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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: May 3, 1999
(Date of earliest event reported)
HILB, ROGAL AND HAMILTON COMPANY
(Exact Name of Registrant as Specified in its Charter)
Virginia 0-15981 54-1194795
(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
4235 Innslake Drive
Glen Allen, Virginia 23060
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:
(804) 747-6500
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<PAGE>
Item 2. Acquisition or Disposition of Assets.
On May 3, 1999, Hilb, Rogal and Hamilton Company (the "Company")
acquired all of the issued and outstanding capital stock of American Phoenix
Corporation ("American Phoenix") (collectively, the "Acquisition") pursuant to a
Stock Purchase Agreement (the "Stock Purchase Agreement"), dated March 29, 1999,
by and among the Company, PM Holdings, Inc. ("Holdings"), Phoenix Home Life
Mutual Insurance Company ("Phoenix") and Martin L. Vaughan, III ("Vaughan").
American Phoenix, which is based in Hartford, Connecticut, is the 14th largest
property and casualty insurance brokerage firm in the United States and had
revenues of approximately $73 million in 1998. As a result of the Acquisition,
American Phoenix became a wholly owned subsidiary of the Company.
The purchase price paid by the Company in connection with the
Acquisition consisted of (i) approximately $49.2 million in cash, (ii) the
issuance to Holdings of 865,042 shares of the Company's Common Stock ("Common
Stock") and to Vaughan of 134,958 shares of Common Stock, representing an
aggregate of 1,000,000 shares of Common Stock, and (iii) the issuance to
Holdings and Phoenix of an aggregate principal amount of $32 million of the
Company's 5.25% Convertible Subordinated Debentures (Due 2014) (the
"Subordinated Debentures"), which are convertible into 1,406,593 shares of
Common Stock (subject to adjustment as provided in the Indenture relating to the
Subordinated Debentures). The various components of the purchase price were
determined by arms-length negotiations between the parties. Based upon a value
for the 1,000,000 shares of Common Stock of $16.9 million and an estimated value
for the Subordinated Debentures of $28.5 million, the aggregate purchase price
paid by the Company to Holdings, Phoenix and Vaughan at the closing of the
Acquisition was approximately $94.6 million. For information on the estimated
aggregate purchase price to be recorded by the Company for accounting purposes,
see footnote 3 to the Pro Forma Condensed Combined Financial Statements set
forth in "Item 7(b) - Pro Forma Financial Information" below.
In connection with the consummation of the Acquisition, the Company (i)
has agreed to increase the size of the Board of Directors from 9 to 13 and elect
Vaughan, who serves as President and Chief Executive Officer of American
Phoenix, Robert W. Fiondella, Chairman, President and Chief Executive Officer of
Phoenix, David W. Searfoss, Executive Vice President and Chief Financial Officer
of Phoenix, and Timothy J. Korman, the Company's Executive Vice President, as
additional directors of the Company, (ii) entered into a Voting and Standstill
Agreement with Holdings and Phoenix to establish certain rights and obligations
in connection with the relationship of Holdings and Phoenix to the Company, and
(iii) entered into a Registration Rights Agreement with Holdings and Phoenix to
provide certain demand and piggy-back registration rights of the shares of
Common Stock acquired by Holdings and the shares of Common Stock issuable to
Holdings, Phoenix or their affiliates upon conversion of the Subordinated
Debentures (subject to adjustment as provided in the Indenture relating to the
Subordinated Debentures). Copies of the forms of Voting and Standstill
Agreement, Registration Rights Agreement and Indenture are attached as exhibits
to the Stock Purchase Agreement referenced in Exhibit 2.1 of this Form 8-K.
Executed copies of such documents will be filed on the Company's Form 10-Q for
the quarter ended March 31, 1999.
-2-
<PAGE>
As of the close of business on May 3, 1999, the total number of shares
of Common Stock issued and outstanding was 13,201,314. The 865,042 shares of
Common Stock acquired by Holdings at the closing of the Acquisition represent
approximately 6.6% of the issued and outstanding shares of Common Stock as of
that date.
In addition, on May 3, 1999, the Company entered into a Credit
Agreement (the "Credit Agreement"), dated as of May 3, 1999, among the
Registrant, as Borrower; the lenders named therein; First Union National Bank,
as administrative agent; PNC Bank, as documentation agent; and NationsBanc
Montgomery Securities LLC, as syndication agent. Pursuant to the Credit
Agreement, senior credit facilities (the "Credit Facility") in an aggregate
principal amount of up to $110.0 million were made available (i) to finance the
$49.2 million cash payment to Holdings in connection with the Acquisition, (ii)
to repay outstanding bank borrowings under the Company's existing credit
facilities, (iii) to pay certain fees and expenses in connection with the
Acquisition and the Credit Facility, and (iv) for working capital and general
corporate purposes.
The Credit Agreement contains certain covenants that restrict, or may
have the effect of restricting, the payment of dividends or distributions, and
the purchase or redemption by the Company of its capital stock. Management does
not believe that the restrictions contained in the Credit Agreement will, in the
foreseeable future, adversely affect the Company's ability to pay cash dividends
at the current dividend rate. However, there can be no assurance in this regard.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Businesses Acquired.
The following audited financial statements of American Phoenix and its
subsidiaries are included in this report:
Report of Independent Accountants
Consolidated Balance Sheet at December 31, 1998 and 1997
Consolidated Statement of Operations for the Three Years Ended December
31, 1998, 1997 and 1996
Consolidated Statement of Comprehensive Income and Changes in
Stockholders' Equity for the Three Years Ended December 31, 1998, 1997
and 1996
Consolidated Statement of Cash Flows for the Three Years Ended December
31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
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<PAGE>
American Phoenix
Corporation
(a subsidiary of PM Holdings, Inc.)
Consolidated Financial Statements
December 31, 1998 and 1997
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<PAGE>
Report of Independent Accountants
---------------------------------
To the Board of Directors and Stockholders of
American Phoenix Corporation
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of comprehensive income and changes in
stockholders' equity and of cash flows present fairly, in all material respects,
the financial position of American Phoenix Corporation (a subsidiary of PM
Holdings, Inc.) and its subsidiaries at December 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1998, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Hartford, Connecticut
March 5, 1999,
except as to Note 13 which is as of May 3, 1999
-5-
<PAGE>
<TABLE>
<CAPTION>
American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Consolidated Balance Sheet
- -------------------------------------------------------------------------------------------------------------------
December 31,
1998 1997
<S> <C> <C>
Assets
Cash and cash equivalents $ 10,498,658 $ 16,178,504
Marketable equity securities, at market value 111,226 106,341
Premiums receivable, net of allowance of
$241,220 and $267,849 for doubtful accounts 35,285,012 32,195,746
Installment finance receivables, net of unearned
finance charges of $75,465 and $76,553 and
allowance of $2,000 and $2,000 for doubtful accounts 3,525,739 3,410,329
Income taxes receivable from parent 1,196,746 -
Prepaid expenses and other current assets 2,330,590 2,358,079
------------- -------------
Total current assets 52,947,971 54,248,999
Property and equipment, net 8,221,207 7,879,861
Deferred income taxes, net 3,080,453 6,152,865
Goodwill and other intangible assets, net 42,370,521 43,571,605
------------- -------------
Total assets $ 106,620,152 $ 111,853,330
============= =============
Liabilities
Premiums payable to insurers $ 50,155,157 $ 46,397,935
Short-term debt 18,525,504 8,601,628
Income taxes payable to parent - 182,716
Accounts payable and accrued expenses 6,732,474 5,240,195
------------- -------------
Total current liabilities 75,413,135 60,422,474
Long-term debt 44,151,930 61,814,402
Other long-term liabilities 1,856,693 2,205,312
------------- -------------
Total liabilities 121,421,758 124,442,188
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Minority interest 1,189,506 3,713,411
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Stockholders' deficit
Common stock, Class A, $1 stated value;
5,000 shares authorized, issued and outstanding 5,000 5,000
Common stock, Class B, $1 stated value; 882 shares
authorized, 882 and 441 shares issued and outstanding 882 441
Additional paid-in capital 6,580,418 6,080,859
Accumulated deficit (22,575,458) (22,421,874)
Accumulated other comprehensive (loss) income (1,954) 33,305
------------- -------------
Total stockholders' deficit (15,991,112) (16,302,269)
------------- -------------
Total liabilities, minority interest and stockholders' deficit $ 106,620,152 $ 111,853,330
============= =============
</TABLE>
The accompanying notes are an integral part of these statements.
-6-
<PAGE>
<TABLE>
<CAPTION>
American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Consolidated Statement of Operations
- --------------------------------------------------------------------------------
Year ended December 31,
1998 1997 1996
<S> <C> <C>
Income
Commissions and fees $ 71,635,701 $ 62,469,361 $ 60,410,851
Investment and other income 1,290,228 1,874,425 1,628,207
------------ ------------ ------------
Total income 72,925,929 64,343,786 62,039,058
------------ ------------ ------------
Expenses
Compensation and employee benefits 44,241,870 39,336,216 37,195,821
Amortization and write-off of goodwill and other intangible assets 6,500,503 25,964,093 6,832,956
Depreciation of property and equipment 1,814,099 1,770,720 1,580,311
Other operating expenses 14,424,177 14,151,973 14,090,929
Interest 4,081,890 3,856,213 4,267,405
Management fees 671,622 585,673 563,456
------------ ------------ ------------
Total expenses 71,734,161 85,664,888 64,530,878
------------ ------------ ------------
Income (loss) before income taxes, minority interest
and extraordinary item 1,191,768 (21,321,102) (2,491,820)
Income tax provision (benefit) 2,441,387 (1,768,898) 671,984
------------ ------------ ------------
Loss before minority interest and extraordinary item (1,249,619) (19,552,204) (3,163,804)
Minority interest in net income (loss) 98,965 (170,987) 439,151
------------ ------------ ------------
Loss before extraordinary item (1,348,584) (19,381,217) (3,602,955)
Extraordinary gain on extinguishment of debt
(less applicable income taxes of $805,000) 1,495,000 - -
------------ ------------ ------------
Net income (loss) $ 146,416 $(19,381,217) $ (3,602,955)
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
-7-
<PAGE>
<TABLE>
<CAPTION>
American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Consolidated Statement of Comprehensive Income and
Changes in Stockholders' Equity
- --------------------------------------------------------------------------------
Year ended December 31,
1998 1997 1996
<S> <C> <C> <C>
Net income (loss) $ 146,416 $(19,381,217) $(3,602,955)
------------ ------------ -----------
Other comprehensive (loss) income, net of income taxes:
Gain (loss) on marketable equity securities, all unrealized,
net of income taxes of $1,710, $2,477 and $(31,918) 3,175 4,600 (59,276)
Foreign currency translation adjustment, net of income
taxes of $(20,696), $15,616 and $0 (38,434) 29,002 -
------------ ------------ -----------
Other comprehensive (loss) income (35,259) 33,602 (59,276)
------------ ------------ -----------
Total comprehensive income (loss) $ 111,157 $(19,347,615) $(3,662,231)
============ ============ ===========
Stockholders' (deficit) equity, beginning of year $(16,302,269) $ 3,045,346 $ 6,707,577
Proceeds from issuance of 441 shares of Class B common stock 500,000 - -
Net income (loss) 146,416 (19,381,217) (3,602,955)
Dividends paid (300,000) - -
Other comprehensive (loss) income (35,259) 33,602 (59,276)
------------ ------------ -----------
Stockholders' (deficit) equity, end of year $(15,991,112) $(16,302,269) $ 3,045,346
============ ============ ===========
</TABLE>
The accompanying notes are an integral part of these statements.
-8-
<PAGE>
<TABLE>
<CAPTION>
American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Consolidated Statement of Cash Flows
- --------------------------------------------------------------------------------
Year ended December 31,
1998 1997 1996
<S> <C> <C> <C>
Cash flows from operating activities
Net income (loss) $ 146,416 $(19,381,217) $ (3,602,955)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Extraordinary gain on extinguishment of debt (2,300,000) - -
Depreciation of property and equipment 1,814,099 1,770,720 1,580,311
Amortization and write-off of goodwill and
other intangible assets 6,500,503 25,964,093 6,832,956
Provision for deferred income taxes 3,091,398 (2,746,378) 222,578
Minority interest in net income (loss) 98,965 (170,987) 439,151
(Increase) decrease in assets:
Premiums receivable, net (3,234,227) (1,484,457) 3,542,948
Income taxes receivable from parent (1,196,746) 23,480 238,148
Prepaid expenses and other current assets 27,489 (754,932) (252,170)
Increase (decrease) in liabilities:
Premiums payable to insurers 3,757,222 5,277,953 (4,461,828)
Income taxes payable to parent (182,716) 182,716 -
Accounts payable and accrued expenses (2,237,721) 2,290,112 (1,874,954)
Other long-term liabilities (348,619) 74,659 (64,709)
------------ ------------ ------------
Net cash provided by operating activities 5,936,063 11,045,762 2,599,476
------------ ------------ ------------
Cash flows from investing activities
Issuance of installment finance receivables (10,238,906) (6,310,364) (4,172,734)
Collections of installment finance receivables 10,123,496 5,749,168 5,828,774
Purchases of equipment, net of normal retirements (2,005,445) (2,426,939) (1,091,591)
Acquisitions of businesses, net of cash acquired (1,171,791) (2,675,739) (7,965,791)
------------ ------------ ------------
Net cash used in investing activities (3,292,646) (5,663,874) (7,401,342)
------------ ------------ ------------
Cash flows from financing activities
Proceeds from issuance of debt 19,458,986 28,845,000 24,500,000
Repayments of debt (27,096,583) (31,042,024) (15,959,670)
Proceeds from issuance of common stock 500,000 - -
Purchases of minority interest (885,666) (816,551) -
Dividends paid to shareholders (300,000) - -
------------ ------------ ------------
Net cash (used in) provided by financing activities (8,323,263) (3,013,575) 8,540,330
------------ ------------ ------------
Net (decrease) increase in cash and cash equivalents (5,679,846) 2,368,313 3,738,464
Cash and cash equivalents, beginning of year 16,178,504 13,810,191 10,071,727
------------ ------------ ------------
Cash and cash equivalents, end of year $ 10,498,658 $ 16,178,504 $ 13,810,191
============ ============ ============
Supplemental cash flow information:
Interest paid $ 3,884,281 $ 3,998,510 $ 3,958,532
Income taxes paid $ 1,420,457 $ 843,003 $ 443,824
</TABLE>
The accompanying notes are an integral part of these statements.
-9-
<PAGE>
American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
1. Organization and Description of Business
American Phoenix Corporation was incorporated under the laws of
Connecticut. On May 10, 1981, American Phoenix issued 5,000 shares of Class
A - Common Stock to American Phoenix's parent, PM Holdings, Inc., a
wholly-owned subsidiary of Phoenix Home Life Mutual Insurance Company. On
April 13, 1993, 441 shares of Class B - Non-voting Common Stock were issued
to a member of management. On March 31, 1998, another 441 shares of Class B
- Non-voting Common Stock were issued to that member of management.
American Phoenix is engaged in insurance agency operations. Agency
subsidiaries distribute commercial and personal property-casualty and life
and health insurance.
American Phoenix pays a management fee of 1% of commission income to
Phoenix Home Life, the majority of which is for internal legal and tax
preparation services.
2. Summary of Significant Accounting Policies
Use of Estimates
The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles. The preparation
of these financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, income
and expenses, and related disclosures in the notes to consolidated
financial statements. Actual results could differ from those estimates.
The following is a summary of significant accounting policies.
Basis of Presentation
The consolidated financial statements include the accounts of American
Phoenix and all of its subsidiaries. All significant intercompany
transactions and balances have been eliminated in consolidation. Certain
amounts from prior years have been reclassified to conform to current year
presentation.
In 1998, American Phoenix adopted the Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income". This standard, which
is effective for fiscal years beginning after December 15, 1997,
establishes standards for reporting and displaying comprehensive income and
its components in the financial statements. Under this standard, American
Phoenix is required to classify items of other comprehensive income by
their nature in a financial statement and display the accumulated balance
of other comprehensive income separately from retained earnings in the
stockholders' equity section of the balance sheet.
Cash and Cash Equivalents
Cash equivalents comprise highly liquid mutual fund investments and U.S.
Government Securities. The U.S. Government Securities are carried at
amortized cost, which approximates fair value, and have original maturities
of three months or less.
-10-
<PAGE>
American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Investments
Marketable equity securities, which are classified as available-for-sale,
are valued at fair value. The estimated fair value of marketable equity
securities is based on quoted market prices for those investments.
Unrealized gains or losses on marketable equity securities are included as
accumulated other comprehensive income or loss as a separate component of
stockholders' equity, net of deferred income taxes. Realized capital gains
and losses on the disposition of marketable equity securities are
determined on the basis of the specific identification of the securities
sold. Investment income is recognized when earned.
Premiums Receivable
Premiums receivable represents outstanding premiums due from insureds.
Typically, American Phoenix collects premiums from the insured and, after
deducting its authorized commission, remits the premium to the appropriate
insurance company. In other circumstances, the insurance company collects
the premium directly from the insured and remits the applicable commission
to American Phoenix.
Installment Finance Receivables
Installment finance receivables represent outstanding premiums and unpaid
finance charges due under financing agreements, extending generally nine
months. Installment finance receivables, which generally represent 75 to
80% of the insurance premiums due, are collateralized by the related
unearned insurance premiums on such policies. Upon acceptance of a
financing agreement, the entire installment finance receivable due over the
term of the agreement is recorded net of unearned finance charges. American
Phoenix evaluates the collectibility of its installment finance receivables
based upon its loss experience. Receivables are closely monitored such that
if a receivable becomes past due, the corresponding insurance policy is
canceled and the remaining premiums are refunded by the insurance company
to American Phoenix.
Property and Equipment
Property and equipment is carried at cost less accumulated depreciation.
Depreciation is calculated on a straight-line basis over the estimated
useful lives of such assets (15 to 20 years for buildings and improvements,
3 to 7 years for furniture and office equipment, and 3 to 5 years for
computer equipment). Upon retirement, any gain or loss on property and
equipment is included in operations.
Goodwill and Other Intangible Assets
Goodwill represents the excess of the cost of acquiring a company over the
fair value of its net assets. Goodwill is generally amortized over 10 to 15
years on a straight-line basis. Other intangible assets represent client
listings and non-compete covenants. These intangible assets are amortized
on a straight-line basis over the estimated remaining lives of such assets,
generally 3 to 15 years.
-11-
<PAGE>
American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Management periodically reevaluates the propriety of the carrying value of
goodwill and other intangible assets by comparing estimates of future
undiscounted cash flows. This reevaluation is performed at least annually
or more frequently if warranted by events or circumstances affecting
American Phoenix's business. In 1998 and 1997, certain intangible assets
were identified as being impaired and a charge to reduce their carrying
value was recorded (see Note 6).
Minority Interest
Minority interest represents the ownership interest of management in
certain agency subsidiaries. American Phoenix and these minority interest
shareholders have contractual relationships that provide for management to
put their shares to American Phoenix or for American Phoenix to call or buy
these shares at values based on prescribed formulas.
Revenue Recognition
Commissions earned on commercial policies which are agency billed and
direct billed are recognized on the later of the effective date or the
billing date. Commissions earned on personal policies which are direct
billed by insurers are recognized when received.
American Phoenix receives contingent commissions based on the underwriting
profitability of business generated. Contingent commissions are recognized
when received.
Finance charges on installment finance receivables are deferred and
recognized in income over the term of the receivable using either the
sum-of-the-years'-digits method or the actuarial method, both of which
approximate the level yield method. These methods are used as prescribed by
specific state laws.
Income Taxes
Income taxes are provided based on income reported in the financial
statements. Deferred federal and state income taxes are provided on an
asset and liability approach which requires the recognition of deferred
income tax assets and liabilities for the expected future tax consequences
of timing differences between the financial statement carrying amounts and
the tax basis of assets and liabilities.
American Phoenix is included in the consolidated federal income tax return
of Phoenix Home Life. Current taxes are allocated among all affiliated
companies based on a written tax sharing agreement. It is management's
assessment, based upon the participation of American Phoenix in the
consolidated federal income tax return of Phoenix Home Life, and the
historical profits of Phoenix Home Life that it is more likely than not
that the deferred tax assets at December 31, 1998 will be realized.
American Phoenix files separate tax returns for all states where agencies
are located except Connecticut. American Phoenix files a combined state
return with PM Holdings, Inc. for Connecticut based on a written tax
sharing agreement. For state tax purposes, under the tax allocation
agreement, American Phoenix is not reimbursed for the benefit of its
separate company losses provided on a combined basis, therefore, a full
valuation allowance has been taken against the deferred income tax asset
generated from state net operating losses (see Note 9).
-12-
<PAGE>
American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
3. Acquisition of Agency Subsidiaries
In 1998, 1997 and 1996, American Phoenix acquired the outstanding common
stock or net assets of several agencies and accounted for these
transactions under the purchase method of accounting. The following
represents a summary of agency acquisitions:
o In 1998, American Phoenix purchased $4,615,666 of minority interest
from minority shareholders, of which $3,730,000 is included in accounts
payable and accrued expenses at December 31, 1998. Included in the
accounts payable and accrued expenses balance at December 31, 1998, is
a December 28, 1998 transaction whereby American Phoenix purchased an
additional 26.2% of the outstanding stock of American Phoenix
Corporation of Connecticut for an aggregate amount of $3,300,000
increasing American Phoenix's investment to 100.0%.
o Effective November 1, 1998, Nicholas & Cannon Agency, Inc., a
subsidiary of American Phoenix, purchased certain assets of Suncoast
Insurers for an aggregate amount of $2,500,000, consisting of $750,000
in cash and $1,750,000 in debt.
o Effective November 1, 1998, American Phoenix Corporation of Maryland, a
subsidiary of American Phoenix, purchased certain assets of H.W.R.,
Inc. for an aggregate amount of $200,000 cash.
o Effective September 1, 1997, American Phoenix purchased 81.2% of the
outstanding stock of McCay Corporation for an aggregate amount of
$10,900,000.
o During 1997, American Phoenix purchased an additional 25.4% of the
outstanding stock of Lees Preston Fairy for an aggregate amount of
$495,000, thereby increasing American Phoenix's investment in Lees
Preston Fairy to 62.9%. Effective December 17, 1996, American Phoenix
had purchased 37.5% of the outstanding stock of Lees Preston Fairy for
an aggregate amount of $607,000. Prior to the 1997 acquisition, the
investment had been accounted for under the equity method.
o During 1997, American Phoenix purchased an additional 12.2% of the
outstanding stock of American Phoenix Corporation of Massachusetts from
members of management for an aggregate amount of $817,000, thereby
increasing American Phoenix's investment in American Phoenix
Corporation of Massachusetts to 92.2%.
o Effective October 1, 1996, American Phoenix of New York, a subsidiary
of American Phoenix, purchased certain assets of Robert E. Bill
Associates, Inc. for an aggregate amount of $1,630,000.
o Effective April 1, 1996, American Phoenix purchased certain assets of
Associated Insurance Brokers and the outstanding stock of Giaconia Life
Associates, Inc. for an aggregate amount of $4,250,000.
o Effective April 1, 1996, American Phoenix purchased the outstanding
stock of Howard Hall Agency, Inc. for an aggregate amount of
$1,790,000.
-13-
<PAGE>
American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
o Effective March 1, 1996, American Phoenix Corporation of Orlando, a
subsidiary of American Phoenix, purchased certain assets of
Cass-Knoblock Agency for an aggregate amount of $800,000.
The pro forma unaudited results of operations for the years ended
December 31, 1998 and 1997, assuming the 1998 and 1997 purchase
acquisitions had occurred as of January 1, 1997, are as follows:
1998 1997
Revenues $75,065,681 $74,164,786
Loss before extraordinary item (1,348,584) (18,995,217)
Net income (loss) 146,416 (18,995,217)
4. Investments
The cost, market value and gross unrealized gains and losses of marketable
equity security investments classified as available-for-sale at December
31, are as follows:
1998 1997
Cost $ 99,721 $ 99,721
Market value 111,226 106,341
Gross unrealized gains 31,053 6,620
Gross unrealized losses 19,548 -
5. Property and Equipment
A summary of property and equipment at December 31, is as follows:
-14-
<PAGE>
<TABLE>
<CAPTION>
American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
1998 1997
Gross Net Gross Net
<S> <C> <C> <C> <C>
Buildings, land and improvements $ 5,019,138 $ 3,693,366 $ 5,003,958 $ 3,908,300
Furniture and office equipment 8,955,543 2,041,534 8,338,473 1,897,524
Computer equipment 7,382,808 2,486,307 6,189,082 2,074,037
----------- ----------- ----------- ------------
21,357,489 $ 8,221,207 19,531,513 $ 7,879,861
=========== ============
Less accumulated depreciation (13,136,282) (11,651,652)
----------- -----------
$ 8,221,207 $ 7,879,861
=========== ===========
</TABLE>
6. Goodwill and Other Intangible Assets
Certain declines in premium volume and other adverse circumstances have
affected the profitability of four agencies acquired in 1995 and 1996 and
the recoverability of the carrying amounts of intangible assets from these
agency acquisitions. As a result of these circumstances, impairment losses
of $731,000, $18,757,000 and $0 were recognized and charged to amortization
of goodwill and other intangible assets for the years ended December 31,
1998, 1997 and 1996, respectively. In calculating the impairment loss,
estimated fair value was based upon the expected discounted future cash
flows, including, as applicable, the expected discounted future cash flows
generated by the original client listings purchased.
A summary of goodwill and other intangible assets at December 31, is as
follows:
<TABLE>
<CAPTION>
1998 1997
Gross Net Gross Net
<S> <C> <C> <C> <C>
Goodwill $ 55,557,380 $ 24,982,485 $ 53,024,924 $ 26,871,084
Client listings 43,138,522 17,034,414 40,478,477 16,145,316
Non-compete covenants 4,580,364 353,622 4,570,367 555,205
------------ ------------ ------------ ------------
103,276,266 $ 42,370,521 98,073,768 $ 43,571,605
============ ============
Less accumulated amortization (60,905,745) (54,502,163)
------------ ------------
$ 42,370,521 $ 43,571,605
============ ============
</TABLE>
7. Debt
A summary of debt at December 31, is as follows:
-15-
<PAGE>
American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Short-term debt
Current maturities of variable line of credit $ 7,500,000 $ -
Current maturities of other long-term debt 7,854,630 4,702,062
Short-term debt 874 769,566
Revolving credit lines 3,170,000 3,130,000
------------ ------------
Total short-term debt $ 18,525,504 $ 8,601,628
============ ============
Long-term debt
Variable line of credit due 1999 through 2002 $ 37,500,000 $ 45,000,000
5.23% to 9.00% notes payable to former
shareholders due 1999 through 2004 6,651,930 14,632,110
Variable mortgage note payable due 1999 - 2,182,292
------------ ------------
Total long-term debt $ 44,151,930 $ 61,814,402
============ ============
</TABLE>
Phoenix Home Life guarantees the payment of principal and interest on
substantially all of the above debt for which it receives a .10% guarantee
fee on the outstanding balance. This fee is included in the 1% management
fee paid to Phoenix Home Life.
American Phoenix obtains funding for operations and acquisitions through
two revolving credit lines from commercial banks. American Phoenix pays
interest rates equal to the base rate or Eurodollar rate the date of the
advance, and commitment fees on the unused portions of the credit lines.
Additional information on the credit line relating to acquisition and
operating activities of the company at December 31, and for the years then
ended as follows:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C> <C>
Credit line borrowings at year-end $45,000,000 $45,000,000
Interest rate at year-end 5.9% 6.1%
Unused credit line at year-end $ - $ -
1998 1997 1996
Average credit line borrowings during year $44,192,000 $36,500,000 $28,700,000
Average interest rate during year 5.8% 5.9% 5.7%
Commitment fees on unused credit lines for year $ 533 $ 675 $ 6,292
Interest rates on unused credit line for year 0.100% 0.100% 0.125%
</TABLE>
-16-
<PAGE>
American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Additional information on the credit line relating to a wholly-owned
premium financing subsidiary of the company at December 31, and for the
years then ended as follows:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C> <C>
Credit line borrowings at year-end $ 3,170,000 $ 3,130,000
Interest rate at year-end 5.7% 6.1%
Unused credit line at year-end $ 6,830,000 $ 6,870,000
1998 1997 1996
Average credit line borrowings during year $ 3,688,000 $ 3,036,000 $ 3,500,000
Average interest rate during year 5.8% 5.9% 5.9%
Commitment fees on unused credit lines for year $ 9,157 $ 8,549 $ 10,580
Interest rates on unused credit line for year 0.125% 0.125% 0.125%
</TABLE>
-17-
<PAGE>
American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Principal payments required to be paid by American Phoenix over a five year
period on the debt existing as of December 31, 1998, are as follows:
1999 $ 18,525,504
2000 18,114,082
2001 17,406,116
2002 8,382,350
2003 229,855
2004 and thereafter 19,527
------------
$ 62,677,434
============
8. Lease Commitments
American Phoenix occupies office space under leases which are accounted for
as non-cancelable operating leases. These leases generally include
escalation clauses for increases in lessors' operating expenses and real
estate taxes. Total operating lease expense was $3,605,236 net of rental
income of $826,531, $3,230,232, net of rental income of $573,635, and
$3,247,570, net of rental income of $287,117, for the years ended December
31, 1998, 1997 and 1996, respectively. American Phoenix is committed to the
following future net minimum lease payments under non-cancelable operating
leases:
<TABLE>
<CAPTION>
Income Net
Lease from Lease
Payments Subleases Payments
<S> <C> <C> <C>
1999 $ 4,047,011 $ 463,893 $ 3,583,118
2000 3,596,348 269,162 3,327,186
2001 3,409,418 246,850 3,162,568
2002 3,261,946 246,850 3,015,096
2003 2,494,388 246,850 2,247,538
2004 and thereafter 1,771,235 41,454 1,729,781
---------------- ---------------- ----------------
$ 18,580,346 $ 1,515,059 $ 17,065,287
================ ================ ================
</TABLE>
-18-
<PAGE>
American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
9. Income Taxes
The provisions for income taxes charged to net income and to other
comprehensive income for the years ended December 31, are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Applicable to income before extraordinary item:
Current income tax provision
Federal $ (580,857) $ 375,480 $ 69,406
State 735,846 602,000 380,000
--------------- --------------- --------------
Total current 154,989 977,480 449,406
--------------- --------------- --------------
Deferred income tax provision (benefit)
Federal 2,158,325 (2,535,378) 220,578
State 128,073 (211,000) 2,000
--------------- --------------- --------------
Total deferred 2,286,398 (2,746,378) 222,578
--------------- --------------- --------------
Total income tax provision (benefit) $ 2,441,387 $(1,768,898) $ 671,984
=============== =============== ==============
Applicable to extraordinary item:
Deferred income tax provision $ 805,000 $ - $ -
=============== =============== ==============
Applicable to other comprehensive income:
Deferred income tax provision (benefit) $ (18,986) $ 18,093 $ (31,918)
=============== =============== ==============
</TABLE>
-19-
<PAGE>
American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
The difference between the federal income tax provision at the statutory
rate of 35% and American Phoenix's actual federal income tax rate is
attributable to state income taxes, goodwill and other intangible assets,
the limitation on business meals and entertainment and foreign losses for
which no income tax benefit has been recognized. The effective income tax
rate varied from statutory federal income tax rate as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% -35.0% -35.0%
Nondeductible meals and entertainment 3.4% 0.5% 4.0%
Nondeductible goodwill 35.2% 18.3% 57.6%
Nondeductible amortization 1.0% 7.0% -
State income taxes (net of federal benefit) 7.0% 0.5% -1.1%
Nondeductible foreign loss 12.4% - -
Other -1.0% 0.4% 1.5%
------------ ------------ -----------
Effective income tax rate 93.0% -8.3% 27.0%
============ ============ ===========
</TABLE>
The components of deferred income taxes provided for the years ended
December 31, are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Deferred compensation $ 137,925 $ (64,251) $ (90,822)
Severance payment 18,222 - -
Client listing 1,178,371 (3,004,990) 96,125
State income tax (43,009) 133,458 52,743
Accrued expenses 3,638 - (235,353)
Federal net operating loss carryforwards 1,728,857 196,359 153,815
Accrued rent 96,625 87,270 79,451
Depreciation 50,098 (18,538) 212,369
Non-compete covenants (36,782) (78,505) (45,988)
Allowance for doubtful accounts (887) 5,200 (2,676)
Other (41,660) (2,381) 2,914
----------- ------------ -----------
Net deferred income tax provision (benefit) $ 3,091,398 $(2,746,378) $ 222,578
=========== ============ ===========
</TABLE>
-20-
<PAGE>
American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
The tax effect of temporary differences as of December 31, are as follows:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Deferred tax liabilities:
Depreciation $ (228,950) $ (178,852)
State income tax (132,073) (175,082)
---------- -----------
Gross deferred tax liabilities (361,023) (353,934)
---------- -----------
Deferred tax assets:
Client listings 2,358,610 3,536,981
Foreign subsidiary net operating loss carryforwards 371,172 177,450
Accrued rent 367,835 464,460
State of Connecticut net operating loss carryforwards 329,203 449,501
Deferred compensation 289,652 427,577
Federal net operating loss carryforwards 216,579 1,945,436
Severance payment 103,600 121,822
Allowance for doubtful accounts 60,487 59,600
Non-compete covenants 7,602 (29,180)
Foreign currency translation adjustments 5,080 (15,616)
Accrued expenses 3,352 6,990
Gain on marketable equity securities 893 2,603
Other 27,786 (13,874)
---------- ----------
Gross deferred tax assets 4,141,851 7,133,750
---------- ----------
Valuation allowances:
Foreign subsidiary net operating loss carryforwards (371,172) (177,450)
State of Connecticut net operating loss carryforwards (329,203) (499,501)
----------- ----------
Valuation allowances (700,375) (626,951)
Net deferred income tax asset $3,080,453 $6,152,865
=========== ==========
</TABLE>
At December 31, 1998, American Phoenix had $618,797 of loss carryforwards
for federal tax purposes that begin to expire in the year 2008. Under the
provisions of Internal Revenue Code, these net operating loss carryforwards
will be subject to an annual limitation on utilization, as they have arisen
from acquisitions of the brokerage subsidiaries.
American Phoenix has separate company State of Connecticut net operating
loss carryovers totaling $5,958,424 and $7,279,368 for the years ended
December 31, 1998 and 1997,
-21-
<PAGE>
American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
respectively. These net operating losses will start to expire in the tax
years ending December 31, 2001 and 2000, respectively.
Lees Preston Fairy, a United Kingdom majority owned subsidiary of American
Phoenix, has net operating loss carryforwards totaling $1,237,241 and
$591,499 for the years ended December 31, 1998 and 1997, respectively.
However, a full valuation allowance has been taken against the deferred
income tax asset generated from these foreign losses.
10. Fair Value of Financial Instruments
American Phoenix uses various methods and assumptions in estimating the
fair value of financial instruments. The following valuation methods and
assumptions were utilized in estimating the fair value of financial
instruments:
Cash and cash equivalents - The carrying amounts for cash and cash
equivalents approximate fair value.
Marketable equity securities - The carrying amounts for marketable equity
securities are based on quoted market prices which approximate fair value.
Premiums receivable - The carrying amounts for premiums receivable
approximate fair value.
Installment finance receivables - The carrying amounts for installment
finance receivables approximate fair value.
Premiums payable to insurers - The carrying amounts of premiums payable to
insurers approximate fair value.
Short-term debt - The carrying amounts of borrowings under credit
facilities approximate fair value.
Long-term debt - The carrying amounts of long-term debt approximate fair
value, as fair value is estimated based on current rates that would be
offered to American Phoenix for debt of the same remaining maturities.
11. Litigation
During 1998, American Phoenix received a favorable final arbitration ruling
regarding litigation between American Phoenix Insurance Agency of Georgia,
Inc., a subsidiary of American Phoenix and the former owner of that agency.
The final arbitration ruling canceled American Phoenix Insurance Agency of
Georgia, Inc.'s obligation to pay a promissory note payable to the
subsidiary's former owner totaling $2,300,000. The extinguishment of the
debt settlement is recorded as an extraordinary item in the consolidated
statement of operations in the amount of $1,495,000, net of applicable
income taxes of $805,000.
-22-
<PAGE>
American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
American Phoenix is involved in various legal actions arising in the normal
course of business. It is management's opinion that their final resolution
will not have a significant effect on American Phoenix's consolidated
financial statements.
12. Benefit Plans
American Phoenix sponsors a 401(k) savings plan for all eligible full-time
employees. Employees who make contributions into the plan in amounts not
less than 1% nor more than 15% of their salaries will receive a matching
contribution from American Phoenix in an amount equal to 50% of their
contribution to a maximum not to exceed 3% of their salary. Participants
are immediately vested in their voluntary contributions plus earnings
thereon. The contributions made by American Phoenix on behalf of its
employees totaled $517,488, $592,870 and $345,529 for the years ended
December 31, 1998, 1997 and 1996, respectively. In addition, American
Phoenix sponsors a health and welfare plan for all eligible full-time
employees. The qualified plan complies with requirements established by the
Employee Retirement Income Security Act of 1974.
13. Subsequent Event
On March 30, 1999, PM Holdings, Inc., Phoenix Home Life Mutual Insurance
Company and a member of American Phoenix management executed an agreement
with Hilb, Rogal and Hamilton Company to sell all of the issued and
outstanding shares of American Phoenix to Hilb, Rogal and Hamilton Company
for approximately $49 million in cash, $32 million in convertible notes and
1,000,000 shares of Hilb, Rogal and Hamilton Company common stock. The sale
is subject to satisfaction of certain conditions to closing, including a
provision that requires PM Holdings, Inc. to make a capital contribution of
approximately $20 million to American Phoenix. The sale was completed on
May 3, 1999.
-23-
<PAGE>
(b) Pro Forma Financial Information.
HILB, ROGAL AND HAMILTON COMPANY, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(Unaudited)
The following unaudited Pro Forma Condensed Combined Balance Sheet as
of December 31, 1998 and the unaudited Pro Forma Condensed Combined Statement of
Operations for the year ended December 31, 1998 (the "Pro Forma Financial
Statements") are based upon the respective consolidated financial statements of
the Company and of American Phoenix. The consolidated financial statements of
the Company were filed with the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998 on March 30, 1999. The consolidated
financial statements of American Phoenix are included in this current report.
See "Item 7(a) - Financial Statements of Businesses Acquired."
The Pro Forma Condensed Combined Balance Sheet as of December 31, 1998
is presented as if the Acquisition had occurred on December 31, 1998. The Pro
Forma Condensed Combined Statement of Operations for the year ended December 31,
1998 is presented as if the Acquisition had occurred on January 1, 1998. The Pro
Forma Financial Statements give effect to the Acquisition under the purchase
method of accounting in accordance with Accounting Standards Board Opinion No.
16.
The Pro Forma Financial Statements are presented for comparative
purposes only and are not necessarily indicative of what the actual financial
position of the Company would have been at December 31, 1998 had the Acquisition
occurred at that date or of what the actual results of the Company would have
been if the Acquisition had occurred on January 1, 1998 nor indicative of the
results of operations in future periods. The Pro Forma Financial Statements
should be read in conjunction with, and are qualified in their entirety by the
respective historical financial statements and notes thereto of the Company and
of American Phoenix for the year ended December 31, 1998.
The Pro Forma Financial Statements presented do not reflect future
events that may occur after the Acquisition has been consummated. The Company
believes that operating expense synergies of the combined operations of the
Company and American Phoenix will be realized post-Acquisition. However, for the
purposes of the Pro Forma Financial Statements presented herein, these synergies
have not been reflected because their realization cannot be assured.
-24-
<PAGE>
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED BALANCE SHEET
December 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Hilb, Rogal
and American
Hamilton Phoenix
Company Corporation Pro Forma
Historical Historical Adjustments Pro Forma
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $19,394,958 $ 10,498,658 $ 4,805,898 (1) $ 35,377,526
1,500,000 (2)
(821,988) (3c)
Investments 3,383,742 111,226 3,494,968
Receivables, net 51,570,990 38,810,751 1,439,877 (3) 91,821,618
Prepaid expenses and other current assets 3,852,095 3,527,336 7,379,431
-------------------------------------------------------------------
TOTAL CURRENT ASSETS 78,201,785 52,947,971 6,923,787 138,073,543
INVESTMENTS 3,068,140 3,068,140
PROPERTY & EQUIPMENT, NET 12,387,194 8,221,207 (1,500,000) (2) 14,387,194
(4,721,207) (3)
INTANGIBLE ASSETS, NET 87,470,633 42,370,521 53,710,729 (3) 183,551,883
OTHER ASSETS 6,938,074 3,080,453 (3,080,453) (3) 6,938,074
===================================================================
$188,065,826 $106,620,152 $ 51,332,856 $346,018,834
===================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Premiums payable to insurance companies $ 65,436,784 $ 50,155,157 $115,591,941
Accounts payable and accrued expenses 13,025,426 9,903,348 $ 1,000,000 (3e) 26,428,774
2,500,000 (3f)
Premiums deposits and credits due
customers 7,765,575 0 7,765,575
Current portion of long-term debt 2,277,479 15,354,630 (15,000,000) (1) 2,632,109
-------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 88,505,264 75,413,135 (11,500,000) 152,418,399
LONG-TERM DEBT 43,658,306 44,151,930 28,500,000 (3b) 116,310,236
OTHER LONG-TERM LIABILITIES 10,191,881 1,856,693 12,048,574
MINORITY INTEREST 1,189,506 1,410,494 (3) 2,600,000
SHAREHOLDERS' EQUITY
Common Stock 3,831,208 5,882 16,931,250 (3a) 20,762,458
(5,882) (3)
Additional paid in capital 6,580,418 19,805,898 (1) 0
(26,386,316) (3)
Retained earnings 41,879,167 (22,577,412) 22,577,412 (3) 41,879,167
-------------------------------------------------------------------
45,710,375 (15,991,112) 32,922,362 62,641,625
===================================================================
$188,065,826 $106,620,152 $ 51,332,856 $346,018,834
===================================================================
</TABLE>
See notes to the proforma condensed combined financial statements. Bracketed
numbers to the right of the "Pro Forma Adjustments" column refer to such notes.
-25-
<PAGE>
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Hilb, Rogal and American
Hamilton Phoenix
Company Corporation Pro Forma
Historical Historical Adjustments Pro Forma
<S> <C> <C> <C> <C>
REVENUES
Commissions and fees $175,886,766 $71,635,701 $247,522,467
Investment income 1,578,782 839,383 2,418,165
Other 3,582,345 450,845 4,033,190
----------------------------------------------------------------------
181,047,893 72,925,929 253,973,822
-
OPERATING EXPENSES
Compensation and employee benefits 98,478,098 44,241,870 142,719,968
Other operating expenses 46,969,711 16,238,276 $ (1,116,013)(5) 62,091,974
Amortization of intangibles 7,919,355 6,500,503 (2,657,253)(4) 11,762,605
Interest expense 2,317,195 4,081,890 781,558 (7) 7,180,643
Management fees 0 671,622 (671,622)(8) 0
----------------------------------------------------------------------
155,684,359 71,734,161 (3,663,330) 223,755,190
----------------------------------------------------------------------
INCOME BEFORE INCOME TAXES AND
MINORITY INTEREST 25,363,534 1,191,768 3,663,330 30,218,632
Income Taxes 10,418,469 2,441,387 660,932 (6) 13,520,788
----------------------------------------------------------------------
INCOME BEFORE MINORITY INTEREST 14,945,065 (1,249,619) 3,002,398 16,697,844
Minority interest 0 98,965 0 98,965
----------------------------------------------------------------------
NET INCOME $ 14,945,065 $ (1,348,584) $ 3,002,398 $ 16,598,879
======================================================================
NET INCOME PER COMMON SHARE:
BASIC $1.20 $1.23
======================================================================
DILUTED $1.18 $1.17
======================================================================
WEIGHTED AVERAGE SHARES OUTSTANDING:
BASIC 12,496,752 13,496,752
======================================================================
DILUTED 12,708,744 15,115,337
======================================================================
</TABLE>
See notes to the proforma condensed combined financial statements. Bracketed
numbers to the right of the "Pro Forma Adjustments" column refer to such notes.
-26-
<PAGE>
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
December 31, 1998
Notes to Pro Forma Financial Statements
<TABLE>
<CAPTION>
<S> <C>
1. This pro forma adjustment reflects the pre acquisition, capital
contribution of $19,805,898 by Holdings and the partial use of these funds
to reduce bank debt by $15,000,000.
2. This pro forma adjustment reflects the pre acquisition sale of certain
American Phoenix real estate to Holdings for approximately $1,500,000.
3. This pro forma adjustment reflects the issuance of Common Stock and the
Convertible Subordinated Indentures, the assumption of liabilities and the
incurrence of bank debt in connection with the acquisition of American
Phoenix Corporation by the Company resulting in:
Value
a. The issuance of 1,000,000 shares of Common Stock at a price of
$16.93125 per share. In accordance with EITF 95-19, the assumed Common
Stock issuance price of $16.93125 per share represents the average
closing Common Stock price on the NYSE for the five business days
prior through the five business days following the Company's execution
of the Stock Purchase Agreement on March 29, 1999. $ 16,931,250
b. The issuance of $32,000,000 (par value) of the Company's Subordinated
Debentures with a fair value of $28,500,000. The Subordinated
Debentures mature on May 3, 2014, are immediately convertible into
shares of the Company's Common Stock at a price of $22.75 per share,
are callable beginning on May 3, 2009, and are subordinated to all
existing and future senior indebtedness of the Company. The fair value
of the Subordinated Debentures was determined by the independent
valuation of the investment banking firm of Davenport & Company LLC
("Davenport"). Key assumptions utilized by Davenport in their
appraisal were as follows: (i) underlying Common Stock price of
$16.93125 per share; (ii) expected volatility of the underlying Common
Stock of 30%; (iii) expected dividend growth rate of 6%; (iv)
risk-free interest rates equal to those for U.S. Treasury issues on
March 30, 1999 (the announcement date) and (v) an option-adjusted
interest cost for the Subordinated Debentures of approximately 9%. In
addition to performing the valuation, Davenport served as the
Company's financial advisor in connection with the Acquisition. 28,500,000
c. The cash payment of the purchase price to Vaughan and Phoenix. 821,988
d. The assumption of tangible net worth deficit of American Phoenix of
$48,328,012. This was primarily in the form of bank debt of which
$45,000,000 was paid at closing with the proceeds of a new
$110,000,000 bank facility. This credit facility was also used to
refinance existing bank debt of the Company of $40,000,000. 48,328,012
e. Assumed transaction costs. 1,000,000
f. Estimated lease termination, employee termination and relocation
costs. 2,500,000
============
$ 98,081,250
============
</TABLE>
-27-
<PAGE>
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
December 31, 1998
Notes to Pro Forma Financial Statements
The value assigned to goodwill is calculated as follows:
<TABLE>
<CAPTION>
<S> <C>
Total Purchase Price $ 98,081,250
Book value deficit of American Phoenix at December 31, 1998 15,991,112
Pre acquisition capital infusion (19,805,898)
Tangible net worth deficit assumed by the Company and included in purchase price (48,328,012)
---------------
Adjusted book value of American Phoenix (52,142,798)
Adjustments:
Reduce property, plant & equipment to fair values 4,721,207
Eliminate deferred tax asset due to Section 338 election 3,080,453
Adjust minority interest to contractual buy-out liability as it is the Company's intent
to buy these shares at values based on prescribed formulas. 1,410,494
Miscellaneous purchase accounting adjustment (1,439,877)
---------------
Total Adjustments 7,772,277
---------------
Goodwill $ 53,710,729
===============
4. This pro forma adjustment reflects the elimination of historical
amortization of American Phoenix Corporation ($6,500,503) and the
amortization of goodwill acquired at the time of the Acquisition over a
period of 25 years ($3,843,250).
5. This pro forma adjustment reflects the elimination of historical
depreciation expense of American Phoenix ($1,814,099) and recording of
depreciation expense based upon the fair values of property, plant and
equipment acquired in the Acquisition ($444,444). In addition, this
adjustment reflects the rental expense related to buildings previously
owned by American Phoenix sold prior to the Acquisition ($253,642).
6. This proforma adjustment reflects the income tax effect of the proforma
adjustments at an expected future effective tax rate of 40% ($1,465,332),
reduced for the tax impact of decrease in nondeductible amortization of
$2,011,000 per year ($804,400).
7. This pro forma adjustment eliminates historical interest of American
Phoenix ($4,081,890) and records interest expense under the new debt
structure as follows:
Interest on Subordinated Debentures, including amortization of discount $ 1,900,932
Interest on debt assumed or incurred in the acquisition, at an assumed interest rate
of 6.0275%, the London Interbank Offered Rate ("LIBOR") at April 30, 1999 plus 1.125%.
A change of .125% in the assumed interest rate would increase or decrease interest
expense by approximately $61,000. 2,962,516
---------------
$ 4,863,448
===============
</TABLE>
-28-
<PAGE>
(c) Exhibits.
Exhibit No. Description
2.1 Stock Purchase Agreement, dated March 29,
1999, by and among the Registrant, PM
Holdings, Inc., Phoenix Home Life Mutual
Insurance Company and Martin L. Vaughan, III
(incorporated by reference to Exhibit 2 to
the Company's Form 10-K for the year ended
December 31, 1998, File No. 0-15981).
23.1 Consent of PricewaterhouseCoopers LLP.
99.1 Credit Agreement dated as of May 3,1999,
among the Registrant, as Borrower; the
lenders named therein; First Union National
Bank, as administrative agent; PNC Bank, as
documentation agent; and NationsBanc
Montgomery Securities LLC, as syndication
agent.
99.2 Press release dated May 3, 1999.
-29-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
HILB, ROGAL AND HAMILTON COMPANY
(Registrant)
Date: May 14, 1999 By: /s/ Carolyn Jones
------------------------------------------
Carolyn Jones
Senior Vice President, Chief Financial Officer
and Treasurer
<PAGE>
Exhibit Index
Exhibit No. Description
2.1 Stock Purchase Agreement, dated March 29, 1999, by and
among the Registrant, PM Holdings, Inc., Phoenix Home Life
Mutual Insurance Company and Martin L. Vaughan, III
(incorporated by reference to Exhibit 2 to the Company's
Form 10-K for the year ended December 31, 1998, File No.
0-15981).
23.1 Consent of PricewaterhouseCoopers LLP
99.1 Credit Agreement dated as of May 3, 1999, among the
Registrant, as Borrower; the lenders named therein; First
Union National Bank, as administrative agent; PNC Bank, as
documentation agent; and NationsBanc Montgomery Securities
LLC, as syndication agent.
99.2 Press release dated May 3, 1999.
Exhibit 23.1
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration
Statements (Form S-4 No. 33-44271, Form S-8 No. 33-59866, Form S-8 No. 333-44735
and Form S-8 No. 333-53417) of Hilb, Rogal and Hamilton Company of our report
dated March 5, 1999, except as to Note 13 which is as of May 3, 1999, relating
to the consolidated financial statements of American Phoenix Corporation, which
appears in the Current Report on Form 8-K of Hilb, Rogal and Hamilton Company
dated May 3, 1999.
/s/ PricewaterhouseCoopers LLP
Hartford, Connecticut
May 3, 1999
Exhibit 99.1
================================================================================
CREDIT AGREEMENT
among
HILB, ROGAL AND HAMILTON COMPANY,
THE LENDERS NAMED HEREIN,
FIRST UNION NATIONAL BANK,
as Administrative Agent
PNC BANK,
as Documentation Agent
and
NATIONSBANC MONTGOMERY SECURITIES LLC,
as Syndication Agent
$110,000,000 Senior Credit Facilities
Lead and Sole Arranger:
FIRST UNION CAPITAL MARKETS CORP.
Dated as of May 3, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
RECITALS......................................................................................................... 1
ARTICLE I
DEFINITIONS
1.1 Defined Terms............................................................................................1
1.2 Accounting Terms........................................................................................20
1.3 Other Terms; Construction...............................................................................21
ARTICLE II
AMOUNT AND TERMS OF THE LOANS
2.1 Commitments.............................................................................................21
2.2 Borrowings..............................................................................................22
2.3 Disbursements; Funding Reliance; Domicile of Loans......................................................25
2.4 Notes...................................................................................................25
2.5 Termination and Reduction of Commitments and Swingline Commitment.......................................26
2.6 Mandatory Payments and Prepayments......................................................................27
2.7 Voluntary Prepayments...................................................................................30
2.8 Interest................................................................................................30
2.9 Fees....................................................................................................32
2.10 Interest Periods........................................................................................32
2.11 Conversions and Continuations...........................................................................33
2.12 Method of Payments; Computations........................................................................34
2.13 Recovery of Payments....................................................................................35
2.14 Use of Proceeds.........................................................................................36
2.15 Pro Rata Treatment......................................................................................36
2.16 Increased Costs; Change in Circumstances; Illegality; etc...............................................37
2.17 Taxes ...............................................................................................39
2.18 Compensation............................................................................................41
ARTICLE III
CONDITIONS OF BORROWING
3.1 Conditions of Initial Borrowing.........................................................................42
3.2 Conditions of All Borrowings............................................................................45
i
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Corporate Organization and Power........................................................................46
4.2 Authorization; Enforceability...........................................................................46
4.3 No Violation............................................................................................47
4.4 Governmental and Third-Party Authorization; Permits.....................................................47
4.5 Litigation..............................................................................................47
4.6 Taxes...................................................................................................48
4.7 Subsidiaries............................................................................................48
4.8 Full Disclosure.........................................................................................48
4.9 Margin Regulations......................................................................................48
4.10 No Material Adverse Change..............................................................................49
4.11 Financial Matters.......................................................................................49
4.12 Ownership of Properties.................................................................................50
4.13 ERISA ...............................................................................................50
4.14 Environmental Matters...................................................................................50
4.15 Compliance With Laws....................................................................................51
4.16 Regulated Industries....................................................................................52
4.17 Insurance...............................................................................................52
4.18 Material Contracts......................................................................................52
4.19 Labor Relations.........................................................................................52
4.20 Year 2000 Compatibility.................................................................................52
4.21 Transaction Documents...................................................................................53
4.22 Consummation of Transactions............................................................................53
ARTICLE V
AFFIRMATIVE COVENANTS
5.1 Financial Statements....................................................................................53
5.2 Other Business and Financial Information................................................................54
5.3 Corporate Existence; Franchises; Maintenance of Properties..............................................56
5.4 Compliance with Laws....................................................................................57
5.5 Payment of Obligations..................................................................................57
5.6 Insurance...............................................................................................57
5.7 Maintenance of Books and Records; Inspection............................................................57
5.8 Permitted Acquisitions..................................................................................58
5.9 Material Subsidiaries; Subsidiary Guarantors............................................................60
5.10 Year 2000 Compatibility.................................................................................60
5.11 Further Assurances......................................................................................60
ii
<PAGE>
ARTICLE VI
FINANCIAL COVENANTS
6.1 Leverage Ratio..........................................................................................61
6.2 Fixed Charge Coverage Ratio.............................................................................61
6.3 Cash Flow Coverage Ratio................................................................................61
ARTICLE VII
NEGATIVE COVENANTS
7.1 Merger; Consolidation...................................................................................62
7.2 Indebtedness............................................................................................62
7.3 Liens...................................................................................................64
7.4 Disposition of Assets...................................................................................65
7.5 Investments.............................................................................................66
7.6 Restricted Payments.....................................................................................67
7.7 Transactions with Affiliates............................................................................67
7.8 Lines of Business.......................................................................................68
7.9 Certain Amendments......................................................................................68
7.10 Limitation on Certain Restrictions......................................................................68
7.11 No Other Negative Pledges...............................................................................68
7.12 Fiscal Year.............................................................................................69
7.13 Accounting Changes......................................................................................69
ARTICLE VIII
EVENTS OF DEFAULT
8.1 Events of Default.......................................................................................69
8.2 Remedies: Termination of Commitments, Acceleration, etc.................................................71
8.3 Remedies: Set-Off.......................................................................................72
ARTICLE IX
THE ADMINISTRATIVE AGENT
9.1 Appointment.............................................................................................72
9.2 Nature of Duties........................................................................................72
9.3 Exculpatory Provisions..................................................................................73
9.4 Reliance by Administrative Agent........................................................................73
9.5 Non-Reliance on Administrative Agent and Other Lenders..................................................74
9.6 Notice of Default.......................................................................................74
9.7 Indemnification.........................................................................................74
9.8 The Administrative Agent in its Individual Capacity.....................................................75
9.9 Successor Administrative Agent..........................................................................75
iii
<PAGE>
9.10 Swingline Lender........................................................................................76
9.11 Syndication Agent, Documentation Agent..................................................................76
ARTICLE X
MISCELLANEOUS
10.1 Fees and Expenses.......................................................................................76
10.2 Indemnification.........................................................................................77
10.3 Governing Law; Consent to Jurisdiction..................................................................77
10.4 Waiver of Jury Trial....................................................................................78
10.5 Notices.................................................................................................78
10.6 Amendments, Waivers, etc................................................................................79
10.7 Assignments, Participations.............................................................................80
10.8 No Waiver...............................................................................................82
10.9 Successors and Assigns..................................................................................83
10.10 Survival................................................................................................83
10.11 Severability............................................................................................83
10.12 Construction............................................................................................83
10.13 Confidentiality.........................................................................................83
10.14 Counterparts; Effectiveness.............................................................................84
10.15 Disclosure of Information...............................................................................84
10.16 Entire Agreement........................................................................................84
</TABLE>
iv
<PAGE>
EXHIBITS [OMITTED*]
Exhibit A-1 Form of Term Note
Exhibit A-2 Form of Revolving Note
Exhibit A-3 Form of Swingline Note
Exhibit B-1 Form of Notice of Borrowing
Exhibit B-2 Form of Notice of Swingline Borrowing
Exhibit B-3 Form of Notice of Conversion/Continuation
Exhibit C Form of Compliance Certificate
Exhibit D Form of Assignment and Acceptance
Exhibit E Form of Subsidiary Guaranty
Exhibit F Form of Opinion of Williams, Mullen, Christian & Dobbins, P.C.
Exhibit G Form of Financial Condition Certificate
SCHEDULES [OMITTED*]
Schedule 1.1(a) American Phoenix Assumed Notes
Schedule 1.1(b) American Phoenix Terminating Notes
Schedule 4.4 Consents and Approvals
Schedule 4.7 Subsidiaries
Schedule 4.18 Material Contracts
Schedule 7.2 Indebtedness
Schedule 7.3 Liens
Schedule 7.5 Investments
Schedule 7.7 Transactions with Affiliates
* The Company will provide the omitted exhibits and schedules to the Commission
upon request.
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of the 3rd day of May, 1999 (this
"Agreement"), is made among HILB, ROGAL AND HAMILTON COMPANY, a Virginia
corporation with its principal offices in Glen Allen, Henrico County, Virginia
(the "Borrower"), the banks and financial institutions listed on the signature
pages hereto or that become parties hereto after the date hereof (collectively,
the "Lenders"), FIRST UNION NATIONAL BANK ("First Union"), as administrative
agent for the Lenders (in such capacity, the "Administrative Agent"), PNC BANK,
as documentation agent (in such capacity, the "Documentation Agent"), and
NATIONSBANC MONTGOMERY SECURITIES LLC, as syndication agent (in such capacity,
the "Syndication Agent").
RECITALS
A. The Borrower has requested that the Lenders make available to
the Borrower a term loan facility in the aggregate principal amount of
$45,000,000 and a revolving credit facility in the aggregate principal amount of
$65,000,000. The Borrower will use the proceeds of these facilities to finance
in part the acquisition of American Phoenix Corporation and its subsidiaries, to
refinance certain existing indebtedness, to pay or reimburse certain fees and
expenses in connection herewith and therewith, and for working capital and
general corporate purposes, all as more fully described herein.
B. The Lenders are willing to make available to the Borrower the
credit facilities described herein subject to and on the terms and conditions
set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual provisions, covenants
and agreements herein contained, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. For purposes of this Agreement, in addition to
the terms defined elsewhere herein, the following terms shall have the meanings
set forth below (such meanings to be equally applicable to the singular and
plural forms thereof):
<PAGE>
"Account Designation Letter" shall mean a letter from the Borrower to
the Administrative Agent, duly completed and signed by an Authorized Officer and
in form and substance satisfactory to the Administrative Agent, listing any one
or more accounts to which the Borrower may from time to time request the
Administrative Agent to forward the proceeds of any Loans made hereunder.
"Acquisition" shall mean any transaction or series of related
transactions, consummated on or after the date hereof, by which the Borrower
directly, or indirectly through one or more Subsidiaries, (i) acquires any going
business, or all or substantially all of the assets, of any Person (including,
without limitation, a book of business, whether through purchase of assets,
merger or otherwise, or (ii) acquires securities or other ownership interests of
any Person having at least a majority of combined voting power of the then
outstanding securities or other ownership interests of such Person.
"Acquisition Amount" shall mean, with respect to any Acquisition, (a)
the sum (without duplication) of (i) the amount of cash paid by the Borrower and
its Subsidiaries in connection with such Acquisition, (ii) the Fair Market Value
of all Capital Stock of the Borrower issued or given in connection with such
Acquisition, (iii) the amount (determined in accordance with GAAP) of all
Indebtedness incurred, assumed or acquired by the Borrower and its Subsidiaries
in connection with such Acquisition, (iv) all additional purchase price amounts
in connection with such Acquisition in the form of earnouts and other contingent
obligations that should be recorded as a liability on the balance sheet of the
Borrower and its Subsidiaries or expensed, in either event in accordance with
GAAP, Regulation S-X under the Securities Act of 1933, as amended, or any other
rule or regulation of the Securities and Exchange Commission, (v) all amounts
paid in respect of covenants not to compete, consulting agreements and other
affiliated contracts in connection with such Acquisition, (vi) the amount of all
transaction fees and expenses (including, without limitation, legal, accounting
and finders' fees and expenses) incurred by the Borrower and its Subsidiaries in
connection with such Acquisition and (vii) the aggregate fair market value of
all other consideration given by the Borrower and its Subsidiaries in connection
with such Acquisition, minus (b)(i) in the case of an Acquisition of Capital
Stock of a Target, cash of such Target immediately after or concurrent with the
consummation of such Acquisition, and (ii) in the case of an Acquisition of
assets, cash received by the Borrower and its Subsidiaries in connection with
such Acquisition.
"Acquisition Documents" shall mean the Stock Purchase Agreement and all
other documents and instruments executed or delivered in connection with the
American Phoenix Acquisition.
"Adjusted Base Rate" shall mean, at any time with respect to any Base
Rate Loan, a rate per annum equal to the Base Rate as in effect at such time
plus the Applicable Margin Percentage for Base Rate Loans as in effect at such
time.
"Adjusted LIBOR Rate" shall mean, at any time with respect to any LIBOR
Loan, a rate per annum equal to the LIBOR Rate as in effect at such time plus
the Applicable Margin Percentage for LIBOR Loans as in effect at such time.
2
<PAGE>
"Administrative Agent" shall mean First Union, in its capacity as
Administrative Agent appointed under Article IX, and its successors and
permitted assigns in such capacity.
"Affiliate" shall mean, as to any Person, each other Person that
directly, or indirectly through one or more intermediaries, owns or controls, is
controlled by or under common control with, such Person or is a director or
officer of such Person. For purposes of this definition, with respect to any
Person "control" shall mean (i) the possession, direct or indirect, of the power
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise, or
(ii) the beneficial ownership of securities or other ownership interests of such
Person having 10% or more of the combined voting power of the then outstanding
securities or other ownership interests of such Person ordinarily (and apart
from rights accruing under special circumstances) having the right to vote in
the election of directors or other governing body of such Person.
"Agreement" shall mean this Credit Agreement, as amended, modified or
supplemented from time to time.
"American Phoenix" shall mean American Phoenix Corporation, a
Connecticut corporation.
"American Phoenix Acquisition" shall mean the Borrower's acquisition of
American Phoenix and its Subsidiaries pursuant to the Stock Purchase Agreement.
"American Phoenix Acquisition Indebtedness" shall mean all Indebtedness
of the Borrower outstanding under the Borrower's 5.25% Convertible Subordinated
Debentures, dated the Closing Date, due 2014 in the original aggregate principal
amount of $32,000,000.
"American Phoenix Assumed Notes" shall mean the promissory notes of
American Phoenix issued in connection with the Acquisitions of McCay
Corporation, Nicholas & Cannon Agency, Inc, and American Phoenix Corporation of
Western New York set forth on Schedule 1.1(a).
"American Phoenix Terminating Notes" shall mean the promissory notes of
America Phoenix set forth on Schedule 1.1(b).
"Applicable Margin Percentage" shall mean, at any time from and after
the Closing Date, the applicable percentage (a) to be added to the Base Rate
pursuant to Section 2.8 for purposes of determining the Adjusted Base Rate, (b)
to be added to the LIBOR Rate pursuant to Section 2.8 for purposes of
determining the Adjusted LIBOR Rate, and (c) to be used in calculating the
Commitment Fee, in each case as determined under the following matrix with
reference to the Leverage Ratio:
3
<PAGE>
<TABLE>
<CAPTION>
Applicable Margin Applicable Margin Applicable Margin
Percentage for Percentage for Percentage for
Leverage Ratio Base Rate Loans LIBOR Loans Commitment Fee
-------------- --------------- ----------- --------------
<S> <C> <C> <C>
Greater than or equal to
2.5 to 1.0 0.375% 1.375% 0.275%
Greater than or equal to 2.0 to 1.0 but
less than 2.5 to 1.0 0.125% 1.125% 0.250%
Greater than or equal to 1.5 to 1.0 but
less than 2.0 to 1.0 0.000% 0.875% 0.225%
Greater than or equal to 1.0 to 1.0 but
less than 1.5 to 1.0 0.000% 0.750% 0.200%
Less than 1.0 to 1.0 0.000% 0.625% 0.175%
</TABLE>
On each Adjustment Date (as hereinafter defined), the Applicable Margin
Percentage for all Loans and the Commitment Fee payable pursuant to Section
2.9(b) shall be adjusted effective as of such date (based upon the calculation
of the Leverage Ratio as of the last day of the fiscal period to which such
Adjustment Date relates) in accordance with the above matrix; provided, however,
that, notwithstanding the foregoing or anything else herein to the contrary, if
at any time the Borrower shall have failed to deliver the financial statements
and a Compliance Certificate as required by Section 5.1(a) or Section 5.1(b), as
the case may be, and Section 5.2(a), or if at any time an Event of Default shall
have occurred and be continuing, then at the election of the Required Lenders,
at all times from and including the date on which such statements and Compliance
Certificate are required to have been delivered (or the date of occurrence of
such Event of Default, as the case may be) to the date on which the same shall
have been delivered (or such Event of Default cured or waived, as the case may
be), each Applicable Margin Percentage shall be determined in accordance with
the above matrix as if the Leverage Ratio were greater than or equal to 2.5 to
1.0 (notwithstanding the actual Leverage Ratio). For purposes of this
definition, "Adjustment Date" shall mean, with respect to any fiscal period of
the Borrower beginning with the fiscal quarter ending June 30, 1999, the fifth
(5th) day (or, if such day is not a Business Day, on the next succeeding
Business Day) after delivery by the Borrower in accordance with Section 5.1(a)
or Section 5.1(b), as the case may be, of (i) financial statements as of the end
of and for such fiscal period and (ii) a duly completed Compliance Certificate
with respect to such fiscal period. Until the first Adjustment Date, each
Applicable Margin Percentage shall be determined in accordance with the above
matrix as if the Leverage Ratio were greater than or equal to 2.0 to 1.0 but
less than 2.5 to 1.0 (notwithstanding the actual Leverage Ratio).
"Asset Disposition" shall mean any sale, assignment, transfer or other
disposition by the Borrower or any of its Subsidiaries to any other Person
(other than to the Borrower or to a Wholly Owned Subsidiary), whether in one
transaction or in a series of related transactions, of any of its assets,
business units or other properties (including any interests in property, whether
tangible or intangible, and including Capital Stock of Subsidiaries), excluding
the sale or exchange of used or obsolete equipment to the extent the proceeds of
such sale are applied towards, or such equipment is exchanged for, similar or
substitute replacement equipment.
4
<PAGE>
"Assignee" shall have the meaning given to such term in Section
10.7(a).
"Assignment and Acceptance" shall mean an Assignment and Acceptance
entered into between a Lender and an Assignee and accepted by the Administrative
Agent and the Borrower, in substantially the form of Exhibit D.
"Authorized Officer" shall mean, with respect to any action specified
herein, any officer of the Borrower duly authorized by resolution of the board
of directors of the Borrower to take such action on its behalf, and whose
signature and incumbency shall have been certified to the Administrative Agent
by the secretary or an assistant secretary of the Borrower.
"Bankruptcy Code" shall mean 11 U.S.C. ss.ss. 101 et seq., as amended
from time to time, and any successor statute.
"Base Rate" shall mean the higher of (i) the per annum interest rate
publicly announced from time to time by First Union in Charlotte, North
Carolina, to be its prime rate (which may not necessarily be its best lending
rate), as adjusted to conform to changes as of the opening of business on the
date of any such change in such prime rate, and (ii) the Federal Funds Rate plus
0.5% per annum, as adjusted to conform to changes as of the opening of business
on the date of any such change in the Federal Funds Rate.
"Base Rate Loan" shall mean, at any time, any Loan that bears interest
at such time at the Adjusted Base Rate.
"Borrower Margin Stock" shall mean shares of Capital Stock of the
Borrower that are held by the Borrower or any of its Subsidiaries and that
constitute Margin Stock.
"Borrowing" shall mean the incurrence by the Borrower (including as a
result of conversions and continuations of outstanding Loans pursuant to Section
2.11) on a single date of a group of Loans of a single Class and Type (or a
Swingline Loan made by the Swingline Lender) and, in the case of LIBOR Loans, as
to which a single Interest Period is in effect.
"Borrowing Date" shall mean, with respect to any Borrowing, the date
upon which such Borrowing is made.
"Business Day" shall mean (i) any day other than a Saturday or Sunday,
a legal holiday or a day on which commercial banks in Charlotte, North Carolina
are required by law to be closed and (ii) in respect of any determination
relevant to a LIBOR Loan, any such day that is also a day on which tradings are
conducted in the London interbank Eurodollar market.
"Capital Expenditures" shall mean, for any period, the aggregate amount
(whether paid in cash or accrued as a liability) that would, in accordance with
GAAP, be included on the consolidated statement of cash flows of the Borrower
and its Subsidiaries for such period as additions to equipment, fixed assets,
real property or improvements or other capital assets (including, without
limitation, capital lease obligations); provided, however, that Capital
Expenditures shall not include any such expenditures (i) for replacements and
substitutions for
5
<PAGE>
capital assets, to the extent made with the proceeds of insurance, or (ii) made
in connection with Permitted Acquisitions.
"Capital Stock" shall mean (i) with respect to any Person that is a
corporation, any and all shares, interests or equivalents in capital stock
(whether voting or nonvoting, and whether common or preferred) of such
corporation, and (ii) with respect to any Person that is not a corporation, any
and all partnership, membership, limited liability company or other equity
interests of such Person; and in each case, any and all warrants, rights or
options to purchase any of the foregoing.
"Cash Equivalents" shall mean (i) securities issued or unconditionally
guaranteed by the United States of America or any state thereof or any agency or
instrumentality thereof, backed by the full faith and credit of the United
States of America and maturing within 180 days from the date of acquisition,
(ii) commercial paper issued by any Person organized under the laws of the
United States of America, maturing within 180 days from the date of acquisition
and, at the time of acquisition, having a rating of at least A-1 or the
equivalent thereof by Standard & Poor's Ratings Services or at least P-1 or the
equivalent thereof by Moody's Investors Service, Inc., (iii) time deposits and
certificates of deposit maturing within 180 days from the date of issuance and
issued by a bank or trust company organized under the laws of the United States
of America or any state thereof that has combined capital and surplus of at
least $500,000,000 and that has (or is a subsidiary of a bank holding company
that has) a long-term unsecured debt rating of at least A or the equivalent
thereof by Standard & Poor's Ratings Services or at least A2 or the equivalent
thereof by Moody's Investors Service, Inc., (iv) repurchase obligations with a
term not exceeding seven (7) days with respect to underlying securities of the
types described in clause (i) above entered into with any bank or trust company
meeting the qualifications specified in clause (iii) above, and (v) money market
funds at least 95% of the assets of which are continuously invested in
securities of the type described in clause (i) above.
"Cash Flow Coverage Ratio" shall mean, as of the last day of any fiscal
quarter, the ratio of (i) the sum of Consolidated EBITDA of the Borrower for the
period of four consecutive fiscal quarters then ending plus Consolidated
Operating Lease Expense for such period to (ii) the sum of Consolidated Interest
Expense of the Borrower for such period plus Consolidated Operating Lease
Expense for such period.
"Class" shall have the meaning given to such term in Section 2.2(a).
"Closing Date" shall mean the date upon which the initial extensions of
credit are made pursuant to this Agreement.
"Commitment" shall mean, with respect to any Lender, such Lender's Term
Loan Commitment and Revolving Credit Commitment.
"Commitment Fee" shall have the meaning given to such term in Section
2.9(b).
"Compliance Certificate" shall mean a fully completed and duly executed
certificate in the form of Exhibit C, together with a Covenant Compliance
Worksheet.
6
<PAGE>
"Consolidated EBITDA" shall mean, for any Person for any period, the
aggregate of (i) Consolidated Net Income for such Person for such period, plus
(ii) the sum of Consolidated Interest Expense for such Person, federal, state,
local and other income taxes, depreciation, amortization of intangible assets,
and other noncash expenses or charges reducing income for such period, all to
the extent taken into account in the calculation of Consolidated Net Income for
such Person for such period, minus (iii) the sum of extraordinary or
nonrecurring gains incurred in connection with the sale of all of the Capital
Stock or substantially all of the assets of an insurance agency, including
without limitation a book of business (collectively, "Agency Dispositions"), but
only to the extent such sum exceeds the sum of (A) extraordinary or nonrecurring
losses incurred in connection with Agency Dispositions and (B) $3,250,000, all
to the extent taken into account in the calculation of Consolidated Net Income
for such Person for such period, minus (iv) the sum of extraordinary or
nonrecurring gains and other noncash credits increasing income for such period
that are not incurred in connection with Agency Dispositions, all to the extent
taken into account in the calculation of Consolidated Net Income for such Person
for such period, plus (v) for the Borrower only, the sum (up to $2,500,000) of
expenses incurred in connection with the American Phoenix Acquisition to the
extent incurred within six (6) months of the Closing Date and taken into account
in the calculation of Consolidated Net Income for the Borrower for such period;
provided, however, that, for purposes of calculating Consolidated EBITDA for the
Borrower for the four consecutive fiscal quarters ending June 30, 1999,
September 30, 1999, December 31, 1999 and March 31, 2000, Consolidated EBITDA
shall be determined on a pro forma basis in accordance with GAAP as if American
Phoenix and its Subsidiaries had been consolidated with the Borrower for such
periods; provided further that, nothing in this Agreement shall be construed to
allow any other such pro forma determination of Consolidated EBITDA for any
other Acquisition unless the Required Lenders otherwise consent.
"Consolidated Fixed Charges" shall mean, for any period, the aggregate
(without duplication) of the following, all determined on a consolidated basis
for the Borrower and its Subsidiaries in accordance with GAAP for such period:
(a) Consolidated Interest Expense for the Borrower for such period, (b) the
aggregate (without duplication) of all scheduled payments of principal on
Indebtedness required to be made by the Borrower and its Subsidiaries during the
period of four consecutive fiscal quarters immediately following the end of such
period, including, without limitation, the aggregate principal amount of the
Term Loans due under Section 2.6(a) (as such amounts may have been previously
adjusted in accordance with the terms of this Agreement as a result of prior
prepayments on the Term Loans, including adjustments made pursuant to Section
2.6(f) or Section 2.7(b)), (c) dividends paid by the Borrower during such
period, and (d) repurchases by the Borrower of its Capital Stock occurring
during such period (but specifically excluding, if applicable, any stock
repurchases occurring prior to January 1, 1999).
"Consolidated Indebtedness" shall mean, as of any date of
determination, the aggregate (without duplication) of all Indebtedness of the
Borrower and its Subsidiaries as of such date, determined on a consolidated
basis in accordance with GAAP. For purposes of determining Consolidated
Indebtedness as of any date, (i) each Contingent Obligation of the Borrower and
its Subsidiaries required to be included in such determination shall be valued
at the maximum aggregate principal amount (whether or not drawn or outstanding)
of the Indebtedness that is the
7
<PAGE>
corresponding "primary obligation" (as such term is defined in the definition of
Contingent Obligation) as of such date, and (ii) each earnout and other
contingent obligation incurred in connection with an Acquisition (whether
consummated before or after the date hereof) shall be valued at the amount that
should be recorded as a liability on the balance sheet of the Borrower and its
Subsidiaries as of such date, in accordance with GAAP, Regulation S-X of the
Securities Act of 1933, as amended, or any other rule or regulation of the
Securities and Exchange Commission.
"Consolidated Interest Expense" shall mean, for any Person for any
period, the sum (without duplication) of (i) total interest expense of such
Person and its Subsidiaries for such period in respect of Indebtedness of such
Person and its Subsidiaries (including, without limitation, all such interest
expense accrued or capitalized during such period, whether or not actually paid
during such period), determined on a consolidated basis in accordance with GAAP,
(ii) all net amounts payable under or in respect of Hedge Agreements, to the
extent paid or accrued by such Person and its Subsidiaries during such period,
and (iii) all commitment fees and other ongoing fees in respect of Indebtedness
(including, if applicable to such Person, the Commitment Fee and the fees
provided for under the Fee Letter) paid, accrued or capitalized by such Person
and its Subsidiaries during such period; provided, however, that, for purposes
of calculating the Consolidated Interest Expense for the Borrower (i) for the
four consecutive fiscal quarters ending June 30, 1999, Consolidated Interest
Expense shall be determined for the period commencing on April 1, 1999 and
ending on such date pro forma as if the Closing Date had been the April 1, 1999
(the "Pro Forma Interest Expense") and multiplied by 4, (ii) for the four
consecutive fiscal quarters ending September 30, 1999 and December 31, 1999,
Consolidated Interest Expense shall be determined by multiplying (A) the sum of
the Pro Forma Interest Expense plus Consolidated Interest Expense for the
Borrower for the period commencing on July 1, 1999 and ending on the last day of
such fiscal quarter by (B) 2, in the case of the fiscal quarter ending September
30, 1999, and (C) 4/3, in the case of the fiscal quarter ending December 31,
1999, and (iii) for the four consecutive fiscal quarters ending March 31, 2000,
Consolidated Interest Expense shall be the sum of the Pro Forma Interest Expense
plus Consolidated Interest Expense for the Borrower for the three fiscal
quarters ending March 31, 2000.
"Consolidated Net Income" shall mean, for any Person for any period,
net income (or loss) for such Person and its Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP.
"Consolidated Operating Lease Expense" shall mean, for any period, the
operating lease expense, net of any sublease income, for the Borrower and its
Subsidiaries for such period, each as determined on a consolidated basis in
accordance with GAAP.
"Contingent Obligation" shall mean, with respect to any Person, any
direct or indirect liability of such Person with respect to any Indebtedness,
liability or other obligation (the "primary obligation") of another Person (the
"primary obligor"), whether or not contingent, (a) to purchase, repurchase or
otherwise acquire such primary obligation or any property constituting direct or
indirect security therefor, (b) to advance or provide funds (i) for the payment
or discharge 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 or any balance sheet item,
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level of income or financial condition 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 in respect
thereof to make payment of such primary obligation or (d) otherwise to assure or
hold harmless the owner of any such primary obligation against loss or failure
or inability to perform in respect thereof; provided, however, that, with
respect to the Borrower and its Subsidiaries, the term Contingent Obligation
shall not include endorsements for collection or deposit in the ordinary course
of business.
"Covenant Compliance Worksheet" shall mean a fully completed worksheet
in the form of Attachment A to Exhibit C.
"Credit Documents" shall mean this Agreement, the Notes, the Fee
Letter, the Subsidiary Guaranty and all other agreements, instruments, documents
and certificates now or hereafter executed and delivered to the Administrative
Agent or any Lender by or on behalf of the Borrower or any of its Subsidiaries
with respect to this Agreement and the transactions contemplated hereby, in each
case as amended, modified, supplemented or restated from time to time.
"Debt Issuance" shall mean the issuance or sale by the Borrower or any
of its Subsidiaries of any debt securities, whether in a public offering of such
securities or otherwise other than any such securities issued to a Target (or
its securityholders at the time of the Acquisition thereof by the Borrower and a
Subsidiary) in connection with the American Phoenix Acquisition or any Permitted
Acquisition and constituting all or a portion of the applicable purchase price.
"Default" shall mean any event or condition that, with the passage of
time or giving of notice, or both, would constitute an Event of Default.
"Disqualified Capital Stock" shall mean, with respect to any Person,
any Capital Stock of such Person that, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable), or upon
the happening of any event or otherwise, (i) matures or is mandatorily
redeemable or subject to any mandatory repurchase requirement, pursuant to a
sinking fund obligation or otherwise, (ii) is redeemable or subject to any
mandatory repurchase requirement at the sole option of the holder thereof, or
(iii) is convertible into or exchangeable for (whether at the option of the
issuer or the holder thereof) (a) debt securities or (b) any Capital Stock
referred to in (i) or (ii) above, in each case under (i), (ii) or (iii) above at
any time on or prior to the first anniversary of the later of the Revolving Loan
Maturity Date and the Term Loan Maturity Date; provided, however, that only the
portion of Capital Stock that so matures or is mandatorily redeemable, is so
redeemable at the option of the holder thereof, or is so convertible or
exchangeable on or prior to such date shall be deemed to be Disqualified Capital
Stock.
"Dollars" or "$" shall mean dollars of the United States of America.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and any successor statute, and all rules and
regulations from time to time promulgated thereunder.
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"ERISA Affiliate" shall mean any Person (including any trade or
business, whether or not incorporated) that would be deemed to be under "common
control" with, or a member of the same "controlled group" as, the Borrower or
any of its Subsidiaries, within the meaning of Sections 414(b), (c), (m) or (o)
of the Internal Revenue Code or Section 4001 of ERISA.
"ERISA Event" shall mean any of the following with respect to a Plan or
Multiemployer Plan, as applicable: (i) a Reportable Event with respect to a Plan
or a Multiemployer Plan, (ii) a complete or partial withdrawal by the Borrower
or any ERISA Affiliate from a Multiemployer Plan that results in liability under
Section 4201 or 4204 of ERISA, or the receipt by the Borrower or any ERISA
Affiliate of notice from a Multiemployer Plan that it is in reorganization or
insolvency pursuant to Section 4241 or 4245 of ERISA or that it intends to
terminate or has terminated under Section 4041A of ERISA, (iii) the distribution
by the Borrower or any ERISA Affiliate under Section 4041 or 4041A of ERISA of a
notice of intent to terminate any Plan or the taking of any action to terminate
any Plan, (iv) the commencement of proceedings by the PBGC under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Plan, or the receipt by the Borrower or any ERISA Affiliate of a notice from any
Multiemployer Plan that such action has been taken by the PBGC with respect to
such Multiemployer Plan, (v) the institution of a proceeding by any fiduciary of
any Multiemployer Plan against the Borrower or any ERISA Affiliate to enforce
Section 515 of ERISA, which is not dismissed within thirty (30) days, (vi) the
imposition upon the Borrower or any ERISA Affiliate of any liability under Title
IV of ERISA, other than for PBGC premiums due but not delinquent under Section
4007 of ERISA, or the imposition or threatened imposition of any Lien upon any
assets of the Borrower or any ERISA Affiliate as a result of any alleged failure
to comply with the Internal Revenue Code or ERISA in respect of any Plan, (vii)
the engaging in or otherwise becoming liable for a nonexempt Prohibited
Transaction by the Borrower or any ERISA Affiliate, (viii) a violation of the
applicable requirements of Section 404 or 405 of ERISA or the exclusive benefit
rule under Section 401(a) of the Internal Revenue Code by any fiduciary of any
Plan for which the Borrower or any of its ERISA Affiliates may be directly or
indirectly liable or (ix) the adoption of an amendment to any Plan that,
pursuant to Section 401(a)(29) of the Internal Revenue Code or Section 307 of
ERISA, would result in the loss of tax-exempt status of the trust of which such
Plan is a part if the Borrower or an ERISA Affiliate fails to timely provide
security to such Plan in accordance with the provisions of such sections.
"Eligible Assignee" shall mean (i) a commercial bank organized under
the laws of the United States or any state thereof and having total assets in
excess of $500,000,000, (ii) a commercial bank organized under the laws of any
other country that is a member of the Organization for Economic Cooperation and
Development or any successor thereto (the "OECD") or a political subdivision of
any such country and having total assets in excess of $500,000,000, provided
that such bank or other financial institution is acting through a branch or
agency located in the United States, in the country under the laws of which it
is organized or in another country that is also a member of the OECD, (iii) the
central bank of any country that is a member of the OECD, (iv) a finance
company, insurance company or other financial institution or fund that is
engaged in making, purchasing or otherwise investing in loans in the ordinary
course of its business and having total assets in excess of $250,000,000, (v)
any Affiliate of an existing Lender or (vi) any other Person approved by the
Required Lenders, which approval shall not be unreasonably withheld.
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"Environmental Claims" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
accusations, allegations, notices of noncompliance or violation, investigations
(other than internal reports prepared by any Person in the ordinary course of
its business and not in response to any third party action or request of any
kind) or proceedings relating in any way to any actual or alleged violation of
or liability under any Environmental Law or relating to any permit issued, or
any approval given, under any such Environmental Law (collectively, "Claims"),
including, without limitation, (i) any and all Claims by Governmental
Authorities for enforcement, cleanup, removal, response, remedial or other
actions or damages pursuant to any applicable Environmental Law and (ii) any and
all Claims by any third party seeking damages, contribution, indemnification,
cost recovery, compensation or injunctive relief resulting from Hazardous
Substances or arising from alleged injury or threat of injury to human health or
the environment.
"Environmental Laws" shall mean any and all federal, state and local
laws, statutes, ordinances, rules, regulations, permits, licenses, approvals,
rules of common law and orders of courts or Governmental Authorities, relating
to the protection of human health or occupational safety or the environment, now
or hereafter in effect and in each case as amended from time to time, including,
without limitation, requirements pertaining to the manufacture, processing,
distribution, use, treatment, storage, disposal, transportation, handling,
reporting, licensing, permitting, investigation or remediation of Hazardous
Substances.
"Equity Issuance" shall mean the issuance, sale or other disposition by
the Borrower or any of its Subsidiaries of its Capital Stock, any rights,
warrants or options to purchase or acquire any shares of its Capital Stock, or
any other security or instrument representing, convertible into or exchangeable
for an equity interest in the Borrower or any of its Subsidiaries; provided,
however, that the term Equity Issuance shall not include (i) the issuance or
sale of Capital Stock by any of the Subsidiaries of the Borrower to the Borrower
or any other Subsidiary, or (ii) any Capital Stock of the Borrower issued to a
Target (or its securityholders at the time of the Acquisition thereof by the
Borrower or a Subsidiary) in connection with the American Phoenix Acquisition or
any Permitted Acquisition and constituting all or a portion of the applicable
purchase price.
"Event of Default" shall have the meaning given to such term in Section
8.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time, and any successor statute, and all rules and
regulations from time to time promulgated thereunder.
"Fair Market Value" shall mean, with respect to any Capital Stock of
the Borrower given in connection with an Acquisition, the value given to such
Capital Stock for purposes of such Acquisition by the parties thereto, as
determined in good faith pursuant to the relevant acquisition agreement or
otherwise in connection with such Acquisition.
"Federal Funds Rate" shall mean, for any period, a fluctuating per
annum interest rate (rounded upwards, if necessary, to the nearest 1/100 of one
percentage point) equal for each day
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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 that 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.
"Federal Reserve Board" shall mean the Board of Governors of the
Federal Reserve System or any successor thereto.
"Fee Letter" shall mean the letter from First Union to the Borrower,
dated March 15, 1999, relating to certain fees payable by the Borrower in
respect of the transactions contemplated by this Agreement, as amended, modified
or supplemented from time to time.
"Financial Condition Certificate" shall mean a fully completed and duly
executed certificate, substantially in the form of Exhibit G, together with the
attachments thereto.
"Financial Officer" shall mean, with respect to the Borrower, the chief
financial officer, vice president - finance, principal accounting officer or
treasurer of the Borrower.
"Fixed Charge Coverage Ratio" shall mean, as of the last day of any
fiscal quarter, the ratio of (i) Consolidated EBITDA for the Borrower for the
period of four consecutive fiscal quarters then ending minus Capital
Expenditures for such period to (ii) Consolidated Fixed Charges for such period.
"GAAP" shall mean generally accepted accounting principles, as set
forth in the statements, opinions and pronouncements of the Accounting
Principles Board, the American Institute of Certified Public Accountants and the
Financial Accounting Standards Board, consistently applied and maintained, as in
effect from time to time (subject to the provisions of Section 1.2).
"Governmental Authority" shall mean any nation or government, any state
or other political subdivision thereof and any central bank thereof, any
municipal, local, city or county government, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
"Hazardous Substances" shall mean any substances or materials (i) that
are or become defined as hazardous wastes, hazardous substances, pollutants,
contaminants or toxic substances under any Environmental Law, (ii) that are
defined by any Environmental Law as toxic, explosive, corrosive, ignitable,
infectious, radioactive, mutagenic or otherwise hazardous, (iii) the presence of
which require investigation or response under any Environmental Law, (iv) that
constitute a nuisance, trespass or health or safety hazard to Persons or
neighboring properties, (v) that consist of underground or aboveground storage
tanks, whether empty, filled or partially filled with any substance, or (vi)
that contain, without limitation, asbestos, polychlorinated biphenyls, urea
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formaldehyde foam insulation, petroleum hydrocarbons, petroleum derived
substances or wastes, crude oil, nuclear fuel, natural gas or synthetic gas.
"Hedge Agreement" shall mean any interest or foreign currency rate
swap, cap, collar, option, hedge, forward rate or other similar agreement or
arrangement designed to protect against fluctuations in interest rates or
currency exchange rates.
"Indebtedness" shall mean, with respect to any Person (without
duplication), (i) all indebtedness and obligations of such Person for borrowed
money or in respect of loans or advances of any kind, (ii) all obligations of
such Person evidenced by notes, bonds, debentures or similar instruments, (iii)
all reimbursement obligations of such Person with respect to surety bonds,
letters of credit and bankers' acceptances (in each case, whether or not drawn
or matured and in the stated amount thereof), (iv) all obligations of such
Person to pay the deferred purchase price of property or services, (v) all
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person, (vi) all
obligations of such Person as lessee under leases that are or are required to
be, in accordance with GAAP, recorded as capital leases, to the extent such
obligations are required to be so recorded, (vii) all Disqualified Capital Stock
issued by such Person, with the amount of Indebtedness represented by such
Disqualified Capital Stock being equal to the greater of its voluntary or
involuntary liquidation preference and its maximum fixed repurchase price, but
excluding accrued dividends, if any (for purposes hereof, the "maximum fixed
repurchase price" of any Disqualified Capital Stock that does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Disqualified Capital Stock as if such Disqualified Capital Stock were purchased
on any date on which Indebtedness shall be required to be determined pursuant to
this Agreement, and if such price is based upon, or measured by, the fair market
value of such Disqualified Capital Stock, such fair market value shall be
determined reasonably and in good faith by the board of directors or other
governing body of the issuer of such Disqualified Capital Stock), (viii) the net
termination obligations of such Person under any Hedge Agreements, calculated as
of any date as if such agreement or arrangement were terminated as of such date,
(ix) all Contingent Obligations of such Person and (x) all indebtedness referred
to in clauses (i) through (ix) above secured by any Lien on any property or
asset owned or held by such Person regardless of whether the indebtedness
secured thereby shall have been assumed by such Person or is nonrecourse to the
credit of such Person.
"Interest Period" shall have the meaning given to such term in Section
2.10.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time, and any successor statute, and all rules and
regulations from time to time promulgated thereunder.
"LIBOR Loan" shall mean, at any time, any Loan that bears interest at
such time at the Adjusted LIBOR Rate.
"LIBOR Rate" shall mean, with respect to each LIBOR Loan comprising
part of the same Borrowing for any Interest Period, an interest rate per annum
obtained by dividing (i) (y) the rate of interest (rounded upward, if necessary,
to the nearest 1/16 of one percentage point) appearing
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on Telerate Page 3750 (or any successor page) or (z) if no such rate is
available, the rate of interest determined by the Administrative Agent to be the
rate or the arithmetic mean of rates (rounded upward, if necessary, to the
nearest 1/16 of one percentage point) at which Dollar deposits in immediately
available funds are offered by First Union to first-tier banks in the London
interbank Eurodollar market, in each case under (y) and (z) above at
approximately 11:00 a.m., London time, two (2) Business Days prior to the first
day of such Interest Period for a period substantially equal to such Interest
Period and in an amount substantially equal to the amount of First Union's LIBOR
Loan comprising part of such Borrowing, by (ii) the amount equal to 1.00 minus
the Reserve Requirement (expressed as a decimal) for such Interest Period.
"Lender" shall mean each financial institution signatory hereto and
each other financial institution that becomes a "Lender" hereunder pursuant to
Section 10.7, and their respective successors and assigns.
"Lending Office" shall mean, with respect to any Lender, the office of
such Lender designated as its "Lending Office" on its signature page hereto or
in an Assignment and Acceptance, or such other office as may be otherwise
designated in writing from time to time by such Lender to the Borrower and the
Administrative Agent. A Lender may designate separate Lending Offices as
provided in the foregoing sentence for the purposes of making or maintaining
different Types of Loans, and, with respect to LIBOR Loans, such office may be a
domestic or foreign branch or Affiliate of such Lender.
"Leverage Ratio" shall mean, as of the last day of any fiscal quarter,
the ratio of (i) Consolidated Indebtedness as of such date to (ii) Consolidated
EBITDA for the Borrower for the period of four consecutive fiscal quarters then
ending.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
security interest, lien (statutory or otherwise), preference, priority, charge
or other encumbrance of any nature, whether voluntary or involuntary, including,
without limitation, the interest of any vendor or lessor under any conditional
sale agreement, title retention agreement, capital lease or any other lease or
arrangement having substantially the same effect as any of the foregoing.
"Loans" shall mean any or all of the Term Loans, the Revolving Loans
and the Swingline Loans.
"Margin Stock" shall have the meaning given to such term in Regulation
U.
"Material Adverse Change" shall mean a material adverse change in the
condition (financial or otherwise), operations, prospects, business, properties
or assets of the Borrower and its Subsidiaries (including American Phoenix (both
prior to and after the consummation of the American Phoenix Acquisition)), taken
as a whole.
"Material Adverse Effect" shall mean a material adverse effect upon (i)
the condition (financial or otherwise), operations, prospects, business,
properties or assets of the Borrower and its Subsidiaries, taken as a whole,
(ii) the ability of the Borrower and its Subsidiaries to perform their
obligations, as a whole, under this Agreement or any of the other Credit
Documents, or
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(iii) the legality, validity or enforceability of this Agreement or any of the
other Credit Documents or the rights and remedies of the Administrative Agent
and the Lenders hereunder and thereunder.
"Material Contract" shall have the meaning given to such term in
Section 4.18.
"Material Subsidiary" shall mean each of (i) American Phoenix and its
Subsidiaries (other than Nicholas & Cannon Agency, Inc., Lees Preston Fairy
Limited, Lees Preston Fairy (Holdings), Ltd., Lees Preston Investments Limited,
LPF Management Limited and McCay Benefits Corporation), and (ii) at the relevant
time of determination, any Subsidiary of the Borrower having (A) revenues for
the four quarters most recently ended constituting at least two and one-quarter
percent (2.25%) of the total revenues of the Borrower and its Subsidiaries on a
consolidated basis for such period, in each case determined in accordance with
GAAP, or (B) Consolidated EBITDA for the four quarters most recently ended
constituting at least two and one-quarter percent (2.25%) of the Consolidated
EBITDA for the Borrower for such period.
"McCay Benefits Corporation" shall mean McCay Benefits Corporation, a
New Jersey corporation and a Wholly Owned Subsidiary of McCay Corporation.
"Multiemployer Plan" shall mean any "multiemployer plan" within the
meaning of Section 4001(a)(3) of ERISA to which the Borrower or any ERISA
Affiliate makes, is making or is obligated to make contributions or has made or
been obligated to make contributions.
"Net Cash Proceeds" shall mean (i) in the case of any Equity Issuance
or Debt Issuance, the aggregate cash payments received by the Borrower and its
Subsidiaries less reasonable and customary fees and expenses (including
underwriting discounts and commissions) incurred by the Borrower and its
Subsidiaries in connection therewith and (ii) in the case of any Asset
Disposition, the aggregate amount of all cash payments received by the Borrower
and its Subsidiaries in connection with such Asset Disposition less (x)
reasonable fees and expenses incurred by the Borrower and its Subsidiaries in
connection therewith, (y) Indebtedness to the extent the amount thereof is
secured by a Lien on the property that is the subject of such Asset Disposition
and the transferee of (or holder of the Lien on) such Property requires that
such Indebtedness be repaid as a condition to such Asset Disposition, and (z)
any income or transfer taxes paid or reasonably estimated by the Borrower to be
payable by the Borrower and its Subsidiaries as a result of such Asset
Disposition.
"Notes" shall mean any or all of the Term Notes, the Revolving Notes
and the Swingline Note.
"Notice of Borrowing" shall have the meaning given to such term in
Section 2.2(b).
"Notice of Conversion/Continuation" shall have the meaning given to
such term in Section 2.11(b).
"Notice of Swingline Borrowing" shall have the meaning given to such
term in Section 2.2(d).
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"Obligations" shall mean all principal of and interest (including, to
the greatest extent permitted by law, post-petition interest) on the Loans and
all fees, expenses, indemnities and other obligations owing, due or payable at
any time by the Borrower to the Administrative Agent, any Lender, or any other
Person entitled thereto, under this Agreement or any of the other Credit
Documents.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any
successor thereto.
"Participant" shall have the meaning given to such term in Section
10.7(d).
"Permitted Acquisition" shall mean (a) any Acquisition with respect to
which all of the following conditions are satisfied: (i) each business acquired
shall be within the permitted lines of business described in Section 7.8, (ii)
any Capital Stock given as consideration in connection therewith shall be
Capital Stock of the Borrower, (iii) the Acquisition, at no time, shall have
been contested by the board of directors of the Target, (iv) in the case of an
Acquisition involving the acquisition of control of Capital Stock of any Person,
immediately after giving effect to such Acquisition such Person (or the
surviving Person, if the Acquisition is effected through a merger or
consolidation) shall be the Borrower or a Wholly Owned Subsidiary, and (v) all
of the conditions and requirements of Sections 5.8 and 5.9 applicable to such
Acquisition are satisfied; or (b) any other Acquisition to which the Required
Lenders (or the Administrative Agent on their behalf) shall have given their
prior written consent (which consent may be in their sole discretion and may be
given subject to such additional terms and conditions as the Required Lenders
shall establish) and with respect to which all of the conditions and
requirements set forth in this definition and in Section 5.8, and in or pursuant
to any such consent, have been satisfied or waived in writing by the Required
Lenders (or the Administrative Agent on their behalf).
"Permitted Liens" shall have the meaning given to such term in Section
7.3.
"Person" shall mean any corporation, association, joint venture,
partnership, limited liability company, organization, business, individual,
trust, government or agency or political subdivision thereof or any other legal
entity.
"Plan" shall mean any "employee pension benefit plan" within the
meaning of Section 3(2) of ERISA that is subject to the provisions of Title IV
of ERISA (other than a Multiemployer Plan) and to which the Borrower or any
ERISA Affiliate may have any liability.
"Premium Funding Associates" shall mean Premium Funding Associates,
Inc., a Connecticut corporation.
"Prepayment Account" shall have the meaning given to such term in
Section 2.6(f).
"Pro Forma Balance Sheet" shall have the meaning given to such term in
Section 4.11(b).
"Prohibited Transaction" shall mean any transaction described in (i)
Section 406 of ERISA that is not exempt by reason of Section 408 of ERISA or by
reason of a Department of Labor prohibited transaction individual or class
exemption or (ii) Section 4975(c) of the Internal
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Revenue Code that is not exempt by reason of Section 4975(c)(2) or 4975(d) of
the Internal Revenue Code.
"Projections" shall have the meaning given to such term in Section
4.11(c).
"Refunded Swingline Loans" shall have the meaning given to such term in
Section 2.2(e).
"Register" shall have the meaning given to such term in Section
10.7(b).
"Regulations D, T, U and X" shall mean Regulations D, T, U and X,
respectively, of the Federal Reserve Board, and any successor regulations.
"Reportable Event" shall mean (i) any "reportable event" within the
meaning of Section 4043(c) of ERISA for which the 30-day notice under Section
4043(a) of ERISA has not been waived by the PBGC (including any failure to meet
the minimum funding standard of, or timely make any required installment under,
Section 412 of the Internal Revenue Code or Section 302 of ERISA, regardless of
the issuance of any waivers in accordance with Section 412(d) of the Internal
Revenue Code), (ii) any such "reportable event" subject to advance notice to the
PBGC under Section 4043(b)(3) of ERISA, (iii) any application for a funding
waiver or an extension of any amortization period pursuant to Section 412 of the
Internal Revenue Code, and (iv) a cessation of operations described in Section
4062(e) of ERISA.
"Required Lenders" shall mean the Lenders holding outstanding Loans and
unutilized Commitments (or, after the termination of the Revolving Credit
Commitments, outstanding Loans) representing more than fifty-one percent (51%)
of the aggregate at such time of all outstanding Loans and unutilized
Commitments (or, after the termination of the Revolving Credit Commitments, the
aggregate at such time of all outstanding Loans).
"Requirement of Law" shall mean, with respect to any Person, the
charter, articles or certificate of organization or incorporation and bylaws or
other organizational or governing documents of such Person, and any statute,
law, treaty, rule, regulation, order, decree, writ, injunction or determination
of any arbitrator or court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or to which
such Person or any of its property is subject or otherwise pertaining to any or
all of the transactions contemplated by this Agreement and the other Credit
Documents.
"Reserve Requirement" shall mean, with respect to any Interest Period,
the reserve percentage (expressed as a decimal) in effect from time to time
during such Interest Period, as provided by the Federal Reserve Board, applied
for determining the maximum reserve requirements (including, without limitation,
basic, supplemental, marginal and emergency reserves) applicable to First Union
under Regulation D with respect to "Eurocurrency liabilities" within the meaning
of Regulation D, or under any similar or successor regulation with respect to
Eurocurrency liabilities or Eurocurrency funding.
"Responsible Officer" shall mean, with respect to the Borrower, the
president, the chief executive officer, the chief financial officer, any
executive officer, or any other Financial Officer of
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the Borrower, and any other officer or similar official thereof responsible for
the administration of the obligations of the Borrower in respect of this
Agreement.
"Revolving Credit Commitment" shall mean, with respect to any Lender at
any time, the amount set forth opposite such Lender's name on its signature page
hereto under the caption "Revolving Credit Commitment" or, if such Lender has
entered into one or more Assignment and Acceptances, the amount set forth for
such Lender at such time in the Register maintained by the Administrative Agent
pursuant to Section 10.7(b) as such Lender's "Revolving Credit Commitment," as
such amount may be reduced at or prior to such time pursuant to the terms
hereof.
"Revolving Credit Maturity Date" shall mean June 30, 2004.
"Revolving Credit Termination Date" shall mean the Revolving Credit
Maturity Date or such earlier date of termination of the Revolving Credit
Commitments pursuant to Section 2.5 or Section 8.2.
"Revolving Loans" shall have the meaning given to such term in Section
2.1(b).
"Revolving Notes" shall mean the promissory notes of the Borrower in
substantially the form of Exhibit A-2, together with any amendments,
modifications and supplements thereto, substitutions therefor and restatements
thereof.
"Stock Purchase Agreement" shall mean the Stock Purchase Agreement
dated as of March 29, 1999 by and between the Borrower, PM Holdings, Inc., a
Connecticut corporation, Phoenix Home Life Mutual Insurance Company, a New York
life insurance company, and Martin L. Vaughan, III, pursuant to which the
Borrower has agreed (subject to certain terms and conditions contained therein)
to consummate the American Phoenix Acquisition, as such agreement may be
amended, modified or supplemented from time to time.
"Subordinated Indebtedness" shall have the meaning given to such term
in Section 7.2.
"Subsidiary" shall mean, with respect to any Person, any corporation or
other Person of which more than fifty percent (50%) of the outstanding Capital
Stock having ordinary voting power to elect a majority of the board of
directors, board of managers or other governing body of such Person, is at the
time, directly or indirectly, owned or controlled by such Person and one or more
of its other Subsidiaries or a combination thereof (irrespective of whether, at
the time, securities of any other class or classes of any such corporation or
other Person shall or might have voting power by reason of the happening of any
contingency). When used without reference to a parent entity, the term
"Subsidiary" shall be deemed to refer to a Subsidiary of the Borrower.
"Subsidiary Guarantor" shall mean any Subsidiary of the Borrower that
is a guarantor under the Subsidiary Guaranty.
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"Subsidiary Guaranty" shall mean a guaranty agreement made by the
Subsidiary Guarantors in favor of the Administrative Agent and the Lenders, in
substantially the form of Exhibit E, as amended, modified or supplemented from
time to time.
"Swingline Commitment" shall mean $5,000,000 or, if less, the aggregate
Revolving Credit Commitments at the time of determination, as such amount may be
reduced at or prior to such time pursuant to the terms hereof.
"Swingline Lender" shall mean First Union in its capacity as maker of
Swingline Loans, and its successors in such capacity.
"Swingline Loans" shall have the meaning given to such term in Section
2.1(c).
"Swingline Maturity Date" shall mean the date that is five (5) Business
Days prior to the Revolving Credit Maturity Date.
"Swingline Note" shall mean the promissory note of the Borrower in
substantially the form of Exhibit A-3, together with any amendments,
modifications and supplements thereto, substitutions therefor and restatements
thereof.
"Target" shall have the meaning given to such term in Section 5.8.
"Term Loan Commitment" shall mean, with respect to any Lender at any
time, the amount set forth opposite such Lender's name on its signature page
hereto under the caption "Term Loan Commitment" or, if such Lender has entered
into one or more Assignment and Acceptances, the amount set forth for such
Lender at such time in the Register maintained by the Administrative Agent
pursuant to Section 10.7(b) as such Lender's "Term Loan Commitment," as such
amount may be reduced at or prior to such time pursuant to the terms hereof.
"Term Loan Maturity Date" shall mean June 30, 2004.
"Term Loans" shall have the meaning given to such term in Section
2.1(a).
"Term Notes" shall mean the promissory notes of the Borrower in
substantially the form of Exhibit A-1, together with any amendments,
modifications and supplements thereto, substitutions therefor and restatements
thereof.
"Terminating Senior Indebtedness" shall mean all Indebtedness (i) of
the Borrower under (A) the credit agreement, dated as of February 12, 1996, as
amended, between the Borrower and Crestar Bank, as agent, and the banks named
therein, and (B) the credit agreement, dated as of February 12, 1996, as
amended, between the Borrower and Crestar Bank, (ii) of Premium Funding
Associates, under the credit agreement, dated August 15, 1994, as amended,
between Premium Funding Associates and First National Bank of Boston, and (iii)
of American Phoenix under (A) the credit agreement, dated as of August 11, 1996,
between American Phoenix and The First National Bank of Boston, and (B) the
credit agreement, dated as of February 2, 1999, between American Phoenix and
Deutsche Bank.
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"Transaction Documents" shall mean, collectively, the Credit Documents,
the Acquisition Documents and any and all other agreements, certificates,
instruments and documents heretofore, now or hereafter executed by or in behalf
of the Borrower or any of its Subsidiaries with respect to any of the foregoing
or with respect to the Transactions, in each case without regard to any
amendments, modifications or supplements thereto or restatements thereof other
than those approved by the Required Lenders pursuant to the terms hereof.
"Transactions" shall mean, collectively, the transactions contemplated
by the Transaction Documents, including (i) the making of the initial Loans
hereunder, (ii) the American Phoenix Acquisition, including the incurrence of
the American Phoenix Acquisition Indebtedness and the issuance of Capital Stock
of the Borrower in connection therewith, (iii) the repayment of the Terminating
Senior Indebtedness, and (iv) the payment of permitted fees and expenses in
connection with the foregoing.
"Type" shall have the meaning given to such term in Section 2.2(a).
"Unfunded Pension Liability" shall mean, with respect to any Plan or
Multiemployer Plan, the excess of its benefit liabilities under Section
4001(a)(16) of ERISA over the current value of its assets, determined in
accordance with the applicable assumptions used for funding under Section 412 of
the Code for the applicable plan year.
"Unutilized Revolving Credit Commitment" shall mean, with respect to
any Lender at any time, such Lender's Revolving Credit Commitment at such time
less the aggregate principal amount of all Revolving Loans made by such Lender
that are outstanding at such time.
"Unutilized Swingline Commitment" shall mean, with respect to the
Swingline Lender at any time, the Swingline Commitment at such time less the
aggregate principal amount of all Swingline Loans that are outstanding at such
time.
"Wholly Owned" shall mean, with respect to any Subsidiary of any
Person, that 100% of the outstanding Capital Stock of such Subsidiary is owned,
directly or indirectly, by such Person.
1.2 Accounting Terms. Except as specifically provided otherwise in
this Agreement, all accounting terms used herein that are not specifically
defined shall have the meanings customarily given them in accordance with GAAP.
Notwithstanding anything to the contrary in this Agreement, for purposes of
calculation of the financial covenants set forth in Article VI, all accounting
determinations and computations hereunder shall be made in accordance with GAAP
as in effect as of the date of this Agreement applied on a basis consistent with
the application used in preparing the most recent financial statements of the
Borrower referred to in Section 4.11(a). In the event that any changes in GAAP
after such date are required to be applied to the Borrower and would affect the
computation of the financial covenants contained in Article VI, such changes
shall be followed only from and after the date this Agreement shall have been
amended to take into account any such changes.
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1.3 Other Terms; Construction. Unless otherwise specified or
unless the context otherwise requires, all references herein to sections,
annexes, schedules and exhibits are references to sections, annexes, schedules
and exhibits in and to this Agreement, and all terms defined in this Agreement
shall have the defined meanings when used in any other Credit Document or any
certificate or other document made or delivered pursuant hereto. All references
herein to the Lenders or any of them shall be deemed to include the Swingline
Lender unless specifically provided otherwise or unless the context otherwise
requires.
ARTICLE II
AMOUNT AND TERMS OF THE LOANS
2.1 Commitments. (a) Each Lender severally agrees, subject to and
on the terms and conditions of this Agreement, to make a loan (each, a "Term
Loan," and collectively, the "Term Loans") to the Borrower on the Closing Date
in a principal amount not to exceed its Term Loan Commitment. No Term Loans
shall be made at any time after the Closing Date. To the extent repaid, Term
Loans may not be reborrowed.
(b) Each Lender severally agrees, subject to and on the terms and
conditions of this Agreement, to make loans (each, a "Revolving Loan," and
collectively, the "Revolving Loans") to the Borrower, from time to time on any
Business Day during the period from and including the Closing Date to but not
including the Revolving Credit Termination Date, in an aggregate principal
amount at any time outstanding not greater than its Revolving Credit Commitment,
provided that no Borrowing of Revolving Loans shall be made if, immediately
after giving effect thereto, the sum of (x) the aggregate principal amount of
Revolving Loans outstanding at such time, and (y) the aggregate principal amount
of Swingline Loans outstanding at such time (excluding the aggregate amount of
any Swingline Loans to be repaid with proceeds of Revolving Loans made pursuant
to such Borrowing) would exceed the aggregate Revolving Credit Commitments at
such time. Subject to and on the terms and conditions of this Agreement, the
Borrower may borrow, repay and reborrow Revolving Loans.
(c) The Swingline Lender agrees, subject to and on the terms and
conditions of this Agreement, to make loans (each, a "Swingline Loan," and
collectively, the "Swingline Loans") to the Borrower, from time to time on any
Business Day during the period from the Closing Date to but not including the
Swingline Maturity Date (or, if earlier, the Revolving Credit Termination Date),
in an aggregate principal amount at any time outstanding not exceeding the
Swingline Commitment, notwithstanding that the aggregate principal amount of
Swingline Loans outstanding at any time, when added to the aggregate principal
amount of the Revolving Loans made by the Swingline Lender in its capacity as a
Lender outstanding at such time, may exceed its Revolving Credit Commitment at
such time, but provided that no Borrowing of Swingline Loans shall be made if,
immediately after giving effect thereto, the sum of (x) the aggregate principal
amount of Revolving Loans outstanding at such time, and (y) the aggregate
principal amount of Swingline Loans outstanding at such time would exceed the
aggregate Revolving Credit Commitments at such time. Subject to and on the terms
and conditions of this Agreement, the
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Borrower may borrow, repay (including by means of a Borrowing of Revolving Loans
pursuant to Section 2.2(e)) and reborrow Swingline Loans.
2.2 Borrowings. (a) The Term Loans and Revolving Loans (each,
together with the Swingline Loans, a "Class" of Loan) shall, at the option of
the Borrower and subject to the terms and conditions of this Agreement, be
either Base Rate Loans or LIBOR Loans (each, a "Type" of Loan), provided that
(i) all Loans comprising the same Borrowing shall, unless otherwise specifically
provided herein, be of the same Type,and (ii) no Borrowing of LIBOR Loans may be
made at any time prior to the third (3rd) Business Day after the Closing Date.
The Swingline Loans shall be made and maintained as Base Rate Loans at all
times.
(b) In order to make a Borrowing (other than (x) Borrowings of
Swingline Loans, which shall be made pursuant to Section 2.2(d), (y) Borrowings
for the purpose of repaying Refunded Swingline Loans, which shall be made
pursuant to Section 2.2(e), and (z) Borrowings involving continuations or
conversions of outstanding Loans, which shall be made pursuant to Section 2.11),
the Borrower will give the Administrative Agent written notice not later than
11:00 a.m., Charlotte time, three (3) Business Days prior to each Borrowing to
be comprised of LIBOR Loans and one (1) Business Day prior to each Borrowing to
be comprised of Base Rate Loans; provided, however, that requests for the
Borrowing of the Term Loans and any Revolving Loans to be made on the Closing
Date may, at the discretion of the Administrative Agent, be given later than the
times specified hereinabove. Each such notice (each, a "Notice of Borrowing")
shall be irrevocable, shall be given in the form of Exhibit B-1 and shall
specify (1) the aggregate principal amount, Class and initial Type of the Loans
to be made pursuant to such Borrowing, (2) in the case of a Borrowing of LIBOR
Loans, the initial Interest Period to be applicable thereto, and (3) the
requested date of such Borrowing (the "Borrowing Date"), which shall be a
Business Day. Upon its receipt of a Notice of Borrowing, the Administrative
Agent will promptly notify each Lender of the proposed Borrowing.
Notwithstanding anything to the contrary contained herein:
(i) the aggregate principal amount of the Borrowing of
Term Loans shall be in the amount of the aggregate Term Loan
Commitments;
(ii) the aggregate principal amount of each Borrowing
comprised of Base Rate Loans shall not be less than $1,000,000 or, if
greater, an integral multiple of $500,000 in excess thereof (or, in the
case of a Borrowing of Revolving Loans, if less, in the amount of the
aggregate Unutilized Revolving Credit Commitments), and the aggregate
principal amount of each Borrowing comprised of LIBOR Loans shall not
be less than $3,000,000 or, if greater, an integral multiple of
$1,000,000 in excess thereof;
(iii) if the Borrower shall have failed to designate the
Type of Loans comprising a Borrowing, the Borrower shall be deemed to
have requested a Borrowing comprised of Base Rate Loans; and
(iv) if the Borrower shall have failed to select the
duration of the Interest Period to be applicable to any Borrowing of
LIBOR Loans, then the Borrower shall be deemed to have selected an
Interest Period with a duration of one month.
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(c) Not later than 1:00 p.m., Charlotte time, on the requested
Borrowing Date (which shall be the Closing Date, in the case of the Term Loans),
each Lender will make available to the Administrative Agent at its office
referred to in Section 10.5 (or at such other location as the Administrative
Agent may designate) an amount, in Dollars and in immediately available funds,
equal to the amount of the Loan or Loans to be made by such Lender. To the
extent the Lenders have made such amounts available to the Administrative Agent
as provided hereinabove, the Administrative Agent will make the aggregate of
such amounts available to the Borrower in accordance with Section 2.3(a) and in
like funds as received by the Administrative Agent.
(d) In order to make a Borrowing of a Swingline Loan, the Borrower
will give the Administrative Agent and the Swingline Lender written notice not
later than 11:00 a.m., Charlotte time, on the Business Day of such Borrowing.
Each such notice (each, a "Notice of Swingline Borrowing") shall be irrevocable,
shall be given in the form of Exhibit B-2 and shall specify (i) the principal
amount of the Swingline Loan to be made pursuant to such Borrowing (which shall
be in an integral multiple of $100,000 (or, if less, in the amount of the
Unutilized Swingline Commitment)) and (ii) the requested Borrowing Date, which
shall be a Business Day. Not later than 1:00 p.m., Charlotte time, on the
requested Borrowing Date, the Swingline Lender will make available to the
Administrative Agent at its office referred to in Section 10.5 (or at such other
location as the Administrative Agent may designate) an amount, in Dollars and in
immediately available funds, equal to the amount of the requested Swingline
Loan. To the extent the Swingline Lender has made such amount available to the
Administrative Agent as provided hereinabove, the Administrative Agent will make
such amount available to the Borrower in accordance with Section 2.3(a) and in
like funds as received by the Administrative Agent.
(e) With respect to any outstanding Swingline Loans, the Swingline
Lender may at any time (whether or not an Event of Default has occurred and is
continuing) in its sole and absolute discretion, and is hereby authorized and
empowered by the Borrower to, cause a Borrowing of Revolving Loans to be made
for the purpose of repaying such Swingline Loans by delivering to the
Administrative Agent (if the Administrative Agent is different from the
Swingline Lender) and each other Lender (on behalf of, and with a copy to, the
Borrower), not later than 11:00 a.m., Charlotte time, one (1) Business Day prior
to the proposed Borrowing Date therefor, a notice (which shall be deemed to be a
Notice of Borrowing given by the Borrower) requesting the Lenders to make
Revolving Loans (which shall be made initially as Base Rate Loans) on such
Borrowing Date in an aggregate amount equal to the amount of such Swingline
Loans (the "Refunded Swingline Loans") outstanding on the date such notice is
given that the Swingline Lender requests to be repaid. Not later than 1:00 p.m.,
Charlotte time, on the requested Borrowing Date, each Lender (other than the
Swingline Lender) will make available to the Administrative Agent at its office
referred to in Section 10.5 (or at such other location as the Administrative
Agent may designate) an amount, in Dollars and in immediately available funds,
equal to the amount of the Revolving Loan to be made by such Lender. To the
extent the Lenders have made such amounts available to the Administrative Agent
as provided hereinabove, the Administrative Agent will make the aggregate of
such amounts available to the Swingline Lender in like funds as received by the
Administrative Agent, which shall apply such amounts in repayment of the
Refunded Swingline Loans. Notwithstanding any provision of this Agreement to the
contrary, on the relevant Borrowing Date, the Refunded Swingline Loans
(including the
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Swingline Lender's ratable share thereof, in its capacity as a Lender) shall be
deemed to be repaid with the proceeds of the Revolving Loans made as provided
above (including a Revolving Loan deemed to have been made by the Swingline
Lender), and such Refunded Swingline Loans deemed to be so repaid shall no
longer be outstanding as Swingline Loans but shall be outstanding as Revolving
Loans. If any portion of any such amount repaid (or deemed to be repaid) to the
Swingline Lender shall be recovered by or on behalf of the Borrower from the
Swingline Lender in any bankruptcy, insolvency or similar proceeding or
otherwise, the loss of the amount so recovered shall be shared ratably among all
the Lenders in the manner contemplated by Section 2.15(b).
(f) If, as a result of any bankruptcy, insolvency or similar
proceeding with respect to the Borrower, Revolving Loans are not made pursuant
to subsection (e) above in an amount sufficient to repay any amounts owed to the
Swingline Lender in respect of any outstanding Swingline Loans, or if the
Swingline Lender is otherwise precluded for any reason from giving a notice on
behalf of the Borrower as provided for hereinabove, the Swingline Lender shall
be deemed to have sold without recourse, representation or warranty, and each
Lender shall be deemed to have purchased and hereby agrees to purchase, a
participation in such outstanding Swingline Loans in an amount equal to its
ratable share (based on the proportion that its Revolving Credit Commitment
bears to the aggregate Revolving Credit Commitments at such time) of the unpaid
amount thereof together with accrued interest thereon. Upon one (1) Business
Day's prior notice from the Swingline Lender, each Lender (other than the
Swingline Lender) will make available to the Administrative Agent at its office
referred to in Section 10.5 (or at such other location as the Administrative
Agent may designate) an amount, in Dollars and in immediately available funds,
equal to its respective participation. To the extent the Lenders have made such
amounts available to the Administrative Agent as provided hereinabove, the
Administrative Agent will make the aggregate of such amounts available to the
Swingline Lender in like funds as received by the Administrative Agent. In the
event any such Lender fails to make available to the Administrative Agent the
amount of such Lender's participation as provided in this subsection (f), the
Swingline Lender shall be entitled to recover such amount on demand from such
Lender, together with interest thereon for each day from the date such amount is
required to be made available for the account of the Swingline Lender until the
date such amount is made available to the Swingline Lender at the Federal Funds
Rate for the first three (3) Business Days and thereafter at the Adjusted Base
Rate applicable to Revolving Loans. Promptly following its receipt of any
payment by or on behalf of the Borrower in respect of a Swingline Loan, the
Swingline Lender will pay to each Lender that has acquired a participation
therein such Lender's ratable share of such payment.
(g) Notwithstanding any provision of this Agreement to the
contrary, the obligation of each Lender (other than the Swingline Lender) to
make Revolving Loans for the purpose of repaying any Refunded Swingline Loans
pursuant to subsection (e) above and each such Lender's obligation to purchase a
participation in any unpaid Swingline Loans pursuant to subsection (f) above
shall be absolute and unconditional and shall not be affected by any
circumstance or event whatsoever, including, without limitation, (i) any
set-off, counterclaim, recoupment, defense or other right that such Lender may
have against the Swingline Lender, the Administrative Agent, the Borrower or any
other Person for any reason whatsoever, (ii) the occurrence or continuance of
any Default or Event of Default, (iii) any adverse change in the business,
operations, properties,
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assets, condition (financial or otherwise) or prospects of the Borrower or any
of its Subsidiaries, or (iv) any breach of this Agreement by any party hereto.
2.3 Disbursements; Funding Reliance; Domicile of Loans. (a) The
Borrower hereby authorizes the Administrative Agent to disburse the proceeds of
each Borrowing in accordance with the terms of any written instructions from any
of the Authorized Officers, provided that the Administrative Agent shall not be
obligated under any circumstances to forward amounts to any account not listed
in an Account Designation Letter. The Borrower may at any time deliver to the
Administrative Agent an Account Designation Letter listing any additional
accounts or deleting any accounts listed in a previous Account Designation
Letter.
(b) Unless the Administrative Agent has received, prior to 1:00
p.m., Charlotte time, on the relevant Borrowing Date, written notice from a
Lender that such Lender will not make available to the Administrative Agent such
Lender's ratable portion, if any, of the relevant Borrowing, the Administrative
Agent may assume that such Lender has made such portion available to the
Administrative Agent in immediately available funds on such Borrowing Date in
accordance with the applicable provisions of Section 2.2, and the Administrative
Agent may, in reliance upon such assumption, but shall not be obligated to, make
a corresponding amount available to the Borrower on such Borrowing Date. If and
to the extent that such Lender shall not have made such portion available to the
Administrative Agent, and the Administrative Agent shall have made such
corresponding amount available to the Borrower, such Lender, on the one hand,
and the Borrower, on the other, severally agree to pay to the Administrative
Agent forthwith on demand such corresponding amount, together with interest
thereon for each day from the date such amount is made available to the Borrower
until the date such amount is repaid to the Administrative Agent, (i) in the
case of such Lender, at the Federal Funds Rate, and (ii) in the case of the
Borrower, at the rate of interest applicable at such time to the Type and Class
of Loans comprising such Borrowing, as determined under the provisions of
Section 2.8. If such Lender shall repay to the Administrative Agent such
corresponding amount, such amount shall constitute such Lender's Loan as part of
such Borrowing for purposes of this Agreement. The failure of any Lender to make
any Loan required to be made by it as part of any Borrowing shall not relieve
any other Lender of its obligation, if any, hereunder to make its Loan as part
of such Borrowing, but no Lender shall be responsible for the failure of any
other Lender to make the Loan to be made by such other Lender as part of any
Borrowing. The Administrative Agent shall promptly give notice to the Borrower
after it obtains knowledge that a Lender will not make funds available
hereunder.
(c) Each Lender may, at its option, make and maintain any Loan at,
to or for the account of any of its Lending Offices, provided that any exercise
of such option shall not affect the obligation of the Borrower to repay such
Loan to or for the account of such Lender in accordance with the terms of this
Agreement.
2.4 Notes. (a) The Loans made by each Lender shall be evidenced
(i) in the case of Term Loans, by a Term Note appropriately completed in
substantially the form of Exhibit A-1, (ii) in the case of Revolving Loans, by a
Revolving Note appropriately completed in substantially the form of Exhibit A-2,
and (iii) in the case of the Swingline Loans, by a Swingline Note appropriately
completed in substantially the form of Exhibit A-3.
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(b) Each Term Note issued to a Lender with a Term Loan Commitment
shall (i) be executed by the Borrower, (ii) be payable to the order of such
Lender, (iii) be dated as of the Closing Date (or, in the case of a Term Note
issued after the Closing Date, dated the effective date of the applicable
Assignment and Acceptance), (iv) be in a stated principal amount equal to such
Lender's Term Loan Commitment (or, in the case of a Term Note issued after the
Closing Date, in an amount equal to the unpaid principal amount of such Lender's
Term Loan), (v) bear interest in accordance with the provisions of Section 2.8,
as the same may be applicable from time to time to the Term Loan made by such
Lender, and (vi) be entitled to all of the benefits of this Agreement and the
other Credit Documents and subject to the provisions hereof and thereof.
(c) Each Revolving Note issued to a Lender with a Revolving Credit
Commitment shall (i) be executed by the Borrower, (ii) be payable to the order
of such Lender, (iii) be dated as of the Closing Date (or, in the case of a
Revolving Note issued after the Closing Date, dated the effective date of the
applicable Assignment and Acceptance), (iv) be in a stated principal amount
equal to such Lender's Revolving Credit Commitment, (v) bear interest in
accordance with the provisions of Section 2.8, as the same may be applicable
from time to time to the Revolving Loans made by such Lender, and (vi) be
entitled to all of the benefits of this Agreement and the other Credit Documents
and subject to the provisions hereof and thereof.
(d) The Swingline Note shall (i) be executed by the Borrower, (ii)
be payable to the order of the Swingline Lender, (iii) be dated as of the
Closing Date, (iv) be in a stated principal amount equal to the Swingline
Commitment, (v) bear interest in accordance with the provisions of Section 2.8,
as the same may be applicable from time to time to the Swingline Loans, and (vi)
be entitled to all of the benefits of this Agreement and the other Credit
Documents and subject to the provisions hereof and thereof.
(e) Each Lender will record on its internal records the amount and
Type of each Loan made by it and each payment received by it in respect thereof
and will, in the event of any transfer of any of its Notes, either endorse on
the reverse side thereof or on a schedule attached thereto (or any continuation
thereof) the outstanding principal amount and Type of the Loans evidenced
thereby as of the date of transfer or provide such information on a schedule to
the Assignment and Acceptance relating to such transfer; provided, however, that
the failure of any Lender to make any such recordation or provide any such
information, or any error therein, shall not affect the Borrower's obligations
under this Agreement or the Notes.
2.5 Termination and Reduction of Commitments and Swingline
Commitment. (a) The Term Loan Commitments shall be automatically and permanently
terminated on the Closing Date (or, if earlier, on May 28, 1999), unless the
Term Loans have been made in full on or prior to such date. The Revolving Credit
Commitments shall be automatically and permanently terminated on the Revolving
Credit Termination Date (or on May 28, 1999, but only if the Closing Date shall
not have occurred on or prior to such date). The Swingline Commitment shall be
automatically and permanently terminated on the Swingline Maturity Date, unless
sooner terminated pursuant to any other provision of this Section or Section
8.2.
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(b) The Revolving Credit Commitments shall, on each date upon
which a prepayment of the Loans is required under any of subsections (d) and (e)
of Section 2.6 (and exceeds in amount the aggregate principal amount of Term
Loans then outstanding) or would be required if Term Loans were then
outstanding, be automatically and permanently reduced by the amount, if any, by
which the amount of such required prepayment (determined as if an unlimited
amount of Term Loans were then outstanding) exceeds the aggregate principal
amount of Term Loans then actually outstanding, as more particularly set forth
in Section 2.6(f).
(c) At any time and from time to time after the date hereof, upon
not less than five (5) Business Days' prior written notice to the Administrative
Agent (and, in the case of a termination or reduction of the Unutilized
Swingline Commitment, the Swingline Lender), the Borrower may terminate in whole
or reduce in part the aggregate Unutilized Revolving Credit Commitments or the
Unutilized Swingline Commitment, provided that any such partial reduction shall
be in an aggregate amount of not less than $5,000,000 ($1,000,000 in the case of
the Unutilized Swingline Commitment) or, if greater, an integral multiple of
$1,000,000 in excess thereof. The amount of any termination or reduction made
under this subsection (c) may not thereafter be reinstated.
(d) Each reduction of the Revolving Credit Commitments pursuant to
this Section shall be applied ratably among the Lenders according to their
respective Revolving Credit Commitments. Notwithstanding any provision of this
Agreement to the contrary, any reduction of the Revolving Credit Commitments
pursuant to this Section that has the effect of reducing the aggregate Revolving
Credit Commitments to an amount less than the amount of the Swingline Commitment
at such time shall result in an automatic corresponding reduction of the
Swingline Commitment to the amount of the aggregate Revolving Credit Commitments
(as so reduced), without any further action on the part of the Borrower or the
Swingline Lender.
2.6 Mandatory Payments and Prepayments. (a) Except to the extent
due or paid sooner pursuant to the provisions of this Agreement, the Borrower
will repay the aggregate outstanding principal of the Term Loans in the amounts
and on the dates set forth below:
Date Payment Amount
---- --------------
September 30, 2000 $2,250,000
December 31, 2000 $2,250,000
March 31, 2001 $2,250,000
June 30, 2001 $2,250,000
September 30, 2001 $2,812,500
December 31, 2001 $2,812,500
March 31, 2002 $2,812,500
June 30, 2002 $2,812,500
September 30, 2002 $2,812,500
December 31, 2002 $2,812,500
March 31, 2003 $2,812,500
June 30, 2003 $2,812,500
September 30, 2003 $3,375,000
December 31, 2003 $3,375,000
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Date Payment Amount
---- --------------
March 31, 2004 $3,375,000
June 30, 2004 $3,375,000
(b) Except to the extent due or paid sooner pursuant to the
provisions of this Agreement, (i) the aggregate outstanding principal of the
Term Loans shall be due and payable in full on the Term Loan Maturity Date, (ii)
the aggregate outstanding principal of the Revolving Loans shall be due and
payable in full on the Revolving Credit Maturity Date, and (iii) the aggregate
outstanding principal of the Swingline Loans shall be due and payable in full on
the Swingline Maturity Date.
(c) In the event that, at any time, the sum of (x) the aggregate
principal amount of Revolving Loans outstanding at such time, and (y) the
aggregate principal amount of Swingline Loans outstanding at such time
(excluding the aggregate amount of any Swingline Loans to be repaid with
proceeds of Revolving Loans made on the date of determination) shall exceed the
aggregate Revolving Credit Commitments at such time (after giving effect to any
concurrent termination or reduction thereof), the Borrower will immediately
prepay the outstanding principal amount of the Swingline Loans and, to the
extent of any excess remaining after prepayment in full of outstanding Swingline
Loans, the Borrower will immediately prepay the outstanding principal amount of
the Revolving Loans in the amount of such excess.
(d) Promptly upon (and in any event not later than two (2)
Business Days after) its receipt thereof, the Borrower will prepay the
outstanding principal amount of the Loans in an amount equal to 75% of the Net
Cash Proceeds from any Equity Issuance and 100% of the Net Cash Proceeds from
any Debt Issuance, and will deliver to the Administrative Agent, concurrently
with such prepayment, a certificate signed by a Financial Officer of the
Borrower in form and substance satisfactory to the Administrative Agent and
setting forth the calculation of such Net Cash Proceeds.
(e) Promptly upon (and in any event not later than two (2)
Business Days after) its receipt thereof, the Borrower will prepay the
outstanding principal amount of the Loans in an amount equal to 100% of the
excess of the Net Cash Proceeds from any Asset Disposition over (i) $3,000,000,
(ii) together with the aggregate of the Net Cash Proceeds from all Asset
Dispositions occurring within the 365-day period immediately preceding such
Asset Disposition (but specifically excluding, if applicable, any Asset
Dispositions occurring prior to April 1, 1999), $6,000,000, or (iii) together
with the aggregate of the Net Cash Proceeds from all Asset Dispositions
occurring during the term of this Agreement, $20,000,000, whichever is greater.
The Borrower will deliver to the Administrative Agent, concurrently with such
prepayment, a certificate signed by a Financial Officer of the Borrower in form
and substance satisfactory to the Administrative Agent and setting forth the
calculation of such Net Cash Proceeds. Notwithstanding the foregoing, nothing in
this subsection shall be deemed to permit any Asset Disposition not expressly
permitted under Section 7.4.
(f) Each prepayment of the Loans made pursuant to subsections (d)
and (e) above shall be applied (i) first, to reduce the outstanding principal
amount of the Term Loans, with such
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reduction to be applied to the scheduled principal payments on the Term Loans
(as set forth in subsection (a) above) on a pro rata basis, (ii) second, to the
extent of any excess remaining after application as provided in clause (i)
above, to reduce the outstanding principal amount of the Swingline Loans, with a
corresponding reduction to the Revolving Credit Commitments as provided in
Section 2.5(b), and (iii) third, to the extent of any excess remaining after
application as provided in clauses (i) and (ii) above, to reduce the outstanding
principal amount of the Revolving Loans, with a corresponding reduction to the
Revolving Credit Commitments as provided in Section 2.5(b). Within each Class of
Loans, each payment or prepayment shall be applied first to prepay all Base Rate
Loans, and any excess shall, at the option of the Borrower, be applied to prepay
any LIBOR Loans of such Class immediately and/or deposited in a separate
Prepayment Account (as defined below) for the Loans of such Class. The
Administrative Agent shall apply any cash deposited in the Prepayment Account
for any Class of Loans to prepay LIBOR Loans of such Class on the last day of
their respective Interest Periods (or, at the direction of the Borrower, on any
earlier date), in ascending order of length of the remaining portion of their
then current Interest Periods, until all outstanding Loans of such Class have
been prepaid or until the allocable cash on deposit in the Prepayment Account
for such Class has been exhausted. For purposes of this Agreement, "Prepayment
Account" for any Class of Loans shall mean an account established by the
Borrower with the Administrative Agent and over which the Administrative Agent
shall have exclusive dominion and control, including the exclusive right of
withdrawal for application in accordance with this Section 2.6(f). The
Administrative Agent will, at the request of the Borrower, invest amounts on
deposit in the Prepayment Account for any Class of Loans in Cash Equivalents
that mature prior to the last day of the applicable Interest Periods of the
LIBOR Loans of such Class to be prepaid; provided, however, that (i) the
Administrative Agent shall not be required to make any investment that, in its
sole business judgment, would require or cause the Administrative Agent to be
in, or would result in any, violation of law, statute, rule or regulation, and
(ii) if an Event of Default shall have occurred and be continuing, the selection
of such investments shall be in the sole discretion of the Administrative Agent.
Other than interest earned on such investments, the Prepayment Accounts shall
not bear interest. Interest or profits, if any, on such investments shall be
deposited in the applicable Prepayment Account and reinvested and disbursed as
set forth above. If the maturity of the Loans has been accelerated pursuant to
Article VIII, the Administrative Agent may, in its sole discretion, apply all
amounts on deposit in the Prepayment Account for any Class of Loans to satisfy
any of the Obligations related to such Class of Loans (provided that such
amounts shall be applied first to prepay all outstanding Base Rate Loans). The
Borrower hereby pledges and assigns to the Administrative Agent, for its benefit
and the benefit of the Lenders, each Prepayment Account established hereunder to
secure the Obligations related to such Class of Loans. Each payment or
prepayment of a LIBOR Loan made pursuant to the provisions of this Section on a
day other than the last day of the Interest Period applicable thereto shall be
made together with all amounts required under Section 2.18 to be paid as a
consequence thereof.
(g) Each payment or prepayment of a LIBOR Loan made pursuant to
the provisions of this Section on a day other than the last day of the Interest
Period applicable thereto shall be made together with all amounts required under
Section 2.18 to be paid as a consequence thereof.
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(h) Each payment or prepayment pursuant to the provisions of this
Section shall be applied ratably among the Lenders holding the Loans being
prepaid, in proportion to the principal amount held by each.
2.7 Voluntary Prepayments. (a) At any time and from time to time,
the Borrower shall have the right to prepay the Loans, in whole or in part,
without premium or penalty (except as provided in clause (iii) below), upon
written notice given to the Administrative Agent not later than 11:00 a.m.,
Charlotte time, five (5) Business Days prior to each intended prepayment of
LIBOR Loans and one (1) Business Day prior to each intended prepayment of Base
Rate Loans, provided that (i) each partial prepayment shall be in an aggregate
principal amount of not less than $1,000,000 or, if greater, an integral
multiple of $500,000 in excess thereof (an integral multiple of $100,000 in the
case of Swingline Loans), (ii) no partial prepayment of LIBOR Loans made
pursuant to any single Borrowing shall reduce the aggregate outstanding
principal amount of the remaining LIBOR Loans under such Borrowing to less than
$3,000,000 or to any greater amount not an integral multiple of $1,000,000 in
excess thereof, and (iii) unless made together with all amounts required under
Section 2.18 to be paid as a consequence of such prepayment, a prepayment of a
LIBOR Loan may be made only on the last day of the Interest Period applicable
thereto. Each such notice shall specify the proposed date of such prepayment and
the aggregate principal amount, Class and Type of the Loans to be prepaid (and,
in the case of LIBOR Loans, the Interest Period of the Borrowing pursuant to
which made), and shall be irrevocable and shall bind the Borrower to make such
prepayment on the terms specified therein. Revolving Loans and Swingline Loans
(but not Term Loans) prepaid pursuant to this subsection (a) may be reborrowed,
subject to the terms and conditions of this Agreement.
(b) Each prepayment of the Term Loans made pursuant to subsection
(a) above shall be applied to reduce the outstanding principal amount of the
Term Loans, with such reduction to be applied to the scheduled principal
payments on the Term Loans (as set forth in Section 2.6(a)) on a pro rata basis.
Each prepayment of the Loans made pursuant to subsection (a) above shall be
applied ratably among the Lenders holding the Loans being prepaid, in proportion
to the principal amount held by each.
2.8 Interest. (a) The Borrower will pay interest in respect of the
unpaid principal amount of each Loan, from the date of Borrowing thereof until
such principal amount shall be paid in full, (i) at the Adjusted Base Rate
applicable to the Class of such Loan, as in effect from time to time during such
periods as such Loan is a Base Rate Loan, and (ii) at the Adjusted LIBOR Rate
applicable to the Class of such Loan, as in effect from time to time during such
periods as such Loan is a LIBOR Loan.
(b) Upon the occurrence and during the continuance of any default
by the Borrower in the payment of any principal of or interest on any Loan, any
fees or other amount hereunder when due (whether at maturity, pursuant to
acceleration or otherwise), and (at the election of the Required Lenders) upon
the occurrence and during the continuance of any Event of Default, all
outstanding principal amounts of the Loans and, to the greatest extent permitted
by law, all interest accrued on the Loans and all other accrued and outstanding
fees and other amounts hereunder, shall bear interest at a rate per annum equal
to the interest rate applicable from time to time thereafter to such Loans
(whether the Adjusted Base Rate or the Adjusted LIBOR Rate) plus
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2% (or, in the case of fees and other amounts, at the Adjusted Base Rate
applicable to the Loans plus 2%), and, in each case, such default interest shall
be payable on demand. To the greatest extent permitted by law, interest shall
continue to accrue after the filing by or against the Borrower of any petition
seeking any relief in bankruptcy or under any law pertaining to insolvency or
debtor relief.
(c) Accrued (and theretofore unpaid) interest shall be payable as
follows:
(i) in respect of each Base Rate Loan (including any Base
Rate Loan or portion thereof paid or prepaid pursuant
to the provisions of Section 2.6, except as provided hereinbelow), in
arrears on the last Business Day of each calendar quarter, beginning
with the first such day to occur after the Closing Date; provided, that
in the event the Loans are repaid or prepaid in full and the
Commitments have been terminated, then accrued interest in respect of
all Base Rate Loans shall be payable together with such repayment or
prepayment on the date thereof;
(ii) in respect of each LIBOR Loan (including any LIBOR
Loan or portion thereof paid or prepaid pursuant to the provisions of
Section 2.6, except as provided hereinbelow), in arrears (y) on the
last Business Day of the Interest Period applicable thereto (subject to
the provisions of clause (iv) in Section 2.10) and (z) in addition, in
the case of a LIBOR Loan with an Interest Period having a duration of
six months or longer, on each date on which interest would have been
payable under clause (y) above had successive Interest Periods of three
months' duration been applicable to such LIBOR Loan; provided, that in
the event all LIBOR Loans made pursuant to a single Borrowing are
repaid or prepaid in full, then accrued interest in respect of such
LIBOR Loans shall be payable together with such repayment or prepayment
on the date thereof; and
(iii) in respect of any Loan, at maturity (whether pursuant
to acceleration or otherwise) and, after maturity, on demand.
(d) Nothing contained in this Agreement or in any other Credit
Document shall be deemed to establish or require the payment of interest to any
Lender at a rate in excess of the maximum rate permitted by applicable law. If
the amount of interest payable for the account of any Lender on any interest
payment date would exceed the maximum amount permitted by applicable law to be
charged by such Lender, the amount of interest payable for its account on such
interest payment date shall be automatically reduced to such maximum permissible
amount. In the event of any such reduction affecting any Lender, if from time to
time thereafter the amount of interest payable for the account of such Lender on
any interest payment date would be less than the maximum amount permitted by
applicable law to be charged by such Lender, then the amount of interest payable
for its account on such subsequent interest payment date shall be automatically
increased to such maximum permissible amount, provided that at no time shall the
aggregate amount by which interest paid for the account of any Lender has been
increased pursuant to this sentence exceed the aggregate amount by which
interest paid for its account has theretofore been reduced pursuant to the
previous sentence.
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(e) The Administrative Agent shall promptly notify the Borrower
and the Lenders upon determining the interest rate for each Borrowing of LIBOR
Loans after its receipt of the relevant Notice of Borrowing or Notice of
Conversion/Continuation, and upon each change in the Base Rate; provided,
however, that the failure of the Administrative Agent to provide the Borrower or
the Lenders with any such notice shall neither affect any obligations of the
Borrower or the Lenders hereunder nor result in any liability on the part of the
Administrative Agent to the Borrower or any Lender. Each such determination
(including each determination of the Reserve Requirement) shall, absent manifest
error, be conclusive and binding on all parties hereto.
2.9 Fees. The Borrower agrees to pay:
(a) To First Union Capital Markets Corp., for its own account, on
the date of execution of this Agreement, the fees described in paragraph (1) of
the Fee Letter, in the amounts set forth therein as due and payable on such date
and to the extent not theretofore paid to it;
(b) To the Administrative Agent, for the account of each Lender
with a Revolving Credit Commitment, a commitment fee (the "Commitment Fee") for
each calendar quarter (or portion thereof) for the period from the date of this
Agreement to the Revolving Credit Termination Date, at a per annum rate equal to
the Applicable Margin Percentage in effect for such fee from time to time during
such quarter, on such Lender's ratable share (based on the proportion that its
Revolving Credit Commitment bears to the aggregate Revolving Credit Commitments)
of the average daily aggregate Unutilized Revolving Credit Commitments, payable
in arrears (i) on the last Business Day of each calendar quarter, beginning with
the first such day to occur after the Closing Date, and (ii) on the Revolving
Credit Termination Date;
(c) To the Administrative Agent, for its own account, the annual
administrative fee described in paragraph (2) of the Fee Letter, on the terms,
in the amount and at the times set forth therein.
2.10 Interest Periods. Concurrently with the giving of a Notice of
Borrowing or Notice of Conversion/Continuation in respect of any Borrowing
(whether in respect of Term Loans or Revolving Loans) comprised of Base Rate
Loans to be converted into, or LIBOR Loans to be continued as, LIBOR Loans, the
Borrower shall have the right to elect, pursuant to such notice, the interest
period (each, an "Interest Period") to be applicable to such LIBOR Loans, which
Interest Period shall, at the option of the Borrower, be a one, two, three or
six-month period; provided, however, that:
(i) all LIBOR Loans comprising a single Borrowing shall
at all times have the same Interest Period;
(ii) the initial Interest Period for any LIBOR Loan shall
commence on the date of the Borrowing of such LIBOR Loan (including the
date of any continuation of, or conversion into, such LIBOR Loan), and
each successive Interest Period applicable to such LIBOR Loan shall
commence on the day on which the next preceding Interest Period
applicable thereto expires;
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(iii) LIBOR Loans may not be outstanding under more than
six (6) separate Interest Periods at any one time (for which purpose
Interest Periods shall be deemed to be separate even if they are
coterminous);
(iv) if any Interest Period otherwise would expire on a
day that is not a Business Day, such Interest Period shall expire on
the next succeeding Business Day unless such next succeeding Business
Day falls in another calendar month, in which case such Interest Period
shall expire on the next preceding Business Day;
(v) no Interest Period may be selected with respect to
the Term Loans that would end after a scheduled date for repayment of
principal of the Term Loans occurring on or after the first day of such
Interest Period unless, immediately after giving effect to such
selection, the aggregate principal amount of Term Loans that are Base
Rate Loans or that have Interest Periods expiring on or before such
principal repayment date equals or exceeds the principal amount
required to be paid on such principal repayment date;
(vi) the Borrower may not select any Interest Period that
begins prior to the third (3rd) Business Day after the Closing Date or
that expires (y) after the Term Loan Maturity Date, with respect to
Term Loans that are to be maintained as LIBOR Loans, or (z) after the
Revolving Credit Maturity Date, with respect to Revolving Loans that
are to be maintained as LIBOR Loans;
(vii) if any Interest Period begins on a day for which
there is no numerically corresponding day in the calendar month during
which such Interest Period would otherwise expire, such Interest Period
shall expire on the last Business Day of such calendar month; and
(viii) no Interest Period shall commence for any LIBOR Loan
(including a conversion of, or continuation into, a LIBOR Loan) on any
day on which there are Swingline Loans outstanding.
2.11 Conversions and Continuations. (a) The Borrower shall have the
right, on any Business Day occurring on or after the Closing Date, to elect (i)
to convert all or a portion of the outstanding principal amount of any Base Rate
Loans of any Class into LIBOR Loans of the same Class, or to convert any LIBOR
Loans of any Class the Interest Periods for which end on the same day into Base
Rate Loans of the same Class, or (ii) upon the expiration of any Interest
Period, to continue all or a portion of the outstanding principal amount of any
LIBOR Loans of any Class the Interest Periods for which end on the same day for
an additional Interest Period, provided that (w) any such conversion of LIBOR
Loans into Base Rate Loans shall involve an aggregate principal amount of not
less than $1,000,000 or, if greater, an integral multiple of $500,000 in excess
thereof; any such conversion of Base Rate Loans into, or continuation of, LIBOR
Loans shall involve an aggregate principal amount of not less than $3,000,000
or, if greater, an integral multiple of $1,000,000 in excess thereof; and no
partial conversion of LIBOR Loans made pursuant to a single Borrowing shall
reduce the outstanding principal amount of such LIBOR Loans to less than
$3,000,000 or to any greater amount not an integral multiple of $1,000,000 in
excess thereof, (x) except as otherwise provided in Section 2.16(d), LIBOR Loans
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may be converted into Base Rate Loans only on the last day of the Interest
Period applicable thereto (and, in any event, if a LIBOR Loan is converted into
a Base Rate Loan on any day other than the last day of the Interest Period
applicable thereto, the Borrower will pay, upon such conversion, all amounts
required under Section 2.18 to be paid as a consequence thereof), (y) no such
conversion or continuation shall be permitted with regard to any Base Rate Loans
that are Swingline Loans, and (z) no conversion of Base Rate Loans into LIBOR
Loans or continuation of LIBOR Loans shall be permitted during the continuance
of a Default or Event of Default.
(b) The Borrower shall make each such election by giving the
Administrative Agent written notice not later than 11:00 a.m., Charlotte time,
three (3) Business Days prior to the intended effective date of any conversion
of Base Rate Loans into, or continuation of, LIBOR Loans and one (1) Business
Day prior to the intended effective date of any conversion of LIBOR Loans into
Base Rate Loans. Each such notice (each, a "Notice of Conversion/Continuation")
shall be irrevocable, shall be given in the form of Exhibit B-3 and shall
specify (x) the date of such conversion or continuation (which shall be a
Business Day), (y) in the case of a conversion into, or a continuation of, LIBOR
Loans, the Interest Period to be applicable thereto, and (z) the aggregate
amount, Class and Type of the Loans being converted or continued. Upon the
receipt of a Notice of Conversion/Continuation, the Administrative Agent will
promptly notify each Lender of the proposed conversion or continuation. In the
event that the Borrower shall fail to deliver a Notice of
Conversion/Continuation as provided herein with respect to any outstanding LIBOR
Loans, such LIBOR Loans shall automatically be converted to Base Rate Loans upon
the expiration of the then current Interest Period applicable thereto (unless
repaid pursuant to the terms hereof). In the event the Borrower shall have
failed to select in a Notice of Conversion/Continuation the duration of the
Interest Period to be applicable to any conversion into, or continuation of,
LIBOR Loans, then the Borrower shall be deemed to have selected an Interest
Period with a duration of one month.
2.12 Method of Payments; Computations. (a) All payments by the
Borrower hereunder shall be made without setoff, counterclaim or other defense,
in Dollars and in immediately available funds to the Administrative Agent, for
the account of the Lenders entitled to such payment or the Swingline Lender, as
the case may be (except as otherwise expressly provided herein as to payments
required to be made directly to the Lenders) at its office referred to in
Section 10.5, prior to 12:00 noon, Charlotte time, on the date payment is due.
Any payment made as required hereinabove, but after 12:00 noon, Charlotte time,
shall be deemed to have been made on the next succeeding Business Day. If any
payment falls due on a day that is not a Business Day, then such due date shall
be extended to the next succeeding Business Day (except that in the case of
LIBOR Loans to which the provisions of clause (iv) in Section 2.10 are
applicable, such due date shall be the next preceding Business Day), and such
extension of time shall then be included in the computation of payment of
interest, fees or other applicable amounts.
(b) The Administrative Agent will distribute to the Lenders like
amounts relating to payments made to the Administrative Agent for the account of
the Lenders as follows: (i) if the payment is received by 12:00 noon, Charlotte
time, in immediately available funds, the Administrative Agent will make
available to each relevant Lender on the same date, by wire transfer of
immediately available funds, such Lender's ratable share of such payment (based
on the percentage that the amount of the relevant payment owing to such Lender
bears to the total
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amount of such payment owing to all of the relevant Lenders), and (ii) if such
payment is received after 12:00 noon, Charlotte time, or in other than
immediately available funds, the Administrative Agent will make available to
each such Lender its ratable share of such payment by wire transfer of
immediately available funds on the next succeeding Business Day (or in the case
of uncollected funds, as soon as practicable after collected). If the
Administrative Agent shall not have made a required distribution to the
appropriate Lenders as required hereinabove after receiving a payment for the
account of such Lenders, the Administrative Agent will pay to each such Lender,
on demand, its ratable share of such payment with interest thereon at the
Federal Funds Rate for each day from the date such amount was required to be
disbursed by the Administrative Agent until the date repaid to such Lender.
(c) Unless the Administrative Agent shall have received written
notice from the Borrower prior to the date on which any payment is due to any
Lender hereunder that such payment will not be made in full, the Administrative
Agent may assume that the Borrower has made such payment in full to the
Administrative Agent on such date, and the Administrative Agent may, in reliance
on such assumption, but shall not be obligated to, cause to be distributed to
such Lender on such due date an amount equal to the amount then due to such
Lender. If and to the extent the Borrower shall not have so made such payment in
full to the Administrative Agent, and without limiting the obligation of the
Borrower to make such payment in accordance with the terms hereof, such Lender
shall repay to the Administrative Agent forthwith on demand such amount so
distributed to such Lender, together with interest thereon for each day from the
date such amount is so distributed to such Lender until the date repaid to the
Administrative Agent, at the Federal Funds Rate.
(d) All computations of interest and fees hereunder (including
computations of the Reserve Requirement) shall be made on the basis of a year
consisting of 365 or 366 days, as the case may be (in the case of Base Rate
Loans), or 360 days (in all other instances), and the actual number of days
(including the first day, but excluding the last day) elapsed.
2.13 Recovery of Payments. (a) The Borrower agrees that to the
extent the Borrower makes a payment or payments to or for the account of the
Administrative Agent or any Lender, which payment or payments or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside or required to be repaid to a trustee, receiver or any other party
under any bankruptcy, insolvency or similar state or federal law, common law or
equitable cause, then, to the extent of such payment or repayment, the
Obligation intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been received.
(b) If any amounts distributed by the Administrative Agent to any
Lender are subsequently returned or repaid by the Administrative Agent to the
Borrower or its representative or successor in interest, whether by court order
or by settlement approved by the Lender in question, such Lender will, promptly
upon receipt of notice thereof from the Administrative Agent, pay the
Administrative Agent such amount. If any such amounts are recovered by the
Administrative Agent from the Borrower or its representative or successor in
interest, the Administrative Agent will redistribute such amounts to the Lenders
on the same basis as such amounts were originally distributed.
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2.14 Use of Proceeds. (a) The proceeds of the Term Loans shall be
used (i) first, to repay the Terminating Senior Indebtedness in full, (ii)
second, to finance in part the American Phoenix Acquisition, including all
reasonable transaction fees and expenses incurred therewith, (iii) third, to pay
or reimburse reasonable transaction fees and expenses in connection with the
closing of the transactions contemplated hereby, and (iv) thereafter, for
working capital and general corporate purposes and in accordance with the terms
and provisions of this Agreement.
(b) The proceeds of the Revolving Loans shall be used (i) first,
to finance in part the American Phoenix Acquisition, including all reasonable
transaction fees and expenses incurred therewith, and (ii) second, solely for
working capital and general corporate purposes and in accordance with the terms
and provisions of this Agreement (including to finance Permitted Acquisitions in
accordance with the terms and provisions of this Agreement, including, without
limitation, the provisions set forth in Section 5.8).
2.15 Pro Rata Treatment. (a) Except in the case of Swingline Loans,
all fundings, continuations and conversions of Loans of any Class shall be made
by the Lenders pro rata on the basis of their respective Commitments to provide
Loans of such Class (in the case of the initial funding of Loans of such Class
pursuant to Section 2.2) or on the basis of their respective outstanding Loans
of such Class (in the case of continuations and conversions of Loans of such
Class pursuant to Section 2.11, and additionally in all cases in the event the
Commitments have expired or have been terminated), as the case may be from time
to time. All payments on account of principal of or interest on any Loans, fees
or any other Obligations owing to or for the account of any one or more Lenders
shall be apportioned ratably among such Lenders in proportion to the amounts of
such principal, interest, fees or other Obligations owed to them respectively.
(b) Each Lender agrees that if it shall receive any amount
hereunder (whether by voluntary payment, realization upon security, exercise of
the right of setoff or banker's lien, counterclaim or cross action, or
otherwise, other than pursuant to Section 10.7) applicable to the payment of any
of the Obligations that exceeds its ratable share (according to the proportion
of (i) the amount of such Obligations due and payable to such Lender at such
time to (ii) the aggregate amount of such Obligations due and payable to all
Lenders at such time) of payments on account of such Obligations then or
therewith obtained by all the Lenders to which such payments are required to
have been made, such Lender shall forthwith purchase from the other Lenders such
participations in such Obligations as shall be necessary to cause such
purchasing Lender to share the excess payment or other recovery ratably with
each of them; provided, however, that if all or any portion of such excess
payment is thereafter recovered from such purchasing Lender, such purchase from
each such other Lender shall be rescinded and each such other Lender shall repay
to the purchasing Lender the purchase price to the extent of such recovery,
together with an amount equal to such other Lender's ratable share (according to
the proportion of (i) the amount of such other Lender's required repayment to
(ii) the total amount so recovered from the purchasing Lender) of any interest
or other amount paid or payable by the purchasing Lender in respect of the total
amount so recovered. The Borrower agrees that any Lender so purchasing a
participation from another Lender pursuant to the provisions of this subsection
may, to the fullest extent permitted by law, exercise any and all rights of
payment (including, without limitation, setoff, banker's lien or counterclaim)
with respect to such participation as fully as if such participant were a direct
creditor of the Borrower in the amount of
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such participation. If under any applicable bankruptcy, insolvency or similar
law, any Lender receives a secured claim in lieu of a setoff to which this
subsection applies, such Lender shall, to the extent practicable, exercise its
rights in respect of such secured claim in a manner consistent with the rights
of the Lenders entitled under this subsection to share in the benefits of any
recovery on such secured claim.
2.16 Increased Costs; Change in Circumstances; Illegality; etc. (a)
If, at any time after the date hereof and from time to time, the introduction of
or any change in any applicable law, rule or regulation or in the interpretation
or administration thereof by any Governmental Authority charged with the
interpretation or administration thereof, or compliance by any Lender with any
guideline or request from any such Governmental Authority (whether or not having
the force of law), shall (i) subject such Lender to any tax or other charge, or
change the basis of taxation of payments to such Lender, in respect of any of
its LIBOR Loans or any other amounts payable hereunder or its obligation to
make, fund or maintain any LIBOR Loans (other than any change in the rate or
basis of tax on the overall net income of such Lender or its applicable Lending
Office), (ii) impose, modify or deem applicable any reserve, special deposit or
similar requirement (but excluding any reserves to the extent actually included
within the Reserve Requirement in the calculation of the LIBOR Rate) against
assets of, deposits with or for the account of, or credit extended by, such
Lender or its applicable Lending Office, or (iii) impose on such Lender or its
applicable Lending Office any other condition, and the result of any of the
foregoing shall be to increase the cost to such Lender of making or maintaining
any LIBOR Loans or to reduce the amount of any sum received or receivable by
such Lender hereunder, the Borrower will, promptly upon demand therefor by such
Lender, pay to such Lender such additional amounts as shall compensate such
Lender for such increase in costs or reduction in return.
(b) If, at any time after the date hereof and from time to time,
any Lender shall have reasonably determined that the introduction of or any
change in any applicable law, rule or regulation regarding capital adequacy or
in the interpretation or administration thereof by any Governmental Authority
charged with the interpretation or administration thereof, or compliance by such
Lender with any guideline or request from any such Governmental Authority
(whether or not having the force of law), has or would have the effect, as a
consequence of such Lender's Commitment or Loans hereunder, of reducing the rate
of return on the capital of such Lender or any Person controlling such Lender to
a level below that which such Lender or controlling Person could have achieved
but for such introduction, change or compliance (taking into account such
Lender's or controlling Person's policies with respect to capital adequacy), the
Borrower will, promptly upon demand therefor by such Lender therefor, pay to
such Lender such additional amounts as will compensate such Lender or
controlling Person for such reduction in return.
(c) If, on or prior to the first day of any Interest Period, (y)
the Administrative Agent shall have determined that adequate and reasonable
means do not exist for ascertaining the applicable LIBOR Rate for such Interest
Period or (z) the Administrative Agent shall have received written notice from
the Required Lenders of their determination that the rate of interest referred
to in the definition of "LIBOR Rate" upon the basis of which the Adjusted LIBOR
Rate for LIBOR Loans for such Interest Period is to be determined will not
adequately and fairly reflect the cost to such Lenders of making or maintaining
LIBOR Loans during such Interest
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Period, the Administrative Agent will forthwith so notify the Borrower and the
Lenders. Upon such notice, (i) all then outstanding LIBOR Loans shall
automatically, on the expiration date of the respective Interest Periods
applicable thereto (unless then repaid in full), be converted into Base Rate
Loans, (ii) the obligation of the Lenders to make, to convert Base Rate Loans
into, or to continue, LIBOR Loans shall be suspended (including pursuant to the
Borrowing to which such Interest Period applies), and (iii) any Notice of
Borrowing or Notice of Conversion/Continuation given at any time thereafter with
respect to LIBOR Loans shall be deemed to be a request for Base Rate Loans, in
each case until the Administrative Agent or the Required Lenders, as the case
may be, shall have determined that the circumstances giving rise to such
suspension no longer exist (and the Required Lenders, if making such
determination, shall have so notified the Administrative Agent), and the
Administrative Agent shall have so notified the Borrower and the Lenders.
(d) Notwithstanding any other provision in this Agreement, if, at
any time after the date hereof and from time to time, any Lender shall have
determined in good faith that the introduction of or any change in any
applicable law, rule or regulation or in the interpretation or administration
thereof by any Governmental Authority charged with the interpretation or
administration thereof, or compliance with any guideline or request from any
such Governmental Authority (whether or not having the force of law), has or
would have the effect of making it unlawful for such Lender to make or to
continue to make or maintain LIBOR Loans, such Lender will forthwith so notify
the Administrative Agent and the Borrower. Upon such notice, (i) each of such
Lender's then outstanding LIBOR Loans shall automatically, on the expiration
date of the respective Interest Period applicable thereto (or, to the extent any
such LIBOR Loan may not lawfully be maintained as a LIBOR Loan until such
expiration date, upon such notice), be converted into a Base Rate Loan, (ii) the
obligation of such Lender to make, to convert Base Rate Loans into, or to
continue, LIBOR Loans shall be suspended (including pursuant to any Borrowing
for which the Administrative Agent has received a Notice of Borrowing but for
which the Borrowing Date has not arrived), and (iii) any Notice of Borrowing or
Notice of Conversion/Continuation given at any time thereafter with respect to
LIBOR Loans shall, as to such Lender, be deemed to be a request for a Base Rate
Loan, in each case until such Lender shall have determined that the
circumstances giving rise to such suspension no longer exist and shall have so
notified the Administrative Agent, and the Administrative Agent shall have so
notified the Borrower.
(e) Determinations by the Administrative Agent or any Lender for
purposes of this Section of any increased costs, reduction in return, market
contingencies, illegality or any other matter shall, absent manifest error, be
conclusive, provided that such determinations are made in good faith. No failure
by the Administrative Agent or any Lender at any time to demand payment of any
amounts payable under this Section shall constitute a waiver of its right to
demand payment of any additional amounts arising at any subsequent time. Nothing
in this Section shall require or be construed to require the Borrower to pay any
interest, fees, costs or other amounts in excess of that permitted by applicable
law. If any Lender becomes entitled to claim any increased costs or reduction in
return pursuant to subsections (a) or (b) above, it shall provide notice thereof
to the Borrower certifying (i) that one of the events described in such
subsections has occurred and describing in reasonable detail the nature of such
event, (ii) as to the increased
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costs or reduction in return resulting from such event, and (iii) as to the
additional amount demanded by such Lender and a reasonably detailed explanation
of the calculation thereof.
2.17 Taxes. (a) Any and all payments by the Borrower hereunder or
under any Note shall be made, in accordance with the terms hereof and thereof,
free and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, other than net income and franchise taxes imposed on the
Administrative Agent or any Lender by the United States or by the jurisdiction
under the laws of which the Administrative Agent or such Lender, as the case may
be, is organized or in which its principal office or (in the case of a Lender)
its applicable Lending Office is located, or any political subdivision or taxing
authority thereof (all such nonexcluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as "Taxes").
If the Borrower shall be required by law to deduct any Taxes from or in respect
of any sum payable hereunder or under any Note to the Administrative Agent or
any Lender, (i) the sum payable shall be increased as may be necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section), the Administrative Agent or such
Lender, as the case may be, receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Borrower will make such
deductions, (iii) the Borrower will pay the full amount deducted to the relevant
taxation authority or other authority in accordance with applicable law and (iv)
the Borrower will deliver to the Administrative Agent or such Lender, as the
case may be, evidence of such payment.
(b) The Borrower will indemnify the Administrative Agent and each
Lender for the full amount of Taxes (including, without limitation, any Taxes
imposed by any jurisdiction on amounts payable under this Section) paid by the
Administrative Agent or such Lender, as the case may be, and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes were correctly or legally asserted. This
indemnification shall be made within 30 days from the date the Administrative
Agent or such Lender, as the case may be, makes written demand therefor.
(c) Each of the Administrative Agent and the Lenders agrees that
if it subsequently recovers, or receives a permanent net tax benefit with
respect to, any amount of Taxes (i) previously paid by it and as to which it has
been indemnified by or on behalf of the Borrower or (ii) previously deducted by
the Borrower (including, without limitation, any Taxes deducted from any
additional sums payable under clause (i) of subsection (a) above), the
Administrative Agent or such Lender, as the case may be, shall reimburse the
Borrower to the extent of the amount of any such recovery or permanent net tax
benefit (but only to the extent of indemnity payments made, or additional
amounts paid, by or on behalf of the Borrower under this Section with respect to
the Taxes giving rise to such recovery or tax benefit); provided, however, that
the Borrower, upon the request of the Administrative Agent or such Lender,
agrees to repay to the Administrative Agent or such Lender, as the case may be,
the amount paid over to the Borrower (together with any penalties, interest or
other charges), in the event the Administrative Agent or such Lender is required
to repay such amount to the relevant taxing authority or other Governmental
Authority. The determination by the Administrative Agent or any Lender of the
amount of any such recovery or permanent net tax benefit shall, in the absence
of manifest error, be conclusive and binding.
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(d) If any Lender is incorporated or organized under the laws of a
jurisdiction other than the United States of America or any state thereof (a
"Non-U.S. Lender") and claims exemption from United States withholding tax
pursuant to the Internal Revenue Code, such Non-U.S. Lender will deliver to each
of the Administrative Agent and the Borrower, on or prior to the Closing Date
(or, in the case of a Non-U.S. Lender that becomes a party to this Agreement as
a result of an assignment after the Closing Date, on the effective date of such
assignment), (i) in the case of a Non-U.S. Lender that is a "bank" for purposes
of Section 881(c)(3)(A) of the Internal Revenue Code, a properly completed
Internal Revenue Service Forms W-8ECI or W-8BEN, as applicable (or successor
forms), certifying that such Non-U.S. Lender is entitled to an exemption from or
a reduction of withholding or deduction for or on account of United States
federal income taxes in connection with payments under this Agreement or any of
the Notes, together with a properly completed Internal Revenue Service Form W-8
or W-9, as applicable (or successor forms), and (ii) in the case of a Non-U.S.
Lender that is not a "bank" for purposes of Section 881(c)(3)(A) of the Internal
Revenue Code, a certificate in form and substance reasonably satisfactory to the
Administrative Agent and the Borrower and to the effect that (x) such Non-U.S.
Lender is not a "bank" for purposes of Section 881(c)(3)(A) of the Internal
Revenue Code, is not subject to regulatory or other legal requirements as a bank
in any jurisdiction, and has not been treated as a bank for purposes of any tax,
securities law or other filing or submission made to any governmental authority,
any application made to a rating agency or qualification for any exemption from
any tax, securities law or other legal requirements, (y) is not a 10-percent
shareholder for purposes of Section 881(c)(3)(B) of the Internal Revenue Code
and (z) is not a controlled foreign corporation receiving interest from a
related person for purposes of Section 881(c)(3)(C) of the Internal Revenue
Code, together with a properly completed Internal Revenue Service Form W-8 or
W-9, as applicable (or successor forms). Each such Non-U.S. Lender further
agrees to deliver to each of the Administrative Agent and the Borrower an
additional copy of each such relevant form on or before the date that such form
expires or becomes obsolete or after the occurrence of any event (including a
change in its applicable Lending Office) requiring a change in the most recent
forms so delivered by it, in each case certifying that such Non-U.S. Lender is
entitled to an exemption from or a reduction of withholding or deduction for or
on account of United States federal income taxes in connection with payments
under this Agreement or any of the Notes, unless an event (including, without
limitation, any change in treaty, law or regulation) has occurred prior to the
date on which any such delivery would otherwise be required, which event renders
all such forms inapplicable or the exemption to which such forms relate
unavailable and such Non-U.S. Lender notifies the Administrative Agent and the
Borrower that it is not entitled to receive payments without deduction or
withholding of United States federal income taxes. Each such Non-U.S. Lender
will promptly notify the Administrative Agent and the Borrower of any changes in
circumstances that would modify or render invalid any claimed exemption or
reduction.
(e) If any Lender is entitled to a reduction in (and not a
complete exemption from) the applicable withholding tax, the Borrower and the
Administrative Agent may withhold from any interest payment to such Lender an
amount equivalent to the applicable withholding tax after taking into account
such reduction. If any of the forms or other documentation required under
subsection (d) above are not delivered to the Administrative Agent as therein
required, then the Borrower and the Administrative Agent may withhold from any
interest payment to such Lender
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not providing such forms or other documentation an amount equivalent to the
applicable withholding tax.
2.18 Compensation. The Borrower will compensate each Lender upon
demand for all 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 Lender to fund or
maintain LIBOR Loans) that such Lender may incur or sustain (i) if for any
reason (other than a failure on the part of such Lender) a Borrowing or
continuation of, or conversion into, a LIBOR Loan does not occur on a date
specified therefor in a Notice of Borrowing or Notice of
Conversion/Continuation, (ii) if any repayment, prepayment or conversion of any
LIBOR Loan occurs on a date other than the last day of an Interest Period
applicable thereto (including as a consequence of acceleration of the maturity
of the Loans pursuant to Section 8.2), (iii) if any prepayment of any LIBOR Loan
is not made on any date specified in a notice of prepayment given by the
Borrower or (iv) as a consequence of any other failure by the Borrower to make
any payments with respect to any LIBOR Loan when due hereunder. Calculation of
all amounts payable to a Lender under this Section shall be made as though such
Lender had actually funded its relevant LIBOR Loan through the purchase of a
Eurodollar deposit bearing interest at the LIBOR Rate in an amount equal to the
amount of such LIBOR Loan, having a maturity comparable to the relevant Interest
Period; provided, however, that each Lender may fund its LIBOR Loans in any
manner it sees fit and the foregoing assumption shall be utilized only for the
calculation of amounts payable under this Section. Determinations by any Lender
for purposes of this Section of any such losses, expenses or liabilities shall,
absent manifest error, be conclusive, provided that such determinations are made
in good faith.
2.19 Replacement of Lenders . (a) The Borrower may, at any time and
so long as no Default or Event of Default has then occurred and is continuing,
replace any Lender (i) that has requested compensation from the Borrower under
Section 2.16(a) or 2.16(b), (ii) the obligation of which to make or maintain
LIBOR Loans has been suspended under Section 2.16(d) or (iii) that shall refuse
to fund, or otherwise default in the funding, of its ratable share of any
Borrowing requested and permitted to be made hereunder and such refusal has not
been withdrawn or such default has not been cured within three (3) Business Days
after the Borrower has given such Lender written notice thereof, in any case
under clauses (i) through (iii) above by written notice to such Lender and the
Administrative Agent given not more than thirty (30) days after any such event
and identifying one or more Persons each of which shall be an Eligible Assignee
and reasonably acceptable to the Administrative Agent (each, a "Replacement
Lender," and collectively, the "Replacement Lenders") to replace such Lender
(the "Replaced Lender"), provided that (i) the notice from the Borrower to the
Replaced Lender and the Administrative Agent provided for hereinabove shall
specify an effective date for such replacement (the "Replacement Effective
Date"), which shall be at least five (5) Business Days after such notice is
given, (ii) as of the relevant Replacement Effective Date, each Replacement
Lender shall enter into an Assignment and Acceptance with the Replaced Lender
pursuant to Section 10.7(a) (but shall not be required to pay the processing fee
otherwise payable to the Administrative Agent pursuant to Section 10.7(a), which
fee, for purposes hereunder, shall be waived), pursuant to which such
Replacement Lenders collectively shall acquire, in such proportion among them as
they may agree with the Borrower and the Administrative Agent, all (but not less
than all) of the Commitment and outstanding Loans of the Replaced Lender, and,
in connection therewith, shall
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pay (x) to the Replaced Lender, as the purchase price in respect thereof, an
amount equal to the sum as of the Replacement Effective Date (without
duplication) of (1) the unpaid principal amount of, and all accrued but unpaid
interest on, all outstanding Loans of the Replaced Lender and (2) the Replaced
Lender's ratable share of all accrued but unpaid fees owing to the Replaced
Lender under Section 2.9(b), (y) to the Administrative Agent, for its own
account, any amounts owing to the Administrative Agent by the Replaced Lender
under Section 2.3(b), and (z) to the Administrative Agent, for the account of
the Swingline Lender, any amounts owing the Swingline Lender under Section
2.2(f), and (iii) all other obligations of the Borrower owing to the Replaced
Lender (other than those specifically described in clause (ii) above in respect
of which the assignment purchase price has been, or is concurrently being,
paid), including, without limitation, amounts payable under Section 2.16(a) and
(b) which give rise to the replacement of such Replaced Lender and amounts
payable under Section 2.18 as a result of the actions required to be taken under
this Section 2.19, shall be paid in full by the Borrower to the Replaced Lender
on or prior to the Replacement Effective Date.
ARTICLE III
CONDITIONS OF BORROWING
3.1 Conditions of Initial Borrowing. The obligation of each Lender
to make Loans in connection with the initial Borrowing hereunder is subject to
the satisfaction of the following conditions precedent:
(a) The Administrative Agent shall have received the following,
each dated as of the Closing Date (unless otherwise specified) and, except for
the Notes, in sufficient copies for each Lender:
(i) A Term Note for each Lender that is a party hereto as
of the Closing Date, in the amount of such Lender's Term Loan
Commitment; a Revolving Note for each Lender that is a party hereto as
of the Closing Date, in the amount of such Lender's Revolving Credit
Commitment; and a Swingline Note for the Swingline Lender, in the
amount of the Swingline Commitment, in each case duly completed in
accordance with the relevant provisions of Section 2.4 and executed by
the Borrower;
(ii) the Subsidiary Guaranty, duly completed and executed
by each Material Subsidiary of the Borrower and such other Subsidiaries
of the Borrower necessary to comply with Section 5.10;
(iii) the favorable opinions of Williams, Mullen, Christian
& Dobbins, P.C., special counsel to the Borrower, in substantially the
form of Exhibit F, in each case addressed to the Administrative Agent
and the Lenders and addressing such other matters as the Administrative
Agent or any Lender may reasonably request;
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(iv) copies of the executed Acquisition Documents; and
(v) copies of each opinion required to be delivered
pursuant to the Acquisition Documents, which opinions shall be in form
and substance reasonably satisfactory to the Administrative Agent and
shall be accompanied in each case by a letter, unless such opinion is
addressed to the Administrative Agent and the Lenders or expressly
includes a reliance provision, from the counsel rendering such opinion,
stating that the Administrative Agent and the Lenders are entitled to
rely on such opinion as if it were addressed to them.
(b) The Administrative Agent shall have received a certificate,
signed by the president, the chief executive officer or the chief financial
officer of the Borrower, in form and substance satisfactory to the
Administrative Agent, certifying that (i) all representations and warranties of
the Borrower contained in this Agreement and the other Credit Documents are true
and correct as of the Closing Date, both immediately before and after giving
effect to the consummation of the transactions contemplated hereby, the making
of the initial Loans hereunder and the application of the proceeds thereof, (ii)
no Default or Event of Default has occurred and is continuing, both immediately
before and after giving effect to the consummation of the transactions
contemplated hereby, the making of the initial Loans hereunder and the
application of the proceeds thereof, (iii) both immediately before and after
giving effect to the consummation of the transactions contemplated hereby, the
making of the initial Loans hereunder and the application of the proceeds
thereof, no Material Adverse Change has occurred since December 31, 1998, and
there exists no event, condition or state of facts that could reasonably be
expected to result in a Material Adverse Change, and (iv) all conditions to the
initial extensions of credit hereunder set forth in this Section and in Section
3.2 have been satisfied or waived as required hereunder.
(c) The Administrative Agent shall have received a certificate of
the secretary or an assistant secretary of each of the Borrower and the
Subsidiary Guarantors, in form and substance satisfactory to the Administrative
Agent, certifying (i) that attached thereto is a true and complete copy of the
articles or certificate of incorporation and all amendments thereto of the
Borrower or such Subsidiary Guarantor, as the case may be, certified as of a
recent date by the Secretary of State (or comparable Governmental Authority) of
its jurisdiction of organization, and that the same has not been amended since
the date of such certification, (ii) that attached thereto is a true and
complete copy of the bylaws of the Borrower or such Subsidiary Guarantor, as the
case may be, as then in effect and as in effect at all times from the date on
which the resolutions referred to in clause (iii) below were adopted to and
including the date of such certificate, and (iii) that attached thereto is a
true and complete copy of resolutions adopted by the board of directors of the
Borrower or such Subsidiary Guarantor, as the case may be, authorizing the
execution, delivery and performance of this Agreement and the other Credit
Documents to which it is a party, and as to the incumbency and genuineness of
the signature of each officer of the Borrower or such Subsidiary Guarantor, as
the case may be, executing this Agreement or any of such other Credit Documents,
and attaching all such copies of the documents described above.
(d) The Administrative Agent shall have received a certificate as
of a recent date of the good standing of each of the Borrower and the Subsidiary
Guarantors under the laws of its jurisdiction of organization, from the
Secretary of State (or comparable Governmental Authority) of such jurisdiction.
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(e) All legal matters, documentation, and corporate or other
proceedings incident to the Transactions shall be satisfactory in form and
substance to the Administrative Agent; all approvals, permits and consents of
any Governmental Authorities (including, without limitation, the New York
Department of Insurance) or other Persons required in connection with the
execution and delivery of this Agreement and the other Transaction Documents and
the consummation of the Transactions shall have been obtained, without the
imposition of conditions that are not acceptable to the Administrative Agent,
and all related filings, if any, shall have been made, and all such approvals,
permits, consents and filings shall be in full force and effect and the
Administrative Agent shall have received such copies thereof as it shall have
requested; all applicable waiting periods shall have expired without any adverse
action being taken by any Governmental Authority having jurisdiction; and no
action, proceeding, investigation, regulation or legislation shall have been
instituted, threatened or proposed before, and no order, injunction or decree
shall have been entered by, any court or other Governmental Authority, in each
case to enjoin, restrain or prohibit, to obtain substantial damages in respect
of, or that is otherwise related to or arises out of, this Agreement, any of the
other Transaction Documents or the consummation of the Transactions, or that, in
the opinion of the Administrative Agent, could reasonably be expected to have a
Material Adverse Effect.
(f) The Acquisition Documents shall be in full force and effect
and no provision thereof shall have been amended, modified, supplemented or
waived since the date thereof, except as shall have been approved in writing by
the Required Lenders; and the Administrative Agent shall have received evidence
satisfactory to it that, concurrently with the making of the initial Loans
hereunder, all material conditions to closing the American Phoenix Acquisition
set forth in the Acquisition Documents shall have been met (or waived with the
consent of the Required Lenders) and the American Phoenix Acquisition and the
other Transactions shall be consummated in accordance with the terms of the
Transaction Documents and in compliance with all applicable Requirements of Law,
including any necessary stockholder approvals.
(g) The Administrative Agent shall have received evidence
satisfactory to it that (i) concurrently with the making of the initial Loans
hereunder, (x) all principal, interest and other amounts outstanding with
respect to the Terminating Senior Indebtedness shall be repaid and satisfied in
full, (y) all commitments to extend credit under the agreements and instruments
relating thereto shall be terminated, and (z) any Liens securing any Terminating
Senior Indebtedness shall be released and any related filings terminated of
record (or arrangements satisfactory to the Administrative Agent made therefor),
and (ii) any letters of credit outstanding with respect to the Terminating
Senior Indebtedness shall have been terminated or canceled.
(h) The terms of any Indebtedness of the Borrower, American
Phoenix or any of their Subsidiaries (including, without limitation, the
American Phoenix Acquisition Indebtedness and Indebtedness under the American
Phoenix Assumed Notes) existing on the Closing Date shall be satisfactory to the
Lenders.
(i) The corporate and capital structure of the Borrower and its
Subsidiaries, after giving effect to the Transactions, including without
limitation the terms and conditions of any
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preferred and common stock or other equity securities issued by the Borrower,
shall be satisfactory to the Lenders.
(j) The Administrative Agent shall have received the following at
least five (5) days prior to the Closing Date, each of which shall be made no
earlier than thirty (30) days prior to the Closing Date and be in form and
substance satisfactory to the Administrative Agent, certified search reports
from an independent search service satisfactory to the Administrative Agent
listing any tax lien, judgment or pending suit or Uniform Commercial Code
financing statement that names the Borrower, American Phoenix or any of their
respective Subsidiaries as debtor or defendant, as appropriate.
(k) Since December 31, 1998, both immediately before and after
giving effect to the Transactions, there shall not have occurred any Material
Adverse Change or any event, condition or state of facts that could reasonably
be expected to result in a Material Adverse Change.
(l) The Borrower shall have paid (i) to First Union, the unpaid
balance of the fees described in paragraph (1) of the Fee Letter, (ii) to the
Administrative Agent, the initial payment of the annual administrative fee
described in paragraph (2) of the Fee Letter, and (iii) all other fees and
expenses of the Administrative Agent and the Lenders required hereunder or under
any other Credit Document to be paid on or prior to the Closing Date (including
fees and expenses of counsel) in connection with this Agreement and the
transactions contemplated hereby.
(m) The Administrative Agent shall have received a Financial
Condition Certificate, together with the Pro Forma Balance Sheet and the
Projections as described in Sections 4.11(b) and 4.11(c), all of which shall be
in form and substance satisfactory to the Administrative Agent.
(n) The Administrative Agent shall have received a Covenant
Compliance Worksheet, duly completed and certified by the chief financial
officer of the Borrower and in form and substance satisfactory to the
Administrative Agent, demonstrating the Borrower's compliance with the financial
covenants set forth in Sections 6.1 through 6.3, determined on a pro forma basis
as of December 31, 1998, after giving effect to the making of the initial Loans
hereunder and the consummation of the Transactions.
(o) The Administrative Agent shall have received an Account
Designation Letter, together with written instructions from an Authorized
Officer, including wire transfer information, directing the payment of the
proceeds of the initial Loans to be made hereunder.
(p) The Administrative Agent and each Lender shall have received
such other documents, certificates, opinions and instruments in connection with
the transactions contemplated hereby as it shall have reasonably requested.
3.2 Conditions of All Borrowings. The obligation of each Lender to
make any Loans hereunder, including the initial Loans (but excluding Revolving
Loans made for the purpose of repaying Refunded Swingline Loans pursuant to
Section 2.2(e)) is subject to the satisfaction of the following conditions
precedent on the relevant Borrowing Date or date of issuance:
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(a) The Administrative Agent shall have received a Notice of
Borrowing in accordance with Section 2.2(b), or (together with the Swingline
Lender) a Notice of Swingline Borrowing in accordance with Section 2.2(d), as
applicable;
(b) Each of the representations and warranties contained in
Article IV and in the other Credit Documents shall be true and correct on and as
of such Borrowing Date (including the Closing Date, in the case of the initial
Loans made hereunder) or date of issuance with the same effect as if made on and
as of such date, both immediately before and after giving effect to the Loans to
be made (except to the extent any such representation or warranty is expressly
stated to have been made as of a specific date, in which case such
representation or warranty shall be true and correct in all material respects as
of such date); and
(c) No Default or Event of Default shall have occurred and be
continuing on such date, both immediately before and after giving effect to the
Loans to be made on such date.
Each giving of a Notice of Borrowing or a Notice of Swingline
Borrowing, and the consummation of each Borrowing, shall be deemed to constitute
a representation by the Borrower that the statements contained in subsections
(b) and (c) above are true, both as of the date of such notice or request and as
of the relevant Borrowing Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into this
Agreement and to induce the Lenders to extend the credit contemplated hereby,
the Borrower represents and warrants to the Administrative Agent and the
Lenders, both before and after giving effect to the Transactions, as follows:
4.1 Corporate Organization and Power. Each of the Borrower and the
Subsidiary Guarantors (i) is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation, (ii)
has the full corporate power and authority to execute, deliver and perform the
Credit Documents to which it is or will be a party, to own and hold its property
and to engage in its business as presently conducted, and (iii) is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where the nature of its business or the ownership of its
properties requires it to be so qualified, except where the failure to be so
qualified would not, individually or in the aggregate, be reasonably likely to
have a Material Adverse Effect.
4.2 Authorization; Enforceability. Each of the Borrower and the
Subsidiary Guarantors has taken, or on the Closing Date will have taken, all
necessary corporate action to execute, deliver and perform each of the Credit
Documents to which it is or will be a party, and has, or on the Closing Date (or
any later date of execution and delivery) will have, validly executed and
delivered each of the Credit Documents to which it is or will be a party. This
Agreement constitutes, and each of the other Credit Documents upon execution and
delivery will
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constitute, the legal, valid and binding obligation of each of the Borrower and
the Subsidiary Guarantors that is a party hereto or thereto, enforceable against
it in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally, by general equitable principles or by
principles of good faith and fair dealing.
4.3 No Violation. The execution, delivery and performance by each
of the Borrower and the Subsidiary Guarantors of this Agreement and each of the
other Transaction Documents to which it is or will be a party, and compliance by
it with the terms hereof and thereof, do not and will not (i) violate any
provision of its articles or certificate of incorporation or bylaws or
contravene any other Requirement of Law applicable to it, (ii) conflict with,
result in a breach of or constitute (with notice, lapse of time or both) a
default under any indenture, agreement or other instrument to which it is a
party, by which it or any of its properties is bound or to which it is subject,
or (iii) result in or require the creation or imposition of any Lien upon any of
its properties or assets. No Subsidiary is a party to any agreement or
instrument or otherwise subject to any restriction or encumbrance that restricts
or limits its ability to make dividend payments or other distributions in
respect of its Capital Stock, to repay Indebtedness owed to the Borrower or any
other Subsidiary, to make loans or advances to the Borrower or any other
Subsidiary, or to transfer any of its assets or properties to the Borrower or
any other Subsidiary, in each case other than such restrictions or encumbrances
existing under or by reason of the Credit Documents or applicable Requirements
of Law.
4.4 Governmental and Third-Party Authorization; Permits. (a) No
consent, approval, authorization or other action by, notice to, or registration
or filing with, any Governmental Authority or other Person is or will be
required as a condition to or otherwise in connection with the due execution,
delivery and performance by each of the Borrower and its Subsidiaries of this
Agreement or any of the other Credit Documents to which it is or will be a party
or the legality, validity or enforceability hereof or thereof, other than (i)
consents, authorizations and filings that have been (or on or prior to the
Closing Date will have been) made or obtained and that are (or on the Closing
Date will be) in full force and effect, which consents, authorizations and
filings are listed on Schedule 4.4, and (ii) consents and filings the failure to
obtain or make which would not, individually or in the aggregate, have a
Material Adverse Effect.
(b) Each of the Borrower and the Subsidiary Guarantors has, and is
in good standing with respect to, all governmental approvals, licenses, permits
and authorizations necessary to conduct its business as presently conducted and
to own or lease and operate its properties, except for those the failure to
obtain which would not be reasonably likely, individually or in the aggregate,
to have a Material Adverse Effect.
4.5 Litigation. There are no actions, investigations, suits or
proceedings pending or, to the knowledge of the Borrower, threatened, at law, in
equity or in arbitration, before any court, other Governmental Authority or
other Person, (i) against or affecting the Borrower, any of its Subsidiaries or
any of their respective properties that would, if adversely determined, be
reasonably likely to have a Material Adverse Effect, or (ii) with respect to
this Agreement or any of the other Credit Documents.
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4.6 Taxes. Each of the Borrower and the Subsidiary Guarantors has
timely filed all federal, state and local tax returns and reports required to be
filed by it and has paid all taxes, assessments, fees and other charges levied
upon it or upon its properties that are shown thereon as due and payable, other
than those that are being contested in good faith and by proper proceedings and
for which adequate reserves have been established in accordance with GAAP. Such
returns accurately reflect in all material respects all liability for taxes of
the Borrower and the Subsidiary Guarantors for the periods covered thereby.
There is no ongoing audit or examination or, to the knowledge of the Borrower,
other investigation by any Governmental Authority of the tax liability of the
Borrower or any of the Subsidiary Guarantors, and there is no unresolved claim
by any Governmental Authority concerning the tax liability of the Borrower or
any of the Subsidiary Guarantors for any period for which tax returns have been
or were required to have been filed, other than claims for which adequate
reserves have been established in accordance with GAAP. Neither the Borrower nor
any of the Subsidiary Guarantors has waived or extended or has been requested to
waive or extend the statute of limitations relating to the payment of any taxes.
4.7 Subsidiaries. Schedule 4.7 sets forth a list, as of the
Closing Date, of all of the Subsidiaries of the Borrower and, as to each such
Subsidiary, the percentage ownership (direct and indirect) of the Borrower in
each class of its capital stock and each direct owner thereof. Except for the
shares of capital stock expressly indicated on Schedule 4.7, there are no shares
of capital stock, warrants, rights, options or other equity securities, or other
Capital Stock of any Subsidiary of the Borrower outstanding or reserved for any
purpose. All outstanding shares of capital stock of each Subsidiary of the
Borrower are duly and validly issued, fully paid and nonassessable.
4.8 Full Disclosure. All factual information heretofore or
contemporaneously furnished to the Administrative Agent or any Lender in writing
by or on behalf of the Borrower or any of the Subsidiary Guarantors for purposes
of or in connection with this Agreement and the Transactions is, and all other
such factual information hereafter furnished to the Administrative Agent or any
Lender in writing by or on behalf of the Borrower or any of the Subsidiary
Guarantors will be, true and accurate in all material respects on the date as of
which such information is dated or certified (or, if such information has been
amended or supplemented, on the date as of which any such amendment or
supplement is dated or certified) and not made incomplete by omitting to state a
material fact necessary to make the statements contained therein, in light of
the circumstances under which such information was provided, not misleading.
4.9 Margin Regulations. Neither the Borrower nor any of its
Subsidiaries is engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of purchasing or carrying
Margin Stock. No proceeds of the Loans will be used, directly or indirectly, to
purchase or carry any Margin Stock (other than Borrower Margin Stock purchased
in accordance with Section 7.6), to extend credit for such purpose or for any
other purpose that would violate or be inconsistent with Regulations T, U or X
or any provision of the Exchange Act.
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4.10 No Material Adverse Change. There has been no Material Adverse
Change since December 31, 1998, and there exists no event, condition or state of
facts that could reasonably be expected to result in a Material Adverse Change.
4.11 Financial Matters. (a) The Borrower has heretofore furnished
to the Administrative Agent copies of the audited consolidated balance sheets of
the Borrower and its Subsidiaries as of December 31, 1998, 1997, and 1996, and
the related statements of income, cash flows and stockholders' equity for the
fiscal years then ended, together with the opinion of Ernst & Young, LLP
thereon. Such financial statements have been prepared in accordance with GAAP
and present fairly the financial condition of the Borrower and its Subsidiaries
on a consolidated basis as of the respective dates thereof and the consolidated
results of operations of the Borrower and its Subsidiaries for the respective
periods then ended. Except as fully reflected in the most recent financial
statements referred to above and the notes thereto, there are no material
liabilities or obligations with respect to the Borrower or any of its
Subsidiaries of any nature whatsoever (whether absolute, contingent or otherwise
and whether or not due).
(b) The unaudited pro forma balance sheet of the Borrower as of
December 31, 1998, a copy of which has heretofore been delivered to the
Administrative Agent, gives pro forma effect to the consummation of the
Transactions, all as if such events had occurred on such date (the "Pro Forma
Balance Sheet"). The Pro Forma Balance Sheet has been prepared in accordance
with GAAP (subject to the absence of footnotes required by GAAP and subject to
normal year-end adjustments) and, subject to stated assumptions made in good
faith and having a reasonable basis set forth therein, presents fairly the
financial condition of the Borrower on an unaudited pro forma basis as of the
date set forth therein after giving effect to the consummation of the
transactions described above.
(c) The Borrower has prepared, and has heretofore furnished to the
Administrative Agent a copy of, annual projected balance sheets and statements
of income and cash flows of the Borrower for the six-year period beginning with
the year ending December 31, 1999 and ending with the year ending December 31,
2004, giving effect to the Transactions (the "Projections"). In the opinion of
management of the Borrower, the assumptions used in the preparation of the
Projections were fair, complete and reasonable when made and continue to be
fair, complete and reasonable as of the date hereof. The Projections have been
prepared in good faith by the executive and financial personnel of the Borrower,
are complete and represent a reasonable estimate of the future performance and
financial condition of the Borrower, subject to the uncertainties and
approximations inherent in any projections.
(d) Each of the Borrower and the Subsidiary Guarantors, after
giving effect to the consummation of the transactions contemplated hereby, (i)
has capital sufficient to carry on its businesses as conducted and as proposed
to be conducted, (ii) has assets with a fair saleable value, determined on a
going concern basis, (y) not less than the amount required to pay the probable
liability on its existing debts as they become absolute and matured and (z)
greater than the total amount of its liabilities (including identified
contingent liabilities, valued at the amount that can reasonably be expected to
become absolute and matured), and (iii) does not intend to, and does not believe
that it will, incur debts or liabilities beyond its ability to pay such debts
and liabilities as they mature.
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(e) The Borrower has heretofore furnished to the Administrative
Agent copies of the audited consolidated balance sheets of the American Phoenix
and its Subsidiaries as of December 31, 1998, 1997, and 1996, and the related
statements of income, cash flows and stockholders' equity for the fiscal years
then ended, together with the opinion of PriceWaterhouseCoopers LLP thereon. To
the knowledge of the Borrower, such financial statements have been prepared in
accordance with GAAP and present fairly the financial condition of American
Phoenix and its Subsidiaries on a consolidated basis as of the respective dates
thereof and the consolidated results of operations of American Phoenix and its
Subsidiaries for the respective periods then ended. Except as fully reflected in
the most recent financial statements referred to above and the notes thereto, to
the knowledge of the Borrower, there are no material liabilities or obligations
with respect to American Phoenix or any of its Subsidiaries of any nature
whatsoever (whether absolute, contingent or otherwise and whether or not due).
4.12 Ownership of Properties. Except for minor defects and
irregularities which, individually or in the aggregate, do not materially impair
the practical use thereof for its intended purposes, each of the Borrower and
its Subsidiaries (i) has good and marketable title to all real property owned by
it, (ii) holds interests as lessee under valid leases in full force and effect
with respect to all material leased real and personal property used in
connection with its business, (iii) possesses or has rights to use licenses,
patents, copyrights, trademarks, service marks, trade names and other assets
sufficient to enable it to continue to conduct its business substantially as
heretofore conducted and without any material conflict with the rights of
others, and (iv) has good title to all of its other properties and assets
reflected in the most recent financial statements referred to in Section 4.11(a)
(except as sold or otherwise disposed of since the date thereof in the ordinary
course of business), in each case under (i), (ii), (iii) and (iv) above free and
clear of all Liens other than Permitted Liens.
4.13 ERISA. (a) Each of the Borrower and its ERISA Affiliates is in
compliance in all material respects with the applicable provisions of ERISA, and
each Plan is and has been administered in compliance in all material respects
with all applicable Requirements of Law, including, without limitation, the
applicable provisions of ERISA and the Internal Revenue Code. No ERISA Event (i)
has occurred within the five-year period prior to the Closing Date, (ii) has
occurred and is continuing, or (iii) to the knowledge of the Borrower, is
reasonably expected to occur with respect to any Plan. No Plan has any Unfunded
Pension Liability as of the most recent annual valuation date applicable
thereto, and neither the Borrower nor any ERISA Affiliate has engaged in a
transaction that could be subject to Section 4069 or 4212(c) of ERISA.
(b) Neither the Borrower nor any ERISA Affiliate has had a
complete or partial withdrawal from any Multiemployer Plan, and neither the
Borrower nor any ERISA Affiliate would become subject to any liability under
ERISA if the Borrower or any ERISA Affiliate were to withdraw completely from
all Multiemployer Plans as of the most recent valuation date. No Multiemployer
Plan is in "reorganization" or is "insolvent" within the meaning of such terms
under ERISA.
4.14 Environmental Matters. (a) To the knowledge of the Borrower,
no Hazardous Substances are or have been generated, used, located, released,
treated, disposed of or stored by
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the Borrower or any of its Subsidiaries or by any other Person (including any
predecessor in interest) or otherwise, in, on or under any portion of any real
property, leased or owned, of the Borrower or any of its Subsidiaries, except in
material compliance with all applicable Environmental Laws, and no portion of
any such real property or, to the knowledge of the Borrower, any other real
property at any time leased, owned or operated by the Borrower or any of its
Subsidiaries, has been contaminated by any Hazardous Substance; and no portion
of any real property, leased or owned, of the Borrower or any of its
Subsidiaries has been or is presently the subject of an environmental audit,
assessment or remedial action.
(b) No portion of any real property, leased or owned, of the
Borrower or any of its Subsidiaries has been used by the Borrower or any of its
Subsidiaries or, to the knowledge of the Borrower, by any other Person, as or
for a mine, a landfill, a dump or other disposal facility, a gasoline service
station, or (other than for petroleum substances stored in the ordinary course
of business) a petroleum products storage facility; no portion of such real
property or any other real property at any time leased, owned or operated by the
Borrower or any of its Subsidiaries has, pursuant to any Environmental Law, been
placed on the "National Priorities List" or "CERCLIS List" (or any similar
federal, state or local list) of sites subject to possible environmental
problems; and there are not and have never been any underground storage tanks
situated on any real property, leased or owned, of the Borrower or any of its
Subsidiaries.
(c) To the knowledge of the Borrower, all activities and
operations of the Borrower and its Subsidiaries are in compliance with all
material requirements of all applicable Environmental Laws, except to the extent
the failure so to comply, individually or in the aggregate, would not be
reasonably likely to have a Material Adverse Effect. Each of the Borrower and
its Subsidiaries has obtained all licenses and permits under Environmental Laws
necessary to its respective operations; all such licenses and permits are being
maintained in good standing; and each of the Borrower and its Subsidiaries is in
substantial compliance with all terms and conditions of such licenses and
permits, except for such licenses and permits the failure to obtain, maintain or
comply with which would not be reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect. Neither the Borrower nor any of
its Subsidiaries is involved in any suit, action or proceeding, or has received
any notice, complaint or other request for information from any Governmental
Authority or other Person, with respect to any actual or alleged Environmental
Claims that, if adversely determined, would be reasonably likely, individually
or in the aggregate, to have a Material Adverse Effect; and, to the knowledge of
the Borrower, there are no threatened actions, suits, proceedings or
investigations with respect to any such Environmental Claims, nor any basis
therefor.
4.15 Compliance With Laws. Each of the Borrower and its
Subsidiaries has timely filed all material reports, documents and other
materials required to be filed by it under all applicable Requirements of Law
with any Governmental Authority, has retained all material records and documents
required to be retained by it under all applicable Requirements of Law, and is
otherwise in compliance with all applicable Requirements of Law in respect of
the conduct of its business and the ownership and operation of its properties,
except for such Requirements of Law the failure to comply with which,
individually or in the aggregate, would not be reasonably likely to have a
Material Adverse Effect.
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4.16 Regulated Industries. Neither the Borrower nor any of its
Subsidiaries is (i) an "investment company," a company "controlled" by an
"investment company," or an "investment advisor," within the meaning of the
Investment Company Act of 1940, as amended, or (ii) a "holding company," a
"subsidiary company" of a "holding company," or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company," within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
4.17 Insurance. The assets, properties and business of the Borrower
and its Subsidiaries are insured against such hazards and liabilities, under
such coverages and in such amounts, as are customarily maintained by prudent
companies similarly situated and under policies issued by insurers of recognized
responsibility.
4.18 Material Contracts. Schedule 4.18 lists, as of the Closing
Date, each "material contract" (within the meaning of Item 601(b)(10) of
Regulation S-K under the Exchange Act) to which the Borrower or any of its
Subsidiaries is a party, by which any of them or their respective properties is
bound or to which any of them is subject (collectively, "Material Contracts").
As of the Closing Date, (i) each Material Contract is in full force and effect
and is enforceable by the Borrower or the Subsidiary that is a party thereto in
accordance with its terms, and (ii) neither the Borrower nor any of its
Subsidiaries (nor, to the knowledge of the Borrower, any other party thereto) is
in breach of or default under any Material Contract in any material respect or
has given notice of termination or cancellation of any Material Contract.
4.19 Labor Relations. To the knowledge of the Borrower, neither the
Borrower nor any of its Subsidiaries is engaged in any unfair labor practice
within the meaning of the National Labor Relations Act of 1947, as amended.
There is (i) no unfair labor practice complaint before the National Labor
Relations Board, or grievance or arbitration proceeding arising out of or under
any collective bargaining agreement, pending or, to the knowledge of the
Borrower, threatened, against the Borrower or any of its Subsidiaries, (ii) no
strike, lock-out, slowdown, stoppage, walkout or other labor dispute pending or,
to the knowledge of the Borrower, threatened, against the Borrower or any of its
Subsidiaries, and (iii) to the knowledge of the Borrower, no petition for
certification or union election or union organizing activities taking place with
respect to the Borrower or any of its Subsidiaries.
4.20 Year 2000 Compatibility. Any reprogramming required to permit
the proper functioning, before, on and after January 1, 2000, of (i) the
Borrower's and its Subsidiaries' computer-based systems and (ii) equipment
containing embedded microchips (including systems and equipment supplied by
others or with which the Borrower's or any of its Subsidiaries' systems
interface), and the testing of all such systems and equipment, as so
reprogrammed, will be completed by September 30, 1999. The cost to the Borrower
and its Subsidiaries of such reprogramming and testing and of the reasonably
foreseeable consequences of the year 2000 to the Borrower and its Subsidiaries
(including, without limitation, reprogramming errors and the failure of others'
systems or equipment) will not result in a Default or Material Adverse Effect.
Except for such of the reprogramming referred to in the preceding sentence as
may be necessary, the computer and management information systems of the
Borrower and its Subsidiaries are and, with ordinary course upgrading and
maintenance will continue for the term of this Agreement to
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be, sufficient to permit the Borrower and its Subsidiaries to conduct their
respective businesses without a Material Adverse Effect.
4.21 Transaction Documents. The Borrower has heretofore delivered,
or will on or prior to the Closing Date deliver, to the Administrative Agent a
true, complete and correct copy of each of the Acquisition Documents, in each
case together with all schedules and exhibits referred to therein or delivered
pursuant thereto and all amendments and modifications thereto. Each such
Acquisition Document (together with all schedules and exhibits thereto)
comprises, or upon execution and delivery on or prior to the Closing Date will
comprise, a full and complete copy of all agreements between the parties thereto
with respect to the subject matter thereof, and there are no, and will not then
be any other agreements or understandings or side agreements not contained
therein that relate to or modify the substance thereof. Each such Acquisition
Document is, or upon execution and delivery on or prior to the Closing Date will
be, in full force and effect and, except with the prior approval of the Required
Lenders, no provision thereof has been, or will then have been, amended,
modified, supplemented or waived by any party thereto. All representations and
warranties of the Borrower contained in any of such Acquisition Documents were
true and correct in all material respects on and as of the date made and will be
true in all material respects on and as of the Closing Date with the same effect
as though made on and as of the Closing Date, except as contemplated by the
terms of such Acquisition Documents.
4.22 Consummation of Transactions. As of the Closing Date, the
American Phoenix Acquisition will have been consummated in accordance with the
terms of the Acquisition Documents and all applicable Requirements of Law, and
the Borrower will be the legal owner of all of the outstanding Capital Stock of
American Phoenix, free and clear of any Liens.
ARTICLE V
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that, until the termination of the
Commitments and the payment in full of all principal and interest with respect
to the Loans together with all other amounts then due and owing hereunder:
5.1 Financial Statements. The Borrower will deliver to each
Lender:
(a) As soon as available and in any event within fifty (50) days
after the end of each of the first three fiscal quarters of each fiscal year,
beginning with the fiscal quarter ending March 31, 1999, unaudited consolidated
and consolidating balance sheets of the Borrower and its Subsidiaries as of the
end of such fiscal quarter and unaudited consolidated and consolidating
statements of income, cash flows and stockholders' equity for the Borrower and
its Subsidiaries for the fiscal quarter then ended and for that portion of the
fiscal year then ended, in each case setting forth comparative consolidated (or
consolidating) figures as of the end of and for the corresponding period in the
preceding fiscal year, all in reasonable detail and prepared in accordance with
GAAP (subject to the absence of notes required by GAAP and subject to normal
year-end adjustments) applied on a basis consistent with that of the preceding
quarter or
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containing disclosure of the effect on the financial condition or results of
operations of any change in the application of accounting principles and
practices during such quarter; and
(b) As soon as available and in any event within ninety-five (95)
days after the end of each fiscal year, beginning with the fiscal year ending
December 31, 1999 (i) an audited consolidated balance sheet of the Borrower and
its Subsidiaries as of the end of such fiscal year and audited consolidated
statements of income, cash flows and stockholders' equity for the Borrower and
its Subsidiaries for the fiscal year then ended, including the notes thereto, in
each case setting forth comparative figures as of the end of and for the
preceding fiscal year together with comparative budgeted figures for the fiscal
year then ended, all in reasonable detail and certified by the independent
certified public accounting firm regularly retained by the Borrower or another
independent certified public accounting firm of recognized national standing
reasonably acceptable to the Required Lenders, together with (y) a report
thereon by such accountants that is not qualified as to going concern or scope
of audit and to the effect that such financial statements present fairly the
consolidated financial condition and results of operations of the Borrower and
its Subsidiaries as of the dates and for the periods indicated in accordance
with GAAP applied on a basis consistent with that of the preceding year or
containing disclosure of the effect on the financial condition or results of
operations of any change in the application of accounting principles and
practices during such year, and (z) a report by such accountants to the effect
that, based on and in connection with their examination of the financial
statements of the Borrower and its Subsidiaries, they obtained no knowledge of
the occurrence or existence of any Default or Event of Default relating to
accounting or financial reporting matters, or a statement specifying the nature
and period of existence of any such Default or Event of Default disclosed by
their audit; provided, however, that such accountants shall not be liable by
reason of the failure to obtain knowledge of any Default or Event of Default
that would not be disclosed or revealed in the course of their audit
examination, and (ii) an unaudited consolidating balance sheet of the Borrower
and its Subsidiaries as of the end of such fiscal year and unaudited
consolidating statements of income, cash flows and stockholders' equity for the
Borrower and its Subsidiaries for the fiscal year then ended, all in reasonable
detail.
5.2 Other Business and Financial Information. The Borrower will
deliver to each Lender:
(a) Concurrently with each delivery of the financial statements
described in Section 5.1, a Compliance Certificate with respect to the period
covered by the financial statements then being delivered, executed by a
Financial Officer of the Borrower, together with a Covenant Compliance Worksheet
reflecting the computation of the financial covenants set forth in Sections 6.1
through 6.3 as of the last day of the period covered by such financial
statements;
(b) As soon as available and in any event within thirty (30) days
prior to the end of each fiscal year, beginning with the fiscal year ending
December 31, 1999, consolidated and consolidating projections for the Borrower
and its Subsidiaries for the succeeding fiscal year, consisting of a
consolidated balance sheet and consolidated statements of income and cash flows,
together with a certificate of a Financial Officer of the Borrower to the effect
that such projections have been prepared in good faith and are reasonable
estimates of the financial position and results of operations of the Borrower
and its Subsidiaries for the period covered thereby; and
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as soon as available from time to time thereafter, any modifications or
revisions to or restatements of such projections;
(c) Promptly upon receipt thereof, copies of any "management
letter" submitted to the Borrower or any of its Subsidiaries by its certified
public accountants in connection with each annual, interim or special audit, and
promptly upon completion thereof, any response reports from the Borrower or any
such Subsidiary in respect thereof;
(d) Promptly upon the sending, filing or receipt thereof, copies
of (i) all financial statements, reports, notices and proxy statements that the
Borrower or any of its Subsidiaries shall send or make available generally to
its shareholders, (ii) all regular, periodic and special reports, registration
statements and prospectuses (other than on Form S-8) that the Borrower or any of
its Subsidiaries shall render to or file with the Securities and Exchange
Commission, the National Association of Securities Dealers, Inc. or any national
securities exchange, and (iii) all press releases and other statements made
available generally by the Borrower or any of its Subsidiaries to the public
concerning material developments in the business of the Borrower or any of its
Subsidiaries;
(e) Promptly upon the sending or receipt thereof, copies of all
notices or other correspondence that the Borrower shall send to, or receive
from, the holders of the American Phoenix Acquisition Indebtedness or the
trustee therefor;
(f) Promptly upon (and in any event within five (5) Business Days
after) any Responsible Officer of the Borrower obtaining knowledge thereof,
written notice of any of the following:
(i) the occurrence of any Default or Event of Default,
together with a written statement of a Responsible Officer of the
Borrower specifying the nature of such Default or Event of Default, the
period of existence thereof and the action that the Borrower has taken
and proposes to take with respect thereto;
(ii) the institution or threatened institution of any
action, suit, investigation or proceeding against or affecting the
Borrower or any of its Subsidiaries, including any such investigation
or proceeding by any Governmental Authority (other than routine
periodic inquiries, investigations or reviews), that would, if
adversely determined, be reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect, and any material
development in any litigation or other proceeding previously reported
pursuant to Section 4.5 or this subsection;
(iii) the receipt by the Borrower or any of its
Subsidiaries from any Governmental Authority of (y) any notice
asserting any failure by the Borrower or any of its Subsidiaries to be
in compliance with applicable Requirements of Law or that threatens the
taking of any action against the Borrower or such Subsidiary or sets
forth circumstances that, if taken or adversely determined, would be
reasonably likely to have a Material Adverse Effect, or (z) any notice
of any actual or threatened suspension, limitation or revocation of,
failure to renew, or imposition of any restraining order, escrow
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or impoundment of funds in connection with, any license, permit,
accreditation or authorization of the Borrower or any of its
Subsidiaries, where such action would be reasonably likely to have a
Material Adverse Effect;
(iv) the occurrence of any ERISA Event, together with (x)
a written statement of a Responsible Officer of the Borrower specifying
the details of such ERISA Event and the action that the Borrower has
taken and proposes to take with respect thereto, (y) a copy of any
notice with respect to such ERISA Event that may be required to be
filed with the PBGC and (z) a copy of any notice delivered by the PBGC
to the Borrower or such ERISA Affiliate with respect to such ERISA
Event;
(v) the occurrence of any material default under, or any
proposed or threatened termination or cancellation of, any Material
Contract or other material contract or agreement to which the Borrower
or any of its Subsidiaries is a party, the termination or cancellation
of which would be reasonably likely to have a Material Adverse Effect;
(vi) the occurrence of any of the following: (x) the
assertion of any Environmental Claim against or affecting the Borrower,
any of its Subsidiaries or any of their respective real property,
leased or owned; (y) the receipt by the Borrower or any of its
Subsidiaries of notice of any alleged violation of or noncompliance
with any Environmental Laws; or (z) the taking of any remedial action
by the Borrower, any of its Subsidiaries or any other Person in
response to the actual or alleged generation, storage, release,
disposal or discharge of any Hazardous Substances on, to, upon or from
any real property leased or owned by the Borrower or any of its
Subsidiaries; but in each case under clauses (x), (y) and (z) above,
only to the extent the same would be reasonably likely to have a
Material Adverse Effect; and
(vii) any other matter or event that has, or would be
reasonably likely to have, a Material Adverse Effect, together with a
written statement of a Responsible Officer of the Borrower setting
forth the nature and period of existence thereof and the action that
the Borrower has taken and proposes to take with respect thereto; and
(g) As promptly as reasonably possible, such other information
about the business, condition (financial or otherwise), operations or properties
of the Borrower or any of its Subsidiaries (including any Plan and any
information required to be filed under ERISA) as the Administrative Agent or any
Lender may from time to time reasonably request.
5.3 Corporate Existence; Franchises; Maintenance of Properties.
The Borrower will, and will cause each of its Subsidiaries to, (i) maintain and
preserve in full force and effect its corporate existence, except as expressly
permitted otherwise by Section 7.1, (ii) obtain, maintain and preserve in full
force and effect all other rights, franchises, licenses, permits,
certifications, approvals and authorizations required by Governmental
Authorities and necessary to the ownership, occupation or use of its properties
or the conduct of its business, except to the extent the failure to do so would
not be reasonably likely to have a Material Adverse Effect, and (iii) keep all
material properties in good working order and condition (normal wear and tear
excepted) and from time to time make all necessary repairs to and renewals and
replacements of
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such properties, except to the extent that any of such properties are obsolete
or are being replaced. Nothing contained in this Section 5.3 shall prevent
either the Borrower or a Subsidiary from discontinuing any part of the business
of either the Borrower or such Subsidiary if the discontinuance is in the best
interest of the Borrower and after giving effect thereto, no Default or Event of
Default would exist.
5.4 Compliance with Laws. The Borrower will, and will cause each
of its Subsidiaries to, comply in all material respects with all Requirements of
Law applicable in respect of the conduct of its business and the ownership and
operation of its properties, except to the extent the failure so to comply would
not be reasonably likely to have a Material Adverse Effect. Nothing contained
herein shall prevent either the Borrower or its Subsidiaries form contesting in
good faith by appropriate proceedings any Requirement of Law.
5.5 Payment of Obligations. The Borrower will, and will cause each
of its Subsidiaries to, (i) pay all liabilities and obligations as and when due
(subject to any applicable subordination provisions), except to the extent
failure to do so would not be reasonably likely to have a Material Adverse
Effect, and (ii) pay and discharge all taxes, assessments and governmental
charges or levies imposed upon it, upon its income or profits or upon any of its
properties, prior to the date on which penalties would attach thereto, and all
lawful claims that, if unpaid, might become a Lien upon any of the properties of
the Borrower or any of its Subsidiaries; provided, however, that neither the
Borrower nor any of its Subsidiaries shall be required to pay any such tax,
liability, obligation, assessment, charge, levy or claim that is reasonably
being contested in good faith and by proper proceedings as to assessment,
applicability, amount or validity and as to which the Borrower or such
Subsidiary is maintaining adequate reserves with respect thereto in accordance
with GAAP.
5.6 Insurance. The Borrower will, and will cause each of its
Subsidiaries to, maintain with financially sound and reputable insurance
companies insurance with respect to its assets, properties and business, against
such hazards and liabilities, of such types and in such amounts, as is
customarily maintained by companies in the same or similar businesses similarly
situated.
5.7 Maintenance of Books and Records; Inspection. The Borrower
will, and will cause each of its Subsidiaries to, (i) maintain adequate books,
accounts and records, in which full, true and correct entries shall be made of
all financial transactions in relation to its business and properties, and
prepare all financial statements required under this Agreement, in each case in
accordance with GAAP and in compliance with the requirements of any Governmental
Authority having jurisdiction over it, and (ii) subject to Section 10.13, permit
employees or agents of the Administrative Agent or any Lender to inspect its
properties and examine or audit its books, records, working papers and accounts
and make copies and memoranda of them, and to discuss its affairs, finances and
accounts with its officers and employees and, upon notice to the Borrower, the
independent public accountants of the Borrower and its Subsidiaries (and by this
provision the Borrower authorizes such accountants to discuss the finances and
affairs of the Borrower and its Subsidiaries), all at such times and from time
to time, upon reasonable notice and during business hours, as may be reasonably
requested.
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5.8 Permitted Acquisitions. (a) Subject to the provisions of
subsection (b) below and the requirements contained in the definition of
Permitted Acquisition, and subject to the other terms and conditions of this
Agreement, the Borrower may from time to time on or after the Closing Date
effect Permitted Acquisitions, provided that, with respect to each Permitted
Acquisition:
(i) no Default or Event of Default shall have occurred
and be continuing at the time of the consummation of such Permitted
Acquisition or would exist immediately after giving effect thereto;
(ii) after giving effect to such Permitted Acquisition and
any Borrowings made in connection therewith, the Borrower will be in
compliance with the financial covenants contained in Sections 6.1
through 6.3, in each case such compliance determined with regard to
calculations made on a pro forma basis in accordance with GAAP as if
any Indebtedness incurred, assumed or acquired by the Borrower or a
Subsidiary in connection with such Permitted Acquisition had been
Indebtedness of the Borrower for those periods applicable to such
covenants;
(iii) the Acquisition Amount with respect thereto together
with the aggregate of the Acquisition Amounts for all other
Acquisitions consummated during the same fiscal quarter or the period
of three consecutive fiscal quarters immediately prior thereto (but
specifically excluding, if applicable, any Acquisitions consummated
prior to January 1, 1999) shall not exceed $25,000,000;
(iv) the Acquisition Amount (without regard to the
issuance of any Capital Stock of the Borrower) with respect thereto
together with the aggregate (without duplication) of (A) the
Acquisition Amounts (without regard to the issuance of any Capital
Stock of the Borrower) for all other Acquisitions consummated during
the same fiscal quarter or the period of three consecutive fiscal
quarters immediately prior thereto (but specifically excluding, if
applicable, any Acquisitions consummated prior to January 1, 1999), and
(B) the amount of cash paid by the Borrower and its Subsidiaries in
connection with earnout and contingent obligations during the same
fiscal quarter or the period of three consecutive fiscal quarters
immediately prior thereto for all Acquisitions (whether consummated
before or after the date hereof and including Acquisitions by American
Phoenix and its Subsidiaries), shall not exceed $15,000,000; and
(v) the Acquisition Amount with respect thereto together
with the aggregate of the Acquisition Amounts for all other Permitted
Acquisitions consummated during the term of this Agreement shall not
exceed $80,000,000.
(b) Not less than ten (10) Business Days prior to the consummation
of any Permitted Acquisition with respect to which the Acquisition Amount
exceeds $5,000,000, the Borrower shall have delivered to the Administrative
Agent and each Lender the following:
(i) a reasonably detailed description of the material
terms of such Permitted Acquisition (including, without limitation, the
purchase price and method and structure of
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payment) and of each Person or business that is the subject of such
Permitted Acquisition (each, a "Target");
(ii) historical financial statements of the Target (or, if
there are two or more Targets that are the subject of such Permitted
Acquisition and that are part of the same consolidated group,
consolidated historical financial statements for all such Targets) for
the two (2) most recent fiscal years available and, if available, for
any interim periods since the most recent fiscal year-end;
(iii) consolidated projected income statements of the
Borrower and its Subsidiaries (giving effect to such Permitted
Acquisition and the consolidation with the Borrower of each relevant
Target) for the three-year period following the consummation of such
Permitted Acquisition, in reasonable detail, together with any
appropriate statement of assumptions and pro forma adjustments; and
(iv) a certificate, in form and substance reasonably
satisfactory to the Administrative Agent, executed by a Financial
Officer of the Borrower setting forth the Acquisition Amount and
further to the effect that, to the best of such individual's knowledge,
(x) the consummation of such Permitted Acquisition will not result in a
violation of any provision of this Section (the calculations of the
financial covenants determined in accordance with Section 5.8(a)(ii) to
be attached to the certificate), (y) the Borrower believes in good
faith that it will continue to comply with such financial covenants for
a period of one year following the date of the consummation of such
Permitted Acquisition, and (z) after giving effect to such Permitted
Acquisition and any Borrowings in connection therewith, the Borrower
believes in good faith that it will have sufficient availability under
the Revolving Credit Commitments to meet its ongoing working capital
requirements.
(c) As soon as reasonably practicable after the consummation of
any Permitted Acquisition, the Borrower will deliver to the Administrative Agent
and each Lender a copy of the fully executed acquisition agreement (including
schedules and exhibits thereto) and other material documents and closing papers
delivered in connection therewith.
(d) The consummation of each Permitted Acquisition shall be deemed
to be a representation and warranty by the Borrower that (except as shall have
been approved in writing by the Required Lenders) all conditions thereto set
forth in this Section and in the description furnished under clause (i) of
subsection (b) above have been satisfied, that the same is permitted in
accordance with the terms of this Agreement, and that the matters certified to
by the Financial Officer of the Borrower in the certificate referred to in
clause (iv) of subsection (b) above are, to the best of such individual's
knowledge, true and correct in all material respects as of the date such
certificate is given, which representation and warranty shall be deemed to be a
representation and warranty as of the date thereof for all purposes hereunder,
including, without limitation, for purposes of Sections 3.2 and 8.1.
5.9 Creation or Acquisition of Subsidiaries. Subject to the
provisions of Section 7.5, the Borrower may from time to time create or acquire
new Wholly Owned Subsidiaries in
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connection with Permitted Acquisitions or otherwise, and the Wholly Owned
Subsidiaries of the Borrower may create or acquire new Wholly Owned
Subsidiaries, provided that concurrently with (and in any event within ten (10)
Business Days thereafter) the creation or direct or indirect acquisition by the
Borrower or a Subsidiary thereof, each such new Subsidiary will execute and
deliver to the Administrative Agent a joinder to the Subsidiary Guaranty,
pursuant to which such new Subsidiary shall become a party thereto and shall
guarantee the payment in full of the Obligations of the Borrower under this
Agreement and the other Credit Documents.
5.10 Material Subsidiaries; Subsidiary Guarantors. The Borrower
will cause (i) concurrently with (and in any event within ten (10) Business Days
thereafter) the delivery of any financial statements under Section 5.1 that
reveals that a Subsidiary has become a Material Subsidiary, each of its
Subsidiaries that from time to time hereafter becomes a Material Subsidiary to
execute and deliver to the Administrative Agent a joinder to the Subsidiary
Guaranty, pursuant to which such new Material Subsidiary shall become a party
thereto and shall guarantee the payment in full of the Obligations of the
Borrower under this Agreement and the other Credit Documents, and (ii) such
other Subsidiaries to execute a joinder to the Subsidiary Guaranty, pursuant to
which such Subsidiaries shall become a party thereto and shall guarantee the
payment in full of the Obligations of the Borrower under this Agreement and the
other Credit Documents, as may be necessary so that at all times the aggregate
revenues of the Subsidiary Guarantors for the four fiscal quarters most recently
ended constituted at least seventy-five percent (75%) of the total revenues of
the Borrower and its Subsidiaries for such period, as determined on a
consolidated basis in accordance with GAAP. In addition, within ninety (90) days
of the Closing Date, the Borrower shall cause McCay Benefits Corporation to
execute a joinder to the Subsidiary Guaranty.
5.11 Year 2000 Compatibility. The Borrower will, and will cause
each of its Subsidiaries to, take all action necessary to ensure that its
computer-based systems are able to operate and effectively process data
including dates on and after January 1, 2000. At the request of the
Administrative Agent or the Required Lenders, the Borrower will provide
reasonable assurance of its Year 2000 compatibility.
5.12 Further Assurances. The Borrower will, and will cause each of
its Subsidiaries to, make, execute, endorse, acknowledge and deliver any
amendments, modifications or supplements hereto and restatements hereof and any
other agreements, instruments or documents, and take any and all such other
actions, as may from time to time be reasonably requested by the Administrative
Agent or the Required Lenders to effect, confirm or further assure or protect
and preserve the interests, rights and remedies of the Administrative Agent and
the Lenders under this Agreement and the other Credit Documents.
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ARTICLE VI
FINANCIAL COVENANTS
The Borrower covenants and agrees that, until the termination of the
Commitments and the payment in full of all principal and interest with respect
to the Loans together with all other amounts then due and owing hereunder:
6.1 Leverage Ratio. The Borrower will not permit the Leverage
Ratio as of the last day of any fiscal quarter during the periods set forth
below to be greater than the ratio set forth below opposite such period:
Maximum
Date Leverage Ratio
---- --------------
Closing Date through
December 31, 1999 3.00 : 1.0
January 1, 2000 through
June 30, 2000 2.75 : 1.0
July 1, 2000 through
December 31, 2000 2.50 : 1.0
January 1, 2001 through
June 30, 2001 2.25 : 1.0
Thereafter 2.00 : 1.0
6.2 Fixed Charge Coverage Ratio. The Borrower will not permit the
Fixed Charge Coverage Ratio as of the last day of any fiscal quarter during the
periods set forth below to be less than the ratio set forth below opposite such
period:
Minimum Fixed Charge
Date Coverage Ratio
---- --------------
Closing Date through
December 31, 2001 1.35 : 1.0
Thereafter 1.50 : 1.0
6.3 Cash Flow Coverage Ratio. The Borrower will not permit the
Cash Flow Coverage Ratio as of the last day of any fiscal quarter during the
periods set forth below to be less than the ratio set forth below opposite such
period:
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Minimum Cash Flow
Date Coverage Ratio
---- --------------
Closing Date through
June 30, 2000 3.00 : 1.0
July 1, 2000 through
June 30, 2001 3.25 : 1.0
July 1, 2001 through
June 30, 2002 3.50 : 1.0
July 1, 2002 through
June 30, 2003 3.75 : 1.0
Thereafter 4.00 : 1.0
ARTICLE VII
NEGATIVE COVENANTS
The Borrower covenants and agrees that, until the termination of the
Commitments and the payment in full of all principal and interest with respect
to the Loans together with all other amounts then due and owing hereunder:
7.1 Merger; Consolidation. The Borrower will not, and will not
permit or cause any of its Subsidiaries to, liquidate, wind up or dissolve, or
enter into any consolidation, merger or other combination, or agree to do any of
the foregoing; provided, however, that:
(i) the Borrower may merge or consolidate with another
Person so long as (x) the Borrower is the surviving entity, (y) unless
such other Person is a Wholly Owned Subsidiary immediately prior to
giving effect thereto, such merger or consolidation shall constitute a
Permitted Acquisition and the applicable conditions and requirements of
Sections 5.8 and 5.9 shall be satisfied, and (z) immediately after
giving effect thereto, no Default or Event of Default would exist; and
(ii) any Subsidiary may merge or consolidate with another
Person so long as (x) the surviving entity is the Borrower or a
Subsidiary Guarantor, (y) unless such other Person is a Wholly Owned
Subsidiary immediately prior to giving effect thereto, such merger or
consolidation shall constitute a Permitted Acquisition and the
applicable conditions and requirements of Sections 5.8 and 5.9 shall be
satisfied, and (z) immediately after giving effect thereto, no Default
or Event of Default would exist.
7.2 Indebtedness. The Borrower will not, and will not permit or
cause any of its Subsidiaries to, create, incur, assume or suffer to exist any
Indebtedness other than:
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(i) Indebtedness incurred under this Agreement, the Notes
and the Subsidiary Guaranty;
(ii) Indebtedness existing on the Closing Date and
described in Schedule 7.2;
(iii) accrued expenses (including salaries, accrued
vacation and other compensation), current trade or other accounts
payable and other current liabilities arising in the ordinary course of
business and not incurred through the borrowing of money, provided that
the same shall be paid when due except to the extent being contested in
good faith and by appropriate proceedings;
(iv) loans and advances by the Borrower or any Subsidiary
Guarantors to any other Subsidiary Guarantor or by any Subsidiary
Guarantor to the Borrower, provided that any such loan or advance is
subordinated in right and time of payment to the Obligations;
(v) the American Phoenix Acquisition Indebtedness;
(vi) Indebtedness under the American Phoenix Assumed
Notes, which Indebtedness shall not exceed $5,491,831 in aggregate
principal amount outstanding at any time;
(vii) Indebtedness under the American Phoenix Terminating
Notes but only for the period through the date six (6) months after the
Closing Date, which Indebtedness shall not exceed $2,770,953 in
aggregate principal amount outstanding at any time;
(viii) Indebtedness of the Borrower under Hedge Agreements
the effect of which is to fix or limit interest rates payable by
Borrower as to the Loans;
(ix) unsecured Indebtedness of the Borrower or its
Subsidiaries issued in connection with a Permitted Acquisition to a
Target or its securityholders at the time of such Acquisition that is
expressly subordinated and made junior in right and time of payment to
the Obligations and that is evidenced by one or more written agreements
or instruments which shall provide that such Indebtedness (a) shall
have covenants and undertakings that, taken as a whole, are materially
less restrictive than those contained herein, and (b) shall bear a cash
interest rate not exceeding 12.5% per annum, which Indebtedness shall
not exceed $20,000,000 in aggregate principal amount outstanding at any
time (the Indebtedness described hereinabove, "Subordinated
Indebtedness");
(x) earnout and contingent obligations due and owing by
the Borrower or its Subsidiaries in connection with Permitted
Acquisitions or Acquisitions consummated before the date hereof and set
forth on Schedule 7.2;
(xi) purchase money Indebtedness of the Borrower and its
Subsidiaries incurred solely to finance the payment of all or part of
the purchase price of any equipment, real property or other fixed
assets acquired in the ordinary course of business, including
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Indebtedness in respect of capital lease obligations, and any renewals,
refinancings or replacements thereof (subject to the limitations on the
principal amount thereof set forth in this clause (x)), which
Indebtedness shall not exceed $2,500,000 in aggregate principal amount
outstanding at any time; and
(xii) other unsecured Indebtedness not exceeding $2,500,000
in aggregate principal amount outstanding at any time.
7.3 Liens. The Borrower will not, and will not permit or cause any
of its Subsidiaries to, directly or indirectly, make, create, incur, assume or
suffer to exist, any Lien upon or with respect to any part of its property or
assets, whether now owned or hereafter acquired, or file or permit the filing
of, or permit to remain in effect, any financing statement or other similar
notice of any Lien with respect to any such property, asset, income or profits
under the Uniform Commercial Code of any state or under any similar recording or
notice statute, or agree to do any of the foregoing, other than the following
(collectively, "Permitted Liens"):
(i) Liens in existence on the Closing Date and set forth
on Schedule 7.3;
(ii) Liens imposed by law, such as Liens of carriers,
warehousemen, mechanics, materialmen and landlords, and other similar
Liens incurred in the ordinary course of business for sums not
constituting borrowed money that are not overdue for a period of more
than thirty (30) days or that are being contested in good faith by
appropriate proceedings and for which adequate reserves have been
established in accordance with GAAP (if so required);
(iii) Liens (other than any Lien imposed by ERISA, the
creation or incurrence of which would result in an Event of Default
under Section 8.1(k)) incurred in the ordinary course of business in
connection with worker's compensation, unemployment insurance or other
forms of governmental insurance or benefits, or to secure the
performance of letters of credit, bids, tenders, statutory obligations,
surety and appeal bonds, leases, government contracts and other similar
obligations (other than obligations for borrowed money) entered into in
the ordinary course of business;
(iv) Liens for taxes, assessments or other governmental
charges or statutory obligations that are not delinquent or remain
payable without any penalty or that are being contested in good faith
by appropriate proceedings and for which adequate reserves have been
established in accordance with GAAP (if so required);
(v) Liens securing the purchase money Indebtedness
permitted under clause (xi) of Section 7.2, provided that any such Lien
(a) shall attach to such property concurrently with or within ten (10)
days after the acquisition thereof by the Borrower or such Subsidiary,
(b) shall not exceed the lesser of (y) the fair market value of such
property or (z) the cost thereof to the Borrower or such Subsidiary and
(c) shall not encumber any other property of the Borrower or any of its
Subsidiaries;
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(vi) any attachment or judgment Lien not constituting an
Event of Default under Section 8.1(i) that is being contested in good
faith by appropriate proceedings and for which adequate reserves have
been established in accordance with GAAP (if so required);
(vii) Liens arising from the filing, for notice purposes
only, of financing statements in respect of true leases;
(viii) Liens on Borrower Margin Stock, to the extent the
fair market value thereof exceeds 25% of the fair market value of the
assets of the Borrower and its Subsidiaries (including Borrower Margin
Stock);
(ix) with respect to any real property occupied by the
Borrower or any of its Subsidiaries, all easements, rights of way,
licenses and similar encumbrances on title that do not materially
impair the use of such property for its intended purposes; and
(x) other Liens securing obligations of the Borrower and
its Subsidiaries not exceeding $2,500,000 in aggregate amount
outstanding at any time.
7.4 Disposition of Assets. The Borrower will not, and will not
permit or cause any of its Subsidiaries to, sell, assign, lease, convey,
transfer or otherwise dispose of (whether in one or a series of transactions)
all or any portion of its assets, business or properties (including, without
limitation, any Capital Stock of any Subsidiary), or enter into any arrangement
with any Person providing for the lease by the Borrower or any Subsidiary as
lessee of any asset that has been sold or transferred by the Borrower or such
Subsidiary to such Person, or agree to do any of the foregoing, except for:
(i) the sale or exchange of used or obsolete equipment to
the extent (y) the proceeds of such sale are applied towards, or such
equipment is exchanged for, replacement or substitute equipment or (z)
such equipment is no longer necessary for the operations of the
Borrower or its applicable Subsidiary in the ordinary course of
business;
(ii) the sale or other disposition by the Borrower and its
Subsidiaries of any Borrower Margin Stock to the extent the fair market
value thereof exceeds 25% of the fair market value of the assets of the
Borrower and its Subsidiaries (including Borrower Margin Stock),
provided that fair value is received in exchange therefor;
(iii) the sale, lease or other disposition of assets by a
Subsidiary of the Borrower to the Borrower or to a Subsidiary if,
immediately after giving effect thereto, no Default or Event of Default
would exist; and
(iv) the sale or disposition of assets outside the
ordinary course of business for fair value and for cash, provided that
(w) the Net Cash Proceeds from such sales or dispositions, when
aggregated with the Net Cash Proceeds from all other sales and
dispositions not otherwise specifically permitted under this Section
that are consummated during the same fiscal quarter or the period of
three consecutive fiscal quarters
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immediately prior thereto, do not exceed $10,000,000 in the aggregate
for the Borrower and its Subsidiaries during any fiscal year, (x) such
Net Cash Proceeds are delivered to the Administrative Agent promptly
after receipt thereof for application in prepayment of the Loans in
accordance with, and to the extent required under, the provisions of
Section 2.6(e), (y) in no event shall the Borrower or any of its
Subsidiaries sell or otherwise dispose of any of the Capital Stock of
any Subsidiary Guarantor, and (z) immediately after giving effect
thereto, no Default or Event of Default would exist.
7.5 Investments. The Borrower will not, and will not permit or
cause any of its Subsidiaries to, directly or indirectly, purchase, own, invest
in or otherwise acquire any Capital Stock, evidence of indebtedness or other
obligation or security or any interest whatsoever in any other Person, or make
or permit to exist any loans, advances or extensions of credit to, or any
investment in cash or by delivery of property in, any other Person, or purchase
or otherwise acquire (whether in one or a series of related transactions) any
portion of the assets, business or properties of another Person (including
pursuant to an Acquisition), or create or acquire any Subsidiary, or become a
partner or joint venturer in any partnership or joint venture (collectively,
"Investments"), or make a commitment or otherwise agree to do any of the
foregoing, other than:
(i) Cash Equivalents;
(ii) Investments consisting of purchases and acquisitions
of supplies, materials and equipment in the ordinary course of
business,
(iii) Investments consisting of loans and advances to
employees for reasonable travel, relocation and business expenses in
the ordinary course of business, extensions of trade credit in the
ordinary course of business, and prepaid expenses incurred in the
ordinary course of business;
(iv) without duplication, Investments consisting of
intercompany Indebtedness permitted under clause (iv) of Section 7.2;
(v) Investments existing on the Closing Date and
described in Schedules 7.5.2 and 7.5.3;
(vi) Investments consisting of the making of capital
contributions or the purchase of Capital Stock (a) by the Borrower or
any Subsidiary in any other Wholly Owned Subsidiary provided that the
Borrower complies with the provisions of Sections 5.8 and 5.9, and (b)
by any Subsidiary in the Borrower;
(vii) Permitted Acquisitions;
(viii) Investments consisting of receivables of Premium
Funding Associates, which receivables shall not exceed $15,000,000 at
any time; and
(ix) other Investments not exceeding $4,000,000 in the
aggregate at any time (which Investments existing on the Closing Date
are set forth on Schedule 7.5.1).
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7.6 Restricted Payments. (a) The Borrower will not, and will not
permit or cause any of its Subsidiaries to, directly or indirectly, declare or
make any dividend payment, or make any other distribution of cash, property or
assets, in respect of any of its Capital Stock or any warrants, rights or
options to acquire its Capital Stock, or purchase, redeem, retire or otherwise
acquire for value any shares of its Capital Stock or any warrants, rights or
options to acquire its Capital Stock, or set aside funds for any of the
foregoing, except that:
(i) the Borrower may declare and make dividend payments
or other distributions payable solely in its common stock;
(ii) the Borrower may declare and make dividend payments
or other distributions in an amount not to exceed (a) during each of
the fiscal years ending December 31, 1999 and 2000, $10,500,000, (b)
during the fiscal year ending December 31, 2001, $11,000,000, and (c)
during each fiscal year thereafter, $11,500,000, provided that, in each
case, immediately after giving effect thereto, no Default or Event of
Default would exist;
(iii) the Borrower may purchase, redeem, retire or
otherwise acquire shares of its capital stock in an amount not to
exceed (a) during the fiscal year ending December 31, 1999, $7,500,000,
(b) during the fiscal year ending December 31, 2000, $10,000,000, (c)
during the fiscal year ending December 31, 2001, $11,000,000, and (d)
during each fiscal year thereafter, $15,000,000, provided that, in each
case, immediately after giving effect thereto, no Default or Event of
Default would exist; and
(iv) each Subsidiary of the Borrower may declare and make
dividend payments or other distributions to the Borrower or another
Wholly Owned Subsidiary of the Borrower, to the extent not prohibited
under applicable Requirements of Law.
(b) The Borrower will not, and will not permit or cause any of its
Subsidiaries to, make (or give any notice in respect of) any voluntary or
optional payment or prepayment of principal on the American Phoenix Acquisition
Indebtedness or any Subordinated Indebtedness, or directly or indirectly make
any redemption (including pursuant to any change of control provision),
retirement, defeasance or other acquisition for value of the American Phoenix
Acquisition Indebtedness or any Subordinated Indebtedness, or make any deposit
or otherwise set aside funds for any of the foregoing purposes.
7.7 Transactions with Affiliates. The Borrower will not, and will
not permit or cause any of its Subsidiaries to, enter into any transaction
(including, without limitation, any purchase, sale, lease or exchange of
property or the rendering of any service) with any officer, director,
stockholder or other Affiliate of the Borrower or any Subsidiary, except in the
ordinary course of its business and upon fair and reasonable terms that are no
less favorable to it than would obtain in a comparable arm's length transaction
with a Person other than an Affiliate of the Borrower or such Subsidiary;
provided, however, that nothing contained in this Section shall prohibit:
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(i) transactions described on Schedule 7.7 or otherwise
expressly permitted under this Agreement; and
(ii) the payment by the Borrower of reasonable and
customary fees to members of its board of directors.
7.8 Lines of Business. The Borrower will not, and will not permit
or cause any of its Subsidiaries to, engage in any business other than the
businesses engaged in by it on the date hereof and businesses and activities
reasonably related thereto.
7.9 Certain Amendments. The Borrower will not, and will not permit
or cause any of its Subsidiaries to, (i) amend, modify or waive, or permit the
amendment, modification or waiver of, any provision of any agreement or
instrument evidencing or governing any the American Phoenix Acquisition
Indebtedness or Subordinated Indebtedness, the effect of which would be to (a)
increase the principal amount due thereunder, (b) shorten or accelerate the time
of payment of any amount due thereunder, (c) increase the applicable interest
rate or amount of any fees or costs due thereunder, (d) amend any of the
subordination provisions thereunder (including any of the definitions relating
thereto), (e) make any covenant therein more restrictive or add any new
covenant, or (f) otherwise materially and adversely affect the Lenders, or
breach or otherwise violate any of the subordination provisions applicable
thereto, including, without limitation, restrictions against payment of
principal and interest thereon, or (ii) amend, modify or change any provision of
its articles or certificate of incorporation or bylaws, or the terms of any
class or series of its Capital Stock, other than in a manner that could not
reasonably be expected to adversely affect the Lenders.
7.10 Limitation on Certain Restrictions. The Borrower will not, and
will not permit or cause any of its Subsidiaries to, directly or indirectly,
create or otherwise cause or suffer to exist or become effective any restriction
or encumbrance on (i) the ability of the Borrower and the Subsidiary Guarantors
to perform and comply with their respective obligations under the Credit
Documents or (ii) the ability of any Subsidiary of the Borrower to make any
dividend payments or other distributions in respect of its Capital Stock, to
repay Indebtedness owed to the Borrower or any other Subsidiary, to make loans
or advances to the Borrower or any other Subsidiary, or to transfer any of its
assets or properties to the Borrower or any other Subsidiary, in each case other
than such restrictions or encumbrances existing under or by reason of the Credit
Documents or applicable Requirements of Law.
7.11 No Other Negative Pledges. The Borrower will not, and will not
permit or cause any of its Subsidiaries to, directly or indirectly, enter into
or suffer to exist any agreement or restriction that prohibits or conditions the
creation, incurrence or assumption of any Lien upon or with respect to any part
of its property or assets, whether now owned or hereafter acquired, or agree to
do any of the foregoing, other than as set forth in (i) this Agreement, (ii) any
agreement or instrument creating a Permitted Lien (but only to the extent such
agreement or restriction applies to the assets subject to such Permitted Lien),
and (iii) operating leases of real or personal property entered into by the
Borrower or any of its Subsidiaries as lessee in the ordinary course of
business.
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7.12 Fiscal Year. The Borrower will not, and will not permit or
cause any of its Subsidiaries to, change the ending date of its fiscal year to a
date other than December 31.
7.13 Accounting Changes. The Borrower will not, and will not permit
or cause any of its Subsidiaries to, make or permit any material change in its
accounting policies or reporting practices, except as may be required by GAAP.
ARTICLE VIII
EVENTS OF DEFAULT
8.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default":
(a) The Borrower shall fail to pay any principal of any Loan when
due;
(b) The Borrower shall fail to pay any interest on any Loan, any
fee or any other Obligation when due, and such failure shall continue unremedied
for three (3) Business Days;
(c) The Borrower shall fail to observe, perform or comply with any
condition, covenant or agreement contained in any of Sections 2.14, 5.1, 5.2,
5.3(i), 5.8, 5.9, 5.10 or in Article VI or Article VII;
(d) The Borrower or any of its Subsidiaries shall fail to observe,
perform or comply with any condition, covenant or agreement contained in this
Agreement or any of the other Credit Documents other than those enumerated in
subsections (a), (b) and (c) above, and such failure (i) is deemed by the terms
of the relevant Credit Document to constitute an Event of Default or (ii) shall
continue unremedied for any grace period specifically applicable thereto or, if
no such grace period is applicable, for a period of thirty (30) days after the
earlier of (y) the date on which a Responsible Officer of the Borrower acquires
knowledge thereof and (z) the date on which written notice thereof is delivered
by the Administrative Agent or any Lender to the Borrower;
(e) Any representation or warranty made or deemed made by or on
behalf of the Borrower or any of its Subsidiaries in this Agreement, any of the
other Credit Documents or in any certificate, instrument, report or other
document furnished in connection herewith or therewith or in connection with the
transactions contemplated hereby or thereby shall prove to have been false or
misleading in any material respect as of the time made, deemed made or
furnished;
(f) The Borrower or any of its Subsidiaries shall (i) fail to pay
when due (whether by scheduled maturity, acceleration or otherwise and after
giving effect to any applicable grace period) (y) any principal of or interest
on any Indebtedness (other than the Indebtedness incurred pursuant to this
Agreement) having an aggregate principal amount of at least $2,000,000 or (z)
any termination or other payment under any Hedge Agreement covering a notional
amount of Indebtedness of at least $2,000,000 or (ii) fail to observe, perform
or comply with any condition,
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covenant or agreement contained in any agreement or instrument evidencing or
relating to any such Indebtedness, or any other event shall occur or condition
exist in respect thereof, and the effect of such failure, event or condition is
to cause, or permit the holder or holders of such Indebtedness (or a trustee or
agent on its or their behalf) to cause (with the giving of notice, lapse of
time, or both), such Indebtedness to become due, or to be prepaid, redeemed,
purchased or defeased, prior to its stated maturity;
(g) The Borrower or any of its Subsidiaries shall (i) file a
voluntary petition or commence a voluntary case seeking liquidation, winding-up,
reorganization, dissolution, arrangement, readjustment of debts or any other
relief under the Bankruptcy Code or under any other applicable bankruptcy,
insolvency or similar law now or hereafter in effect, (ii) consent to the
institution of, or fail to controvert in a timely and appropriate manner, any
petition or case of the type described in subsection (h) below, (iii) apply for
or consent to the appointment of or taking possession by a custodian, trustee,
receiver or similar official for or of itself or all or a substantial part of
its properties or assets, (iv) fail generally, or admit in writing its
inability, to pay its debts generally as they become due, (v) make a general
assignment for the benefit of creditors or (vi) take any corporate action to
authorize or approve any of the foregoing;
(h) Any involuntary petition or case shall be filed or commenced
against the Borrower or any of its Subsidiaries seeking liquidation, winding-up,
reorganization, dissolution, arrangement, readjustment of debts, the appointment
of a custodian, trustee, receiver or similar official for it or all or a
substantial part of its properties or any other relief under the Bankruptcy Code
or under any other applicable bankruptcy, insolvency or similar law now or
hereafter in effect, and such petition or case shall continue undismissed and
unstayed for a period of sixty (60) days; or an order, judgment or decree
approving or ordering any of the foregoing shall be entered in any such
proceeding;
(i) Any one or more money judgments, writs or warrants of
attachment, executions or similar processes involving an aggregate amount
(exclusive of amounts fully bonded or covered by insurance as to which the
surety or insurer, as the case may be, has acknowledged its liability in
writing) in excess of $500,000 shall be entered or filed against the Borrower or
any of its Subsidiaries or any of their respective properties and the same shall
not be dismissed, stayed or discharged for a period of thirty (30) days or in
any event later than five days prior to the date of any proposed sale
thereunder;
(j) Any Subsidiary of the Borrower party to the Subsidiary
Guaranty or any Person acting on behalf of any such Subsidiary shall deny or
disaffirm such Subsidiary's obligations under the Subsidiary Guaranty;
(k) Any ERISA Event or any other event or condition shall occur or
exist with respect to any Plan or Multiemployer Plan and, as a result thereof,
together with all other ERISA Events and other events or conditions then
existing, the Borrower and its ERISA Affiliates have incurred or would be
reasonably likely to incur liability to any one or more Plans or Multiemployer
Plans or to the PBGC (or to any combination thereof) in excess of $500,000;
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(l) Any one or more licenses, permits, accreditations or
authorizations of the Borrower or any of its Subsidiaries shall be suspended,
limited or terminated or shall not be renewed, or any other action shall be
taken, by any Governmental Authority in response to any alleged failure by the
Borrower or any of its Subsidiaries to be in compliance with applicable
Requirements of Law, and such action, individually or in the aggregate, would be
reasonably likely to have a Material Adverse Effect;
(m) Any one or more Environmental Claims shall have been asserted
against the Borrower or any of its Subsidiaries (or a reasonable basis shall
exist therefor); the Borrower and its Subsidiaries have incurred or would be
reasonably likely to incur liability as a result thereof; and such liability,
individually or in the aggregate, has or would be reasonably likely to have a
Material Adverse Effect;
(n) Any of the following shall occur: (i) any Person or group of
Persons acting in concert as a partnership or other group shall, as a result of
a tender or exchange offer, open market purchases, privately negotiated
purchases or otherwise, have become, after the date hereof, the "beneficial
owner" (within the meaning of such term under Rule 13d-3 under the Exchange Act)
of securities of the Borrower representing 25% or more of the combined voting
power of the then outstanding securities of the Borrower ordinarily (and apart
from rights accruing under special circumstances) having the right to vote in
the election of directors; or (ii) the Board of Directors of the Borrower shall
cease to consist of a majority of the individuals who constituted the Board of
Directors immediately following the consummation of the Transactions or who
shall have become a member thereof subsequent to the date hereof after having
been nominated, or otherwise approved in writing, by at least a majority of
individuals who constituted the Board of Directors of the Borrower immediately
following the consummation of the Transactions (or their replacements approved
as herein required).
8.2 Remedies: Termination of Commitments, Acceleration, etc. Upon
and at any time after the occurrence and during the continuance of any Event of
Default, the Administrative Agent shall at the direction, or may with the
consent, of the Required Lenders, take any or all of the following actions at
the same or different times:
(a) Declare the Commitments and the Swingline Commitment to be
terminated, whereupon the same shall terminate (provided that, upon the
occurrence of an Event of Default pursuant to Section 8.1(g) or Section 8.1(h),
the Commitments and the Swingline Commitment shall automatically be terminated);
(b) Declare all or any part of the outstanding principal amount of
the Loans to be immediately due and payable, whereupon the principal amount so
declared to be immediately due and payable, together with all interest accrued
thereon and all other amounts payable under this Agreement, the Notes and the
other Credit Documents, shall become immediately due and payable without
presentment, demand, protest, notice of intent to accelerate or other notice or
legal process of any kind, all of which are hereby knowingly and expressly
waived by the Borrower (provided that, upon the occurrence of an Event of
Default pursuant to Section 8.1(g) or Section 8.1(h), all of the outstanding
principal amount of the Loans and all other amounts described in this subsection
(b) shall automatically become immediately due and payable without
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presentment, demand, protest, notice of intent to accelerate or other notice or
legal process of any kind, all of which are hereby knowingly and expressly
waived by the Borrower); and
(c) Exercise all rights and remedies available to it under this
Agreement, the other Credit Documents and applicable law.
8.3 Remedies: Set-Off. In addition to all other rights and
remedies available under the Credit Documents or applicable law or otherwise,
upon and at any time after the occurrence and during the continuance of any
Event of Default, each Lender may, and each is hereby authorized by the
Borrower, at any such time and from time to time, to the fullest extent
permitted by applicable law, without presentment, demand, protest or other
notice of any kind, all of which are hereby knowingly and expressly waived by
the Borrower, to set off and to apply any and all deposits (general or special,
time or demand, provisional or final) and any other property at any time held
(including at any branches or agencies, wherever located), and any other
indebtedness at any time owing, by such Lender to or for the credit or the
account of the Borrower against any or all of the Obligations to such Lender now
or hereafter existing, whether or not such Obligations may be contingent or
unmatured, the Borrower hereby granting to each Lender a continuing security
interest in and Lien upon all such deposits and other property as security for
such Obligations. Each Lender agrees promptly to notify the Borrower and the
Administrative Agent after any such set-off and application; provided, however,
that the failure to give such notice shall not affect the validity of such
set-off and application.
ARTICLE IX
THE ADMINISTRATIVE AGENT
9.1 Appointment. Each Lender hereby irrevocably appoints and
authorizes First Union to act as Administrative Agent hereunder and under the
other Credit Documents and to take such actions as Administrative Agent on its
behalf hereunder and under the other Credit Documents, and to exercise such
powers and to perform such duties, as are specifically delegated to the
Administrative Agent by the terms hereof or thereof, together with such other
powers and duties as are reasonably incidental thereto.
9.2 Nature of Duties. The Administrative Agent shall have no
duties or responsibilities other than those expressly set forth in this
Agreement and the other Credit Documents. The Administrative Agent shall not
have, by reason of this Agreement or any other Credit Document, a fiduciary
relationship in respect of any Lender; and nothing in this Agreement or any
other Credit Document, express or implied, is intended to or shall be so
construed as to impose upon the Administrative Agent any obligations or
liabilities in respect of this Agreement or any other Credit Document except as
expressly set forth herein or therein. 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 not be responsible for the negligence or
misconduct of any agents or attorneys-in-fact that it selects with reasonable
care. The Administrative Agent shall be entitled to consult with legal counsel,
independent public accountants and other experts selected by it with respect to
all matters pertaining to this Agreement and the other Credit Documents and
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its duties hereunder and thereunder and shall not be liable for any action taken
or omitted to be taken in good faith by it in accordance with the advice of such
counsel, accountants or experts. The Lenders hereby acknowledge that the
Administrative Agent shall not be under any duty to take any discretionary
action permitted to be taken by it pursuant to the provisions of this Agreement
or any other Credit Document unless it shall be requested in writing to do so by
the Required Lenders (or, where a higher percentage of the Lenders is expressly
required hereunder, such Lenders).
9.3 Exculpatory Provisions. Neither the Administrative Agent nor
any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates shall be (i) liable for any action taken or omitted to be taken by it
or such Person under or in connection with the Credit Documents, except for its
or such Person's own gross negligence or willful misconduct, (ii) responsible in
any manner to any Lender for any recitals, statements, information,
representations or warranties herein or in any other Credit Document or in any
document, instrument, certificate, report or other writing delivered in
connection herewith or therewith, for the execution, effectiveness, genuineness,
validity, enforceability or sufficiency of this Agreement or any other Credit
Document, or for the financial condition of the Borrower, its Subsidiaries or
any other Person, or (iii) required to ascertain or make any inquiry concerning
the performance or observance of any of the terms, provisions or conditions of
this Agreement or any other Credit Document or the existence or possible
existence of any Default or Event of Default, or to inspect the properties,
books or records of the Borrower or any of its Subsidiaries.
9.4 Reliance by Administrative Agent. The Administrative Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
notice, statement, consent or other communication (including, without
limitation, any thereof by telephone, telecopy, telex, telegram or cable)
believed by it in good faith to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons. The Administrative Agent may deem
and treat each Lender as the owner of its interest hereunder for all purposes
hereof unless and until a written notice of the assignment, negotiation or
transfer thereof shall have been given to the Administrative Agent in accordance
with the provisions of this Agreement. The Administrative Agent shall be
entitled to refrain from taking or omitting to take any action in connection
with this Agreement or any other Credit Document (i) if such action or omission
would, in the reasonable opinion of the Administrative Agent, violate any
applicable law or any provision of this Agreement or any other Credit Document
or (ii) unless and until it shall have received such advice or concurrence of
the Required Lenders (or, where a higher percentage of the Lenders is expressly
required hereunder, such Lenders) as it deems appropriate or it shall first have
been indemnified to its satisfaction by the Lenders against any and all
liability and expense (other than liability and expense arising from its own
gross negligence or willful misconduct) that may be incurred by it by reason of
taking, continuing to take or omitting to take any such action. Without limiting
the foregoing, no Lender shall have any right of action whatsoever against the
Administrative Agent as a result of the Administrative Agent's acting or
refraining from acting hereunder or under any other Credit Document in
accordance with the instructions of the Required Lenders (or, where a higher
percentage of the Lenders is expressly required hereunder, such Lenders), and
such instructions and any action taken or failure to act pursuant thereto shall
be binding upon all of the Lenders (including all subsequent Lenders).
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9.5 Non-Reliance on Administrative Agent and Other Lenders. Each
Lender expressly acknowledges that neither the Administrative Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or Affiliates has
made any representation or warranty to it and that no act by the Administrative
Agent or any such Person hereinafter taken, including any review of the affairs
of the Borrower and its Subsidiaries, shall be deemed to constitute any
representation or warranty by the Administrative Agent to any Lender. Each
Lender represents to the Administrative Agent that (i) it has, independently and
without reliance upon the Administrative Agent or any other Lender and based on
such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, prospects, operations,
properties, financial and other condition and creditworthiness of the Borrower
and its Subsidiaries and made its own decision to enter into this Agreement and
extend credit to the Borrower hereunder, and (ii) it will, independently and
without reliance upon the Administrative Agent or any other Lender 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 hereunder and under the other Credit Documents and to make
such investigation as it deems necessary to inform itself as to the business,
prospects, operations, properties, financial and other condition and
creditworthiness of the Borrower and its Subsidiaries. Except as expressly
provided in this Agreement and the other Credit Documents, the Administrative
Agent shall have no duty or responsibility, either initially or on a continuing
basis, to provide any Lender with any credit or other information concerning the
business, prospects, operations, properties, financial or other condition or
creditworthiness of the Borrower, its Subsidiaries or any other Person that may
at any time come into the possession of the Administrative Agent or any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates.
9.6 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 unless the Administrative Agent shall have received written notice from
the Borrower or a Lender 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 will give notice thereof to the Lenders as soon as reasonably practicable;
provided, however, that if any such notice has also been furnished to the
Lenders, the Administrative Agent shall have no obligation to notify the Lenders
with respect thereto. The Administrative Agent shall (subject to Sections 9.4
and 10.6) take such action with respect to such Default or Event of Default as
shall reasonably be directed by the Required Lenders; 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 Lenders except
to the extent that this Agreement expressly requires that such action be taken,
or not be taken, only with the consent or upon the authorization of the Required
Lenders or all of the Lenders.
9.7 Indemnification. To the extent the Administrative Agent is not
reimbursed by or on behalf of the Borrower, and without limiting the obligation
of the Borrower to do so, the Lenders agree (i) to indemnify the Administrative
Agent and its officers, directors, employees, agents, attorneys-in-fact and
Affiliates, ratably in proportion to their respective percentages as used in
determining the Required Lenders as of the date of determination, from and
against any
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and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses (including, without limitation, attorneys'
fees and expenses) or disbursements of any kind or nature whatsoever that may at
any time (including, without limitation, at any time following the repayment in
full of the Loans and the termination of the Commitments) be imposed on,
incurred by or asserted against the Administrative Agent 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
thereby or any action taken or omitted by the Administrative Agent under or in
connection with any of the foregoing, and (ii) to reimburse the Administrative
Agent upon demand, ratably in proportion to their respective percentages as used
in determining the Required Lenders as of the date of determination, for any
expenses incurred by the Administrative Agent in connection with the
preparation, negotiation, execution, delivery, administration, amendment,
modification, waiver or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement or any of the other Credit Documents
(including, without limitation, reasonable attorneys' fees and expenses and
compensation of agents and employees paid for services rendered on behalf of the
Lenders); provided, however, that no Lender shall be liable for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements to the extent resulting from the gross
negligence or willful misconduct of the party to be indemnified.
9.8 The Administrative Agent in its Individual Capacity. With
respect to its Commitment, the Loans made by it and the Note or Notes issued to
it, the Administrative Agent in its individual capacity and not as
Administrative Agent shall have the same rights and powers under the Credit
Documents as any other Lender and may exercise the same as though it were not
performing the agency duties specified herein; and the terms "Lenders,"
"Required Lenders," "holders of Notes" and any similar terms shall, unless the
context clearly otherwise indicates, include the Administrative Agent in its
individual capacity. The Administrative Agent and its Affiliates may accept
deposits from, lend money to, make investments in, and generally engage in any
kind of banking, trust, financial advisory or other business with the Borrower,
any of its Subsidiaries or any of their respective Affiliates as if the
Administrative Agent were not performing the agency duties specified herein, and
may accept fees and other consideration from any of them for services in
connection with this Agreement and otherwise without having to account for the
same to the Lenders.
9.9 Successor Administrative Agent. The Administrative Agent may
resign at any time by giving ten (10) days' prior written notice to the Borrower
and the Lenders. Upon any such notice of resignation, the Required Lenders will,
with the prior written consent of the Borrower (which consent shall not be
unreasonably withheld), appoint from among the Lenders a successor to the
Administrative Agent (provided that the Borrower's consent shall not be required
in the event a Default or Event of Default shall have occurred and be
continuing). If no successor to the Administrative Agent shall have been so
appointed by the Required Lenders and shall have accepted such appointment
within such ten-day period, then the retiring Administrative Agent may, on
behalf of the Lenders and after consulting with the Lenders and the Borrower,
appoint a successor Administrative Agent from among the Lenders. Upon the
acceptance of any appointment as Administrative Agent by a successor
Administrative Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers,
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privileges and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder and under the other Credit Documents. After any retiring
Administrative Agent's resignation as Administrative Agent, the provisions of
this Article shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Administrative Agent. If no successor to the
Administrative Agent has accepted appointment as Administrative Agent by the
thirtieth (30th) day following a retiring Administrative Agent's notice of
resignation, the retiring Administrative Agent's resignation shall nevertheless
thereupon become effective, and the Lenders shall thereafter perform all of the
duties of the Administrative Agent hereunder and under the other Credit
Documents until such time, if any, as the Required Lenders appoint a successor
Administrative Agent as provided for hereinabove.
9.10 Swingline Lender. The provisions of this Article (other than
Section 9.9) shall apply to the Swingline Lender mutatis mutandis to the same
extent as such provisions apply to the Administrative Agent.
9.11 Syndication Agent, Documentation Agent. Notwithstanding any
other provision of this Agreement or any of the other Credit Documents, the
Syndication Agent and the Documentation Agent are named as such for recognition
purposes only, and in their capacities as such shall have no powers, rights,
duties, responsibilities or liabilities with respect to this Agreement and the
other Credit Documents and the transactions contemplated hereby and thereby.
ARTICLE X
MISCELLANEOUS
10.1 Fees and Expenses. The Borrower agrees (i) whether or not the
transactions contemplated by this Agreement shall be consummated, to pay upon
demand all reasonable out-of-pocket costs and expenses of the Administrative
Agent (including, without limitation, the reasonable fees and expenses of
counsel to the Administrative Agent) in connection with (w) the Administrative
Agent's due diligence investigation in connection with, and the preparation,
negotiation, execution, delivery and syndication of, this Agreement and the
other Credit Documents, and any amendment, modification or waiver hereof or
thereof or consent with respect hereto or thereto, (ii) to pay upon demand all
reasonable out-of-pocket costs and expenses of the Administrative Agent and each
Lender (including, without limitation, reasonable attorneys' fees and expenses)
in connection with (y) any refinancing or restructuring of the credit
arrangement provided under this Agreement, whether in the nature of a
"work-out," in any insolvency or bankruptcy proceeding or otherwise and whether
or not consummated, and (z) the enforcement, attempted enforcement or
preservation of any rights or remedies under this Agreement or any of the other
Credit Documents, whether in any action, suit or proceeding (including any
bankruptcy or insolvency proceeding) or otherwise, and (iii) to pay and hold the
Administrative Agent and each Lender harmless from and against all liability for
any intangibles, documentary, stamp or other similar taxes, fees and excises, if
any, including any interest and penalties, and any finder's or brokerage fees,
commissions and expenses (other than any fees, commissions or expenses of
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finders or brokers engaged by the Administrative Agent or any Lender), that may
be payable in connection with the transactions contemplated by this Agreement
and the other Credit Documents.
10.2 Indemnification. The Borrower agrees, whether or not the
transactions contemplated by this Agreement shall be consummated, to indemnify
and hold the Administrative Agent and each Lender and each of their respective
directors, officers, employees, agents and Affiliates (each, an "Indemnified
Person") harmless from and against any and all claims, losses, damages,
obligations, liabilities, penalties, costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses) of any kind or nature
whatsoever, whether direct, indirect or consequential (collectively,
"Indemnified Costs"), that may at any time be imposed on, incurred by or
asserted against any such Indemnified Person as a result of, arising from or in
any way relating to the preparation, execution, performance or enforcement of
this Agreement or any of the other Credit Documents, any of the transactions
contemplated herein or therein or any transaction financed or to be financed in
whole or in part, directly or indirectly, with the proceeds of any Loans
(including, without limitation, in connection with the actual or alleged
generation, presence, discharge or release of any Hazardous Substances on, into
or from, or the transportation of Hazardous Substances to or from, any real
property at any time owned or leased by the Borrower or any of its Subsidiaries,
any other Environmental Claims or any violation of or liability under any
Environmental Law), or any action, suit or proceeding (including any inquiry or
investigation) by any Person, whether threatened or initiated, related to any of
the foregoing, and in any case whether or not such Indemnified Person is a party
to any such action, proceeding or suit or a subject of any such inquiry or
investigation; provided, however, that no Indemnified Person shall have the
right to be indemnified hereunder for any Indemnified Costs to the extent
resulting from the gross negligence or willful misconduct of such Indemnified
Person. All of the foregoing Indemnified Costs of any Indemnified Person shall
be paid or reimbursed by the Borrower, as and when incurred and upon demand.
10.3 Governing Law; Consent to Jurisdiction. THIS AGREEMENT AND THE
OTHER CREDIT DOCUMENTS HAVE BEEN EXECUTED, DELIVERED AND ACCEPTED IN, AND SHALL
BE DEEMED TO HAVE BEEN MADE IN, VIRGINIA AND SHALL BE GOVERNED BY AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA
(WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF). THE BORROWER HEREBY
CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF ANY STATE COURT WITHIN HENRICO
COUNTY, VIRGINIA OR ANY FEDERAL COURT LOCATED WITHIN THE EASTERN DISTRICT OF THE
COMMONWEALTH OF VIRGINIA FOR ANY PROCEEDING INSTITUTED HEREUNDER OR UNDER ANY OF
THE OTHER CREDIT DOCUMENTS, OR ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OF THE OTHER CREDIT DOCUMENTS, OR ANY PROCEEDING TO WHICH THE
ADMINISTRATIVE AGENT OR ANY LENDER OR THE BORROWER IS A PARTY, INCLUDING ANY
ACTIONS BASED UPON, ARISING OUT OF, OR IN CONNECTION WITH ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENT (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE
ADMINISTRATIVE AGENT OR ANY LENDER OR THE BORROWER. THE
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BORROWER IRREVOCABLY AGREES TO BE BOUND (SUBJECT TO ANY AVAILABLE RIGHT OF
APPEAL) BY ANY JUDGMENT RENDERED OR RELIEF GRANTED THEREBY AND FURTHER WAIVES
ANY OBJECTION THAT IT MAY HAVE BASED ON LACK OF JURISDICTION OR IMPROPER VENUE
OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY SUCH PROCEEDING. THE BORROWER
CONSENTS THAT ALL SERVICE OF PROCESS BE MADE BY REGISTERED OR CERTIFIED MAIL
DIRECTED TO IT AT ITS ADDRESS SET FORTH HEREINBELOW, AND SERVICE SO MADE SHALL
BE DEEMED TO BE COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT THEREOF OR THREE
(3) DAYS AFTER DEPOSIT IN THE UNITED STATES MAILS, PROPER POSTAGE PREPAID AND
PROPERLY ADDRESSED. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT TO SERVE
LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF THE
ADMINISTRATIVE AGENT OR ANY LENDER TO BRING ANY ACTION OR PROCEEDING AGAINST THE
BORROWER IN THE COURTS OF ANY OTHER JURISDICTION.
10.4 Waiver of Jury Trial. EACH OF THE BORROWER AND EACH LENDER
HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ITS RESPECTIVE RIGHTS
TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR IN CONNECTION
WITH THIS AGREEMENT OR ANY OF THE OTHER CREDIT DOCUMENTS, OR ANY PROCEEDING TO
WHICH THE BORROWER OR ANY LENDER IS A PARTY, INCLUDING ANY ACTIONS BASED UPON,
ARISING OUT OF, OR IN CONNECTION WITH ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENT (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE BORROWER OR ANY LENDER.
The scope of this waiver is intended to be all-encompassing of any and all
disputes that may be filed in any court and that relate to the subject matter of
this transaction, including, without limitation, contract claims, tort claims,
breach of duty claims and all other common law and statutory claims. Each of the
Borrower and each Lender (i) acknowledges that this waiver is a material
inducement to enter into a business relationship, that it has relied on this
waiver in entering into this Agreement, and that it will continue to rely on
this waiver in its related future dealings with the other parties hereto, and
(ii) further warrants and represents that it has reviewed this waiver with its
legal counsel and that, based upon such review, it knowingly and voluntarily
waives its jury trial rights to the extent permitted by applicable law. THIS
WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN
WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, MODIFICATIONS
OR SUPPLEMENTS TO OR RESTATEMENTS OF THIS AGREEMENT OR ANY OF THE OTHER CREDIT
DOCUMENTS. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL BY THE COURT.
10.5 Notices. All notices and other communications provided for
hereunder shall be in writing (including telegraphic, telex, facsimile
transmission or cable communication) and mailed, telegraphed, telexed,
telecopied, cabled or delivered to the party to be notified at the following
addresses:
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(a) if to the Borrower, to Hilb, Rogal and Hamilton Company, 4235
Innslake Drive, Glen Allen, Virginia 23060-1220, Attention: Chief Financial
Officer, Telecopy No. (804) 747-6046;
(b) if to the Administrative Agent, to First Union National Bank,
One First Union Center, DC-4, 301 South College Street, Charlotte, North
Carolina 28288-0680, Attention: Syndication Agency Services, Telecopy No. (704)
383-0288; and
(c) if to any Lender, to it at the address set forth on its
signature page hereto (or if to any Lender not a party hereto as of the date
hereof, at the address set forth in its Assignment and Acceptance);
or in each case, to such other address as any party may designate for itself by
like notice to all other parties hereto. All such notices and communications
shall be deemed to have been given (i) if mailed as provided above by any method
other than overnight delivery service, on the third Business Day after deposit
in the mails, (ii) if mailed by overnight delivery service, telegraphed,
telexed, telecopied or cabled, when delivered for overnight delivery, delivered
to the telegraph company, confirmed by telex answerback, transmitted by
telecopier or delivered to the cable company, respectively, or (iii) if
delivered by hand, upon delivery; provided that notices and communications to
the Administrative Agent shall not be effective until received by the
Administrative Agent.
10.6 Amendments, Waivers, etc. No amendment, modification, waiver
or discharge or termination of, or consent to any departure by the Borrower
from, any provision of this Agreement or any other Credit Document, shall be
effective unless in a writing signed by the Required Lenders (or by the
Administrative Agent at the direction or with the consent of the Required
Lenders), and then the same shall be effective only in the specific instance and
for the specific purpose for which given; provided, however, that no such
amendment, modification, waiver, discharge, termination or consent shall:
(a) unless agreed to by each Lender directly affected thereby, (i)
reduce or forgive the principal amount of any Loan, reduce the rate of or
forgive any interest thereon, or reduce or forgive any fees or other Obligations
(other than fees payable to the Administrative Agent for its own account), or
(ii) extend the Term Loan Maturity Date, the Revolving Credit Maturity Date or
any other date (including any scheduled date for the mandatory reduction or
termination of any Commitments) fixed for the payment of any principal of or
interest on any Loan (other than additional interest payable under Section
2.8(b) at the election of the Required Lenders, as provided therein), any fees
(other than fees payable to the Administrative Agent for its own account) or any
other Obligations;
(b) unless agreed to by all of the Lenders, (i) increase or extend
any Commitment of any Lender (it being understood that a waiver of any Event of
Default, if agreed to by the requisite Lenders hereunder, shall not constitute
such an increase), (ii) change the percentage of the aggregate Commitments or of
the aggregate unpaid principal amount of the Loans, or the number or percentage
of Lenders, that shall be required for the Lenders or any of them to take or
approve, or direct the Administrative Agent to take, any action hereunder
(including as set forth
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in the definition of "Required Lenders"), (iii) release any Subsidiary Guarantor
from its obligations under the Subsidiary Guaranty if the effect of such release
would cause the Borrower to be in noncompliance with Section 5.10(ii), or (iv)
change any provision of Section 2.15 or this Section; and
(c) unless agreed to by the Swingline Lender or the Administrative
Agent in addition to the Lenders required as provided hereinabove to take such
action, affect the respective rights or obligations of the Swingline Lender or
the Administrative Agent, as applicable, hereunder or under any of the other
Credit Documents; and provided further that (i) if any amendment, modification,
waiver or consent would adversely affect the holders of Loans of a particular
Class (the "affected Class") relative to holders of Loans of any other Class
(including, without limitation, by way of reducing the relative proportion of
any payments, prepayments or Commitment reductions to be applied for the benefit
of holders of Loans of the affected Class under Sections 2.6(d) and 2.6(e)),
then such amendment, modification, waiver or consent shall require the consent
of Lenders holding more than fifty-one percent (51%) of the aggregate
outstanding principal amount of all Loans of the affected Class, and (ii) the
Fee Letter may be amended or modified, and any rights thereunder waived, in a
writing signed by the parties thereto.
10.7 Assignments, Participations. (a) Each Lender may assign to one
or more other Eligible Assignees (each, an "Assignee") all or a portion of its
rights and obligations under this Agreement (including, without limitation, all
or a portion of its Commitments, the outstanding Loans made by it and the Note
or Notes held by it); provided, however, that (i) any such assignment (other
than an assignment to a Lender or an Affiliate of a Lender) shall not be made
without the prior written consent of the Administrative Agent and the Borrower
(to be evidenced by its counterexecution of the relevant Assignment and
Acceptance), which consent shall not be unreasonably withheld (provided that the
Borrower's consent shall not be required in the event a Default or Event of
Default shall have occurred and be continuing), (ii) each such assignment shall
be of a uniform, and not varying, percentage of all of the assigning Lender's
rights and obligations under this Agreement, and with respect to each Class of
Loans, each such assignment by a Lender of any of its interests relating to
Loans of a particular Class shall be made in such manner so that the same
portion of its Commitment, Loans, Note or Notes and other interests under and
with respect to such Class is assigned to the relevant Assignee, (iii) except in
the case of an assignment to a Lender or an Affiliate of a Lender, no such
assignment shall be in an aggregate principal amount (determined as of the date
of the Assignment and Acceptance with respect to such assignment) less than (x)
in the case of Term Loans and Revolving Credit Commitments, the aggregate amount
of $5,000,000, determined by combining the amount of the assigning Lender's
outstanding Term Loans and Revolving Loans and Unutilized Revolving Credit
Commitment (or, if less, the full amount of the assigning Lender's outstanding
Term Loans and the entire Revolving Credit Commitment), or (y) in the case of
Swingline Loans, the entire Swingline Commitment and the full amount of the
outstanding Swingline Loans, and (iv) the parties to each such assignment will
execute and deliver to the Administrative Agent, for its acceptance and
recording in the Register, an Assignment and Acceptance, together with any Note
or Notes subject to such assignment, and will pay a nonrefundable processing fee
of $3,000 to the Administrative Agent for its own account. Upon such execution,
delivery, acceptance and recording of the Assignment and Acceptance, from and
after the effective date specified therein, which effective date shall be at
least five Business Days after the execution thereof (unless the Administrative
Agent shall
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otherwise agree), (A) the Assignee thereunder shall be a party hereto and, to
the extent that rights and obligations hereunder have been assigned to it
pursuant to such Assignment and Acceptance, shall have the rights and
obligations of the assigning Lender hereunder with respect thereto and (B) the
assigning Lender shall, to the extent that rights and obligations hereunder have
been assigned by it pursuant to such Assignment and Acceptance, relinquish its
rights (other than rights under the provisions of this Agreement and the other
Credit Documents relating to indemnification or payment of fees, costs and
expenses, to the extent such rights relate to the time prior to the effective
date of such Assignment and Acceptance) and be released from its obligations
under this Agreement (and, in the case of an Assignment and Acceptance covering
all or the remaining portion of such assigning Lender's rights and obligations
under this Agreement, such Lender shall cease to be a party hereto). The terms
and provisions of each Assignment and Acceptance shall, upon the effectiveness
thereof, be incorporated into and made a part of this Agreement, and the
covenants, agreements and obligations of each Lender set forth therein shall be
deemed made to and for the benefit of the Administrative Agent and the other
parties hereto as if set forth at length herein.
(b) The Administrative Agent will maintain at its address for
notices referred to herein a copy of each Assignment and Acceptance delivered to
and accepted by it and a register for the recordation of the names and addresses
of the Lenders and the Commitments of, and principal amount of the Loans owing
to, each Lender from time to time (the "Register"). The entries in the Register
shall be conclusive and binding for all purposes, absent manifest error, and the
Borrower, the Administrative Agent and the Lenders may treat each Person whose
name is recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower and
each Lender at any reasonable time and from time to time upon reasonable prior
notice.
(c) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an Assignee and, if required,
counterexecuted by the Borrower, together with the Note or Notes subject to such
assignment and the processing fee referred to in subsection (a) above, the
Administrative Agent will (i) accept such Assignment and Acceptance, (ii) on the
effective date thereof, record the information contained therein in the Register
and (iii) give notice thereof to the Borrower and the Lenders. Within five (5)
Business Days after its receipt of such notice, the Borrower, at its own
expense, will execute and deliver to the Administrative Agent, in exchange for
the surrendered Note or Notes, a new Note or Notes to the order of the Assignee
(and, if the assigning Lender has retained any portion of its rights and
obligations hereunder, to the order of the assigning Lender), prepared in
accordance with the applicable provisions of Section 2.4 as necessary to
reflect, after giving effect to the assignment, the Commitments (or outstanding
Term Loans, as the case may be) of the Assignee and (to the extent of any
retained interests) the assigning Lender, dated the date of the replaced Note or
Notes and otherwise in substantially the form of Exhibits A-1, A-2 and A-3, as
applicable. The Administrative Agent will return canceled Notes to the Borrower.
(d) Each Lender may, without the consent of the Borrower, the
Administrative Agent or any other Lender, sell to one or more other Persons
(each, a "Participant") participations in any portion comprising less than all
of its rights and obligations under this Agreement (including, without
limitation, a portion of its Commitments, the outstanding Loans made by it and
the Note
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or Notes held by it); provided, however, that (i) such Lender's obligations
under this Agreement shall remain unchanged and such Lender shall remain solely
responsible for the performance of such obligations, (ii) no Lender shall sell
any participation that, when taken together with all other participations, if
any, sold by such Lender, covers all of such Lender's rights and obligations
under this Agreement, (iii) the Borrower, the Administrative Agent and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement, and
no Lender shall permit any Participant to have any voting rights or any right to
control the vote of such Lender with respect to any amendment, modification,
waiver, consent or other action hereunder or under any other Credit Document
(except as to actions that would (x) reduce or forgive the principal amount of
any Loan, reduce the rate of or forgive any interest thereon, or reduce or
forgive any fees or other Obligations, (y) extend the Term Loan Maturity Date,
the Revolving Credit Maturity Date or any other date fixed for the payment of
any principal of or interest on any Loan, any fees or any other Obligations, or
(z) increase or extend any Commitment of any Lender), and (iv) no Participant
shall have any rights under this Agreement or any of the other Credit Documents,
each Participant's rights against the granting Lender in respect of any
participation to be those set forth in the participation agreement, and all
amounts payable by the Borrower hereunder shall be determined as if such Lender
had not granted such participation. Notwithstanding the foregoing, each
Participant shall have the rights of a Lender for purposes of Sections 2.16(a),
2.16(b), 2.17, 2.18 and 8.3, and shall be entitled to the benefits thereto, to
the extent that the Lender granting such participation would be entitled to such
benefits if the participation had not been made, provided that no Participant
shall be entitled to receive any greater amount pursuant to any of such Sections
than the Lender granting such participation would have been entitled to receive
in respect of the amount of the participation made by such Lender to such
Participant had such participation not been made.
(e) Nothing in this Agreement shall be construed to prohibit any
Lender from pledging or assigning all or any portion of its rights and interest
hereunder or under any Note to any Federal Reserve Bank as security for
borrowings therefrom; provided, however, that no such pledge or assignment shall
release a Lender from any of its obligations hereunder.
(f) Any Lender or participant may, in connection with any
assignment or participation or proposed assignment or participation pursuant to
this Section, disclose to the Assignee or Participant or proposed Assignee or
Participant any information relating to the Borrower and its Subsidiaries
furnished to it by or on behalf of any other party hereto, provided that such
Assignee or Participant or proposed Assignee or Participant agrees in writing to
keep such information confidential to the same extent required of the Lenders
under Section 10.13.
10.8 No Waiver. The rights and remedies of the Administrative Agent
and the Lenders expressly set forth in this Agreement and the other Credit
Documents are cumulative and in addition to, and not exclusive of, all other
rights and remedies available at law, in equity or otherwise. No failure or
delay on the part of the Administrative Agent or any Lender in exercising any
right, power or privilege shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, power or privilege preclude other
or further exercise thereof or the exercise of any other right, power or
privilege or be construed to be a waiver of any Default or Event of Default. No
course of dealing between any of the Borrower and the Administrative
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Agent or the Lenders or their agents or employees shall be effective to amend,
modify or discharge any provision of this Agreement or any other Credit Document
or to constitute a waiver of any Default or Event of Default. No notice to or
demand upon the Borrower in any case shall entitle the Borrower to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the right of the Administrative Agent or any Lender to exercise any
right or remedy or take any other or further action in any circumstances without
notice or demand.
10.9 Successors and Assigns. This Agreement shall be binding upon,
inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto, and all references herein to any party shall be
deemed to include its successors and assigns; provided, however, that (i) the
Borrower shall not sell, assign or transfer any of its rights, interests, duties
or obligations under this Agreement without the prior written consent of all of
the Lenders and (ii) any Assignees and Participants shall have such rights and
obligations with respect to this Agreement and the other Credit Documents as are
provided for under and pursuant to the provisions of Section 10.7.
10.10 Survival. All representations, warranties and agreements made
by or on behalf of the Borrower or any of its Subsidiaries in this Agreement and
in the other Credit Documents shall survive the execution and delivery hereof or
thereof, the making and repayment of the Loans. In addition, notwithstanding
anything herein or under applicable law to the contrary, the provisions of this
Agreement and the other Credit Documents relating to indemnification or payment
of fees, costs and expenses, including, without limitation, the provisions of
Sections 2.16(a), 2.16(b), 2.17, 2.18, 9.7, 10.1 and 10.2, shall survive the
payment in full of all Loans, the termination of the Commitments, and any
termination of this Agreement or any of the other Credit Documents.
10.11 Severability. To the extent any provision of this Agreement is
prohibited by or invalid under the applicable law of any jurisdiction, such
provision shall be ineffective only to the extent of such prohibition or
invalidity and only in such jurisdiction, without prohibiting or invalidating
such provision in any other jurisdiction or the remaining provisions of this
Agreement in any jurisdiction.
10.12 Construction. The headings of the various articles, sections
and subsections of this Agreement have been inserted for convenience only and
shall not in any way affect the meaning or construction of any of the provisions
hereof. Except as otherwise expressly provided herein and in the other Credit
Documents, in the event of any inconsistency or conflict between any provision
of this Agreement and any provision of any of the other Credit Documents, the
provision of this Agreement shall control.
10.13 Confidentiality. Each Lender agrees to keep confidential,
pursuant to its customary procedures for handling confidential information of a
similar nature and in accordance with safe and sound banking practices, all
nonpublic information provided to it by or on behalf of the Borrower or any of
its Subsidiaries in connection with this Agreement or any other Credit Document;
provided, however, that any Lender may disclose such information (i) to its
directors, employees and agents and to its auditors, counsel and other
professional advisors, (ii) at the demand or request of any bank regulatory
authority, court or other Governmental Authority having or asserting
jurisdiction over such Lender, as may be required pursuant to subpoena or
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other legal process, or otherwise in order to comply with any applicable
Requirement of Law, (iii) in connection with any proceeding to enforce its
rights hereunder or under any other Credit Document or any other litigation or
proceeding related hereto or to which it is a party, (iv) to the Administrative
Agent or any other Lender, (v) to the extent the same has become publicly
available other than as a result of a breach of this Agreement and (vi) pursuant
to and in accordance with the provisions of Section 10.7(f).
10.14 Counterparts; Effectiveness. This Agreement may be executed in
any number of counterparts and by 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. This
Agreement shall become effective upon the execution of a counterpart hereof by
each of the parties hereto and receipt by the Administrative Agent and the
Borrower of written or telephonic notification of such execution and
authorization of delivery thereof.
10.15 Disclosure of Information. The Borrower agrees and consents to
the Administrative Agent's disclosure of information relating to this
transaction to Gold Sheets and other similar bank trade publications. Such
information will consist of deal terms and other information customarily found
in such publications.
10.16 Entire Agreement. THIS AGREEMENT AND THE OTHER DOCUMENTS AND
INSTRUMENTS EXECUTED AND DELIVERED IN CONNECTION HEREWITH (A) EMBODY THE ENTIRE
AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES HERETO AND THERETO RELATING TO
THE SUBJECT MATTER HEREOF AND THEREOF, (B) SUPERSEDE ANY AND ALL PRIOR
AGREEMENTS AND UNDERSTANDINGS OF SUCH PERSONS, ORAL OR WRITTEN, RELATING TO THE
SUBJECT MATTER HEREOF AND THEREOF, INCLUDING, WITHOUT LIMITATION, THE COMMITMENT
LETTER FROM FIRST UNION TO THE BORROWER DATED MARCH 15, 1999 BUT SPECIFICALLY
EXCLUDING THE FEE LETTER, AND (C) MAY NOT BE AMENDED, SUPPLEMENTED, CONTRADICTED
OR OTHERWISE MODIFIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
HILB, ROGAL AND HAMILTON COMPANY
By: /s/ Timothy J. Korman
-------------------------------
Title: Executive Vice President
----------------------------
(signatures continued)
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FIRST UNION NATIONAL BANK, as
Administrative Agent and as a Lender
Term Loan By: /s/ G. M. Golightly
Commitment: -------------------------------
$11,045,454.54 Title: Senior Vice President
----------------------------
Revolving Credit
Commitment:
$15,954,545.46 Instructions for wire transfers to the
Administrative Agent:
First Union National Bank
ABA Routing No. 053000219
Charlotte, North Carolina
Account Number: 5000000018275
Account Name: Hilb, Rogal And Hamilton
Company
Attention: Syndication Agency Services
Address for notices as a Lender:
First Union National Bank
One First Union Center, 10th Floor
301 South College Street
Charlotte, North Carolina 28288-0735
Attention: Thomas A. Hunter, IV
Telephone: (704) 383-6666
Telecopy: (704) 383-7611
Lending Office:
First Union National Bank
One First Union Center, 10th Floor
301 South College Street
Charlotte, North Carolina 28288-0735
Attention: Thomas A. Hunter, IV
Telephone: (704) 383-6666
Telecopy: (704) 383-7611
(signatures continued)
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PNC BANK, as Documentation Agent
and as a Lender
Term Loan By: /s/ Louis R. Cestello
Commitment: ----------------------------
$9,818,181.82 Title: Vice President
-------------------------
Revolving Credit
Commitment:
$14,181,818.18 Address for notices:
249 Fifth Avenue
PI-POPP-06-5
Pittsburgh, Pennsylvania 15222
Attention: Lou Cestello
Telephone: (412) 762-8239
Telecopy: (412) 762-7353
Lending Office:
249 Fifth Avenue
PI-POPP-06-5
Pittsburgh, Pennsylvania 15222
Attention: Lou Cestello
Telephone: (412) 762-8239
Telecopy: (412) 762-7353
(signatures continued)
87
<PAGE>
NATIONSBANK, N.A.
Term Loan By: /s/ Edward H. Phillips, Jr.
Commitment: ----------------------------
$9,818,181.82 Title: Vice President
-------------------------
Revolving Credit
Commitment:
$14,181,818.18 Address for notices:
1111 East Main Street, 18th Floor
Richmond, Virginia 23260-5086
Attention: Edward H. Phillips, Jr.
Telephone: (804) 788-3019
Telecopy: (804) 788-3432
Lending Office:
1111 East Main Street, 18th Floor
Richmond, Virginia 23260-5086
Attention: Edward H. Phillips, Jr.
Telephone: (804) 788-3019
Telecopy: (804) 788-3432
88
<PAGE>
FLEET NATIONAL BANK
Term Loan By: /s/ M. E. Vickery
Commitment: ----------------------------
$8,181,818.18 Title: Assistant Vice President
-------------------------
Revolving Credit
Commitment:
$11,818,181.82 Address for notices:
777 Main Street
Ins. Industry CT/MO/0250
Hartford, Connecticut 06118
Attention: Insurance Industry,
Mark E. Vickery
Telephone: (860) 986-1264
Telecopy: (860) 986-1264
Lending Office:
777 Main Street
Ins. Industry CT/MO/0250
Hartford, Connecticut 06118
Attention: Insurance Industry,
Mark E. Vickery
Telephone: (860) 986-1264
Telecopy: (860) 986-1264
(signatures continued)
89
<PAGE>
CRESTAR BANK
Term Loan By: /s/ Brad H. Booker
Commitment: ----------------------------
$6,136,363.64 Title: Senior Vice President
-------------------------
Revolving Credit
Commitment:
$8,863,636.36 Address for notices:
919 East Main Street, 22nd Floor
Richmond, Virginia 23219
Attention: Christopher B. Werner
Telephone: (804) 782-5998
Telecopy: (804) 782-5413
Lending Office:
919 East Main Street, 22nd Floor
Richmond, Virginia 23219
Attention: Christopher B. Werner
Telephone: (804) 782-5998
Telecopy: (804) 782-5413
90
Exhibit 99.2
Press Release
Hilb, Rogal and Hamilton Company Contact: Andrew L. Rogal
4235 Innslake Drive, P.O. Box 1220 Phone: (804) 747-6500
Glen Allen, Virginia 23060-1220 Fax: (804) 747-6046
Phoenix Contact: Alice S. Ericson
Phone: (860) 403-5946
Fax: (860) 403-7887
For Immediate Release
May 3, 1999
HILB, ROGAL AND HAMILTON COMPANY COMPLETES
ACQUISITION OF AMERICAN PHOENIX CORPORATION
Richmond, Virginia----Hilb, Rogal and Hamilton Company (HRH) today announced the
completion of its acquisition of American Phoenix Corporation (American Phoenix)
from Phoenix Home Life Mutual Insurance Company (Phoenix Home Life).
American Phoenix is a property and casualty insurance brokerage firm which
generated revenues of approximately $73 million in 1998 through its network of
16 branch offices. HRH purchased American Phoenix for approximately $49 million
in cash, $32 million (principal amount) of convertible notes, and 1.0 million
shares of Common Stock.
President and Chief Executive Officer Andrew L. Rogal said, "We are delighted to
join forces with American Phoenix, strengthening the positions of both companies
in our competitive, consolidating industry. The acquisition increases HRH's
middle market distribution capabilities, and provides a variety of opportunities
to build and diversify the revenue base and enhance the efficiency of our
combined operations. We believe the transaction significantly improves HRH's
prospects for earnings growth."
The Company cautions readers that the statements contained herein regarding the
Company's future operations and business prospects are forward-looking
statements made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are based upon
management's current knowledge and assumptions about future events and involve
risks and uncertainties that could cause actual results to differ materially
from anticipated results. For more details on factors that could affect
expectations, see the Company's Annual Report on Form 10-K for the year ended
December 31, 1998, as filed with the Securities and Exchange Commission.
Hilb, Rogal and Hamilton Company provides insurance agency services to a wide
spectrum of clients through a network of more than 70 insurance agencies in the
United States. The Company is traded on the New York Stock Exchange, symbol HRH,
and is ranked as the 7th largest United States insurance agency.
