth below the information relating
to such Competitive Bid Borrowing (the "Proposed Competitive Bid Borrowing") as
required by Section 1.04 of the Credit Agreement:
(i) The aggregate principal amount of the Proposed Competitive Bid Borrowing is
$_____________________.
(ii) The Business Day of the Proposed Competitive Bid Borrowing is
___________, 199__.
(iii) The maturity date with respect to the Proposed Competitive Bid
Borrowing is __________________, 199__.(1)
- -----------------
(1) Such maturity date shall be specified in accordance with Section 1.04 of the
Credit Agreement and, in any event, may not be earlier than one month, in
the case of a Spread
(continued...)
<PAGE>
<PAGE>
EXHIBIT A-2
Page 2
(iv) The interest payment date(s) relating to the Proposed Competitive
Bid Borrowing is (are) _____________ , 19 .
(v) The basis to be used by the Banks in determining the rate or rates
of interest to be offered by the Banks with respect to the Proposed
Competitive Bid Borrowing is: _____________________ .(2)
(vi) Additional terms, if any, applicable to the Proposed Competitive
Bid Borrowing are as follows:
The undersigned hereby certifies that the following statements are true on
the date hereof, and will be true on the date of the Proposed Competitive Bid
Borrowing:
(A) all representations and warranties contained in the Credit
Agreement or in the other Credit Documents are true and correct in all material
respects, before and after giving effect to the Proposed Competitive Bid
Borrowing and to the application of the proceeds therefrom, as though made on
and as of such date unless stated to relate to a specific earlier date, in which
case such representations and warranties shall be true and correct in all
material respects as of such earlier date; and
- -------------
(1) (...Continued)
Borrowing, and seven days, in the case of an Absolute Rate Borrowing, after
the date of the Proposed Competitive Bid Borrowing listed in (ii) above, or
later than the earlier to occur of (x) six months, in the case of a Spread
Borrowing, and 364 days, in the case of an Absolute Rate Borrowing, after
the date of such Proposed Competitive Bid Borrowing and (y) three Business
Days prior to the Final Maturity Date.
(2) Specify whether Proposed Competitive Bid Borrowing shall be an Absolute Rate
Borrowing or a Spread Borrowing and, if a Spread Borrowing, the applicable
Interest Rate Basis.
<PAGE>
<PAGE>
EXHIBIT A-2
Page 3
(B) no Default or Event of Default has occurred and is continuing, or
would result from such Proposed Competitive Bid Borrowing or from the
application of the proceeds therefrom.
Very truly yours,
FRONTIER INSURANCE GROUP, INC.
By
--------------------------------
Title:
<PAGE>
<PAGE>
EXHIBIT B
NOTE
$________________ New York, New York
June 3, 1997
FOR VALUE RECEIVED, FRONTIER INSURANCE GROUP, INC., a Delaware
corporation (the "Borrower"), hereby promises to pay to the order of
_________________________ (the "Bank"), in lawful money of the United States of
America in immediately available funds, at the Administrative Agent's Payment
Office (as defined in the Agreement referred to below) initially located at 31
West 52nd Street, New York, New York 10019, on the Final Maturity Date (as
defined in the Agreement referred to below) the principal sum of _______________
DOLLARS or, if less, the then unpaid principal amount of all Revolving Loans (as
defined in the Agreement) made by the Bank pursuant to the Agreement.
The Borrower also promises to pay interest on the unpaid
principal amount of each Revolving Loan in like money at said office from the
date such Revolving Loan is made until paid at the rates and at the times
provided in Section 1.09 of the Agreement.
This Note is one of the Notes referred to in the Credit
Agreement, dated as of June 3, 1997, among the Borrower, the financial
institutions from time to time party thereto (including the Bank) and Deutsche
Bank AG, New York Branch and/or Cayman Islands Branch, as Administrative Agent
(as from time to time in effect, the "Agreement") and is entitled to the
benefits thereof. As provided in the Agreement, this Note is subject to
voluntary and mandatory prepayment, in whole or in part.
In case an Event of Default (as defined in the Agreement)
shall occur and be continuing, the principal of and accrued interest on this
Note may become or be declared to be due and payable in the manner and with the
effect provided in the Agreement.
The Borrower hereby waives presentment, demand, protest or
notice of any kind in connection with this Note.
<PAGE>
<PAGE>
EXHIBIT B
Page 2
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
FRONTIER INSURANCE GROUP, INC.
By
-----------------------------
Title:
<PAGE>
<PAGE>
EXHIBIT C
Form of Opinion of Epstein, Becker & Green, P.C.
Counsel to Frontier Insurance Group, Inc.
<PAGE>
<PAGE>
EXHIBIT D
Officers' Certificate
<PAGE>
<PAGE>
EXHIBIT E
FORM OF ASSIGNMENT AGREEMENT
ASSIGNMENT AGREEMENT (the "Assignment Agreement") dated as of
_________ __, 19__ between ________________ ("Assignor") and ________________
("Assignee"). All capitalized terms used herein and not otherwise defined shall
have the respective meanings provided such terms in the Credit Agreement
referred to below.
W I T N E S S E T H :
WHEREAS, Assignor is a party to a Credit Agreement, dated as
of June 3, 1997 (as amended to the date hereof, the "Credit Agreement"), among
Frontier Insurance Group, Inc. (the "Borrower"), Deutsche Bank AG, New York
Branch and/or Cayman Islands Branch, as Administrative Agent and various
financial institutions (including Assignor);
WHEREAS, Assignor has a Commitment of $_______under the Credit
Agreement pursuant to which it has made outstanding Loans of $________;
WHEREAS, Assignor and Assignee wish Assignor to assign to
Assignee its rights under the Credit Agreement with respect to [a portion of]
its Commitment and its outstanding Loans; and
WHEREAS, Assignor and Assignee wish Assignee to assume the
obligations of Assignor under the Credit Agreement to the extent of the rights
so assigned;
<PAGE>
<PAGE>
EXHIBIT E
Page 2
NOW, THEREFORE, in consideration of the mutual agreements
herein contained, the parties hereto agree as follows:
1. Assignment. Assignor hereby assigns to Assignee, without
recourse, or representation or warranty (other than expressly provided herein)
and subject to Section 4(b) hereof, that percentage listed on Annex I hereto as
the "Assignee's Share" ("Assignee's Share") of all of Assignor's rights, title
and interest arising under the Credit Agreement relating to Assignor's
Commitment, including Assignee's Share of the Loans heretofore made by the
Assignor under the Credit Agreement. The dollar amount of Assignee's Share of
Assignor's Commitment and outstanding Loans is set forth in Item 5(c) of Annex I
hereto.
2. Assumption. Assignee hereby assumes from Assignor all of
Assignor's obligations arising under the Credit Agreement relating to Assignee's
Share of Assignor's Commitment and of the Loans made by Assignor pursuant
thereto. It is the intent of the parties hereto that Assignor shall be released
from all of its obligations under the Credit Agreement relating to the
Assignee's Share pursuant to Section 11.04(b) of the Credit Agreement.
3. Assignments; Participations. Assignee may assign all or any
part of the rights granted to it hereunder, provided that such assignment
complies with the provisions of Sections 11.04(b) of the Credit Agreement.
Assignee may sell or grant participations in all or any part of the rights
granted to it hereunder in accordance with the provisions of Section 11.04(a) of
the Credit Agreement.
4. Payment of Interest to Assignee. (a) Interest is payable by
the Borrower in respect of the Assignee's Share of the Loans at the rates, and
at the times set forth in Section 1.09 of the Credit Agreement, which interest,
to the extent payable after the Assignment Effective Date (as defined below),
will be payable for the account of the Assignee.(1)
- -------------
(1) In the event that the Assignor and Assignee agree that the rate of interest
payable to the Assignee shall be lower than the rate or rates paid by the
Borrower, with the Assignor being entitled to any excess, and/or interest on
Assignee's Share of the Loans payable after the Assignment Effective Date
shall be, in whole or in part, for the account of the
(continued...)
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EXHIBIT E
Page 3
(b) Notwithstanding anything to the contrary contained in this
Assignment Agreement, if and when Assignor receives or collects, in either case
after the Assignment Effective Date, any payment of interest on any of
Assignee's Share of the Loans which in any such case, is required to be paid to
Assignee pursuant to clause (a) above, Assignor shall distribute to Assignee
such payment.
(c) Notwithstanding anything to the contrary contained in this
Assignment Agreement, if and when Assignee receives or collects any payment of
interest on any of the Loans which, in any such case, is required to be paid to
Assignor pursuant to clause (a) above, Assignee shall distribute to Assignor
such payment.
5. Payments on Assignment Effective Date. In consideration of
the assignment by Assignor to Assignee of Assignee's Share of Assignor's
Commitment and Loans as set forth above, [(a)] Assignee agrees to pay to
Assignor on or prior to the Assignment Effective Date an amount specified by
Assignor in writing on or prior to the Assignment Effective Date which
represents Assignee's Share of the principal amount of the respective Loans made
by Assignee pursuant to the Credit Agreement and outstanding on the Assignment
Effective Date [plus interest accrued thereon as of the Assignment Effective
Date]2 [and (b) Assignor agrees to pay to Assignee within three Business Days
after the Assignment Effective Date the Facility Fee specified in Annex I
hereto](3).
- --------
(1) (continued...)
Assignor, appropriate modifications should be made to Section 4(a). Any such
modified Section 4(a) must provide, however, that the Borrower and the
Administrative Agent shall direct the entire amount of such interest to the
Assignee, and that such fee sharing arrangement shall be effectuated through
payments between the Assignee and the Assignor.
(2) Include bracketed language if appropriate.
(3) Include the bracketed language if a Facility Fee is to be paid.
<PAGE>
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EXHIBIT E
Page 4
6. Effectiveness. This Assignment Agreement shall become
effective on the date (the "Assignment Effective Date") on which (i) Assignor
and Assignee shall have signed a copy hereof (whether the same or different
copies) and, in the case of Assignee, shall have delivered same to Assignor,
(ii) Assignee shall have paid to Assignor the amount set forth in Section 5(a),
and (iii) Assignor or Assignee shall have given written notice of such
assignment to the Administrative Agent and shall have paid to the Administrative
Agent the assignment fee referred to in Section 11.04(b) of the Credit
Agreement.
7. Amendment of Credit Agreement. In accordance with the
requirements of Section 11.04(b) of the Credit Agreement, on the Assignment
Effective Date the Credit Agreement shall be amended by deeming the signature of
Assignee herein as a signature to the Credit Agreement. For purposes of Section
11.04(b) of the Credit Agreement, the Assignee shall be deemed a "Bank" for all
purposes under the Credit Agreement, and shall be subject to and shall benefit
from all of the rights and obligations of a Bank under the Credit Agreement and
the address of the Assignee for notice purposes shall be as set forth opposite
its signature below.
8. Representations and Warranties. Each of the Assignor and the
Assignee represents and warrants to the other party as follows:
(a) it has full power and authority, and has taken all action
necessary, to execute and deliver this Assignment Agreement and to
fulfill its obligations under, and to consummate the transactions
contemplated by, this Assignment Agreement;
(b) the making and performance by it of this Assignment
Agreement and all documents required to be executed and delivered by it
hereunder do not and will not violate any law or regulation of the
jurisdiction of its incorporation or any other law or regulation
applicable to it;
(c) this Assignment Agreement has been duly executed and
delivered by it and constitutes its legal, valid and binding
obligation, enforceable in accordance with its terms; and
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EXHIBIT E
Page 5
(d) all consents, licenses, approvals, authorizations,
exemptions, registrations, filings, opinions and declarations from or
with any agency, department, administrative authority, statutory
corporation or judicial entity necessary for the validity or
enforceability of its obligations under this Assignment Agreement have
been obtained, and no governmental authorizations other than any
already obtained are required in connection with its execution,
delivery and performance of this Assignment Agreement.
9. Expenses. The Assignor and the Assignee agree that each
party shall bear its own expenses in connection with the preparation and
execution of this Assignment Agreement.
10. Foreign Withholding. If the Assignee is organized under
the laws of any jurisdiction other than the United States or any state or other
political subdivision thereof (a) it represents and warrants to the
Administrative Agent and the Borrower that under applicable law and treaties no
taxes will be required to be withheld by the Administrative Agent or the
Borrower with respect to any payments to be made to Assignee in respect of the
Loans and (b) it agrees that it will (i) furnish the Administrative Agent and
the Borrower, concurrently with the execution of this Assignment Agreement,
either U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue Service
Form 1001 (wherein Assignee claims entitlement to complete exemption from U.S.
federal withholding tax on all payments under the Credit Agreement) and, upon
the expiration or obsolescence of any previously delivered form, with a new U.S.
Internal Revenue Service Form 4224 or Form 1001 and comparable statements in
accordance with applicable U.S. laws and regulations and amendments duly
executed and completed by Assignee and (ii) comply from time to time with all
applicable U.S. laws and regulations with regard to the aforementioned
withholding tax exemption.
11. Miscellaneous. (a) Assignor shall not be responsible to
Assignee for the execution (by any party other than the Assignor),
effectiveness, genuineness, validity, enforceability, collectibility or
sufficiency of any of the Credit Documents or for any representations,
warranties, recitals or statements made therein or in any written or oral
statement or in any financial or other statements, instruments, reports,
certificates or any other documents made or furnished or made available by
Assignor to Assignee or by or on behalf of the Borrower or any of its
Subsidiaries to Assignor or Assignee in
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EXHIBIT E
Page 6
connection with the Credit Documents and the transactions contemplated thereby.
Assignor shall not be required to ascertain or inquire as to the performance or
observance of any of the terms, conditions, provisions, covenants or agreements
contained in any of the Credit Documents or as to the use of the proceeds of the
Loans or as to the existence or possible existence of any Default or Event of
Default.
(b) Assignee represents and warrants that it has made its own
independent investigation of the financial condition and affairs of the Borrower
in connection with the making of the Loans and the assignment of the Assigned
Loans to Assignee hereunder and has made and shall continue to make its own
appraisal of the creditworthiness of the Borrower. Assignor shall have no duty
or responsibility either initially or on a continuing basis to make any such
investigation or any such appraisal on behalf of Assignee or to provide Assignee
with any credit or other information with respect thereto, whether coming into
its possession before the making of the Loans or at any time or times thereafter
and shall further have no responsibility with respect to the accuracy of, or the
completeness of, any information provided to Assignee, whether by Assignor or by
or on behalf of the Borrower.
(c) THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS
ASSIGNMENT AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
(d) No term or provision of this Assignment Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by both parties.
(e) This Assignment Agreement may be executed in one or more
counterparts, each of which shall be an original but all of which, taken
together, shall constitute one and the same instrument.
(f) The Assignor may at any time or from time to time grant to
others assignments or participations in its Loans but not in the portions
thereof assigned to Assignee pursuant to this Assignment Agreement. The Assignor
represents and warrants that it has not at any time prior to the Assignment
Effective Date encumbered or assigned the portion of its Loans being assigned
hereunder.
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EXHIBIT E
Page 7
(g) All payments hereunder or in connection herewith shall be
made in U.S. Dollars and in immediately available funds, if payable to the
Assignor, to the account of the Assignor at its office as designated in Annex I
hereto, and, if payable to the Assignee, to the account of the Assignee at its
office, as designated in Annex I hereto.
(h) This Assignment Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns. Neither of the parties hereto may assign or transfer any of its rights
or obligations under this Assignment Agreement without the prior consent of the
other party. The preceding sentence shall not limit the right of the Assignee to
assign all or part of the Assigned Loans in the manner contemplated by the
Credit Agreement, subject to the provisions of Section 3 hereof.
(i) All representations and warranties made herein and
indemnities provided for herein shall survive the consummation of the
transaction contemplated hereby.
(j) The Assignor shall promptly provide the Assignee with
copies of the documents received in connection with the transactions
contemplated by the Credit Documents and this Assignment Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Assignment Agreement as of the date first above written.
[NAME OF ASSIGNOR]
By
-----------------------------
Title:
[NAME OF ASSIGNEE]
By
-----------------------------
Title:
<PAGE>
<PAGE>
ANNEX I
to
Assignment Agreement
<TABLE>
<S> <C> <C>
1. Borrower: Frontier Insurance Group, Inc.
2. Date of Credit Agreement: as of June 3, 1997.
3. Assignee:
4. Date of Assignment Agreement: ________________, 19__
5. Amount of Assignment:
a. Assignor's outstanding Commitment Loans
Commitment/Loans......................... $ $
------------- -----------
b. Assignee's Share......................... $ $
------------- -----------
c. Amount of Assigned Share................. $ $
------------- -----------
[6. Facility Fee: $___________]
7. Notice and Payment Instructions:
Assignor:
--------------------------------
--------------------------------
--------------------------------
Attention:
</TABLE>
<PAGE>
<PAGE>
ANNEX I
Page 2
Assignee:
--------------------------------
--------------------------------
--------------------------------
Attention:
Accepted and Agreed:
[NAME OF ASSIGNOR]
By
---------------------------
Title:
[NAME OF ASSIGNEE]
By
---------------------------
Title:
