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: June 17, 1996
LIFE USA HOLDING, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 0-18485 41-1578384
(State of Incorporation) (Commission File Number) (IRS Employer
Identification No.)
Suite 95, Interchange North Building
300 South Highway 169
Minneapolis, Minnesota 55426
(Address of principal executive offices)
(612) 546-7386
(Registrant's telephone number, including area code)
Item 5. Other Events
On May 17, 1996, Life USA Holding, Inc. (the Company) entered into an agreement
with two of its reinsurers under which the Company will receive a long-term line
of credit in the amount of $30 million. Funds drawn against the line of credit
will be used to fund certain investments and acquisitions the Company may make,
capital contributions to LifeUSA Insurance Company, the Company's wholly-owned
life insurance subsidiary, or for capital expenditures.
Item 7. Exhibits
Attached hereto are the following exhibits:
Description of Document Exhibit No.
Loan Agreement dated May 17, 1996 between Life USA Holding, Inc.
and Employers Reassurance Corporation and Named Lenders.............. 1
Stock Pledge Agreement dated May 17, 1996 between Life USA Holding, Inc.
and Employers Reassurance Corporation................................ 2
Press release announcing the signing of a loan agreement between
Life USA Holding, Inc. and two of its reinsurers..................... 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Life USA HOLDING, INC.
Date: June 17, 1996 By /s/ Mark A. Zesbaugh
--------------------
Mark A. Zesbaugh
Executive Vice President
Chief Financial Officer
EXHIBIT 1
U.S. $30,000,000
LOAN AGREEMENT
Dated as of May 17, 1996
between
LIFE USA HOLDING, INC.
as Borrower
and
THE LENDERS NAMED HEREIN
as Lenders
and
EMPLOYERS REASSURANCE CORPORATION
as Agent and Lender
TABLE OF CONTENTS
SECTION Page
1. DEFINITIONS......................................................... 1
2. AMOUNT AND TERMS OF CREDIT.......................................... 22
2.1. Term Loan Advances............................................ 22
2.2. Mandatory Prepayment.......................................... 23
2.3. Optional Prepayment; Prepayment Premium....................... 24
2.4. Use of Proceeds............................................... 24
2.5. Interest on Term Loan......................................... 24
2.6. Fees.......................................................... 26
2.7. Receipt of Payment............................................ 26
2.8. Application of Payments....................................... 27
2.9. Sharing of Payments, Etc...................................... 27
2.10. Accounting.................................................... 28
2.11. Indemnity..................................................... 28
2.12. Access........................................................ 28
2.13. Capital Adequacy.............................................. 29
2.14. Taxes......................................................... 29
2.15. Limitations on Section 2.13 and 2.14.......................... 32
3. CONDITIONS PRECEDENT................................................ 32
3.1. Conditions to Initial Term Loan............................... 32
3.2. Further Conditions to each Term Loan Advance.................. 35
4. REPRESENTATIONS AND WARRANTIES...................................... 36
4.1. Corporate Existence; Compliance with Law...................... 36
4.2. Executive Offices............................................. 36
4.3. Subsidiaries.................................................. 36
4.4. Corporate Power; Authorization;
Enforceable Obligations...................................... 37
4.5. Solvency...................................................... 37
4.6. Financial Statements.......................................... 37
4.7. Projections................................................... 39
4.8. No Default.................................................... 40
4.9. Burdensome Restrictions....................................... 40
4.10. Labor Matters................................................. 40
4.11. Other Ventures; FMO Investments............................... 40
4.12. Investment Company Act........................................ 41
4.13. Margin Regulations............................................ 41
4.14. Taxes......................................................... 41
4.15. ERISA......................................................... 42
4.16. No Litigation................................................. 44
4.17. Brokers....................................................... 45
4.18. Employment and Labor Agreements............................... 45
4.19. Patents, Trademarks, Copyrights and Licenses.................. 45
4.20. Full Disclosure............................................... 46
4.21. Liens......................................................... 46
4.22. No Material Adverse Effect.................................... 46
4.23. Environmental Protection...................................... 46
4.24. Insurance Licenses............................................ 47
4.25. Agreements with Affiliates.................................... 47
4.26. Reinsurance Agreements; Operating Contracts................... 47
4.27. A.M. Best Rating.............................................. 48
5. FINANCIAL STATEMENTS AND INFORMATION................................ 48
5.1. Reports and Notices........................................... 48
5.2. Certificates; Other Information............................... 50
5.3. Communication with Accountants................................ 52
6. AFFIRMATIVE COVENANTS............................................... 53
6.1. Maintenance of Existence and
Conduct of Business.......................................... 53
6.2. Payment of Obligations........................................ 53
6.3. Financial Covenants........................................... 54
6.4. Books and Records............................................. 55
6.5. Litigation.................................................... 55
6.6. Insurance..................................................... 55
6.7. Compliance with Law........................................... 56
6.8. Agreements.................................................... 56
6.9. Supplemental Disclosure....................................... 56
6.10. Employee Plans................................................ 57
6.11. Compliance with Taxes......................................... 59
6.12. Environmental Matters......................................... 59
6.13. SEC Filings; Certain Other Notices............................ 60
6.14. Reinsurance and Surplus Relief
Reinsurance.................................................. 60
6.15. Portfolio Management.......................................... 61
6.16. Pledge of FMO Investments
and Intellectual Property.................................... 61
7. NEGATIVE COVENANTS.................................................. 61
7.1. Mergers, Etc.................................................. 61
7.2. Investments; Loans and Advances............................... 61
7.3. Indebtedness.................................................. 62
7.4. Employee Loans................................................ 62
7.5. Capital Structure............................................. 63
7.6. Maintenance of Business....................................... 63
7.7. Transactions with Affiliates.................................. 63
7.8. Guaranteed Indebtedness....................................... 64
7.9. Liens......................................................... 64
7.10. Capital Expenditures.......................................... 64
7.11. Sales of Assets............................................... 64
7.12. Cancellation of Indebtedness.................................. 64
7.13. Events of Default............................................. 65
7.14. Restricted Payments........................................... 65
7.15. ERISA......................................................... 65
7.16. Payment or Modification of
Subordinated Obligations..................................... 66
7.17. Modification of Allianz Agreement............................. 67
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES.............................. 67
8.1. Events of Default............................................. 67
8.2. Remedies...................................................... 70
8.3. Waivers by Borrower........................................... 71
8.4. Right of Set-Off.............................................. 71
9. THE AGENT........................................................... 72
9.1. Authorization and Action...................................... 72
9.2. Agent's Reliance, Etc......................................... 72
9.3. ERAC and Affiliates........................................... 73
9.4. Lender Credit Decision........................................ 73
9.5. Indemnification............................................... 73
9.6. Successor Agent............................................... 74
10. MISCELLANEOUS....................................................... 75
10.1. Complete Agreement; Modification
of Agreement; Sale of Interest.............................. 75
10.2. Fees and Expenses............................................ 76
10.3. No Waiver by Agent or Any Lender............................. 78
10.4. Remedies..................................................... 78
10.5. Waiver of Jury Trial......................................... 78
10.6. Severability................................................. 78
10.7. Parties...................................................... 79
10.8. Conflict of Terms............................................ 79
10.9. Authorized Signature......................................... 79
10.10. Governing Law................................................ 79
10.11. Notices...................................................... 79
10.12. Confidentiality.............................................. 81
10.13. Survival..................................................... 81
10.14. Section Titles............................................... 81
10.15. Counterparts................................................. 82
INDEX OF EXHIBITS AND SCHEDULES
Exhibit A - Form of Term Loan Note
Exhibit B - Form of Notice of Term Loan Borrowing
Exhibit C - Form of Pledge Agreement
Exhibit D - Form of Legal Opinion
Schedule 1 - FMO Investment Guidelines
Schedule 2 - Lender Addresses
Schedule 4.2 - Executive Offices
Schedule 4.3 - Subsidiaries
Schedule 4.6(b) - Exceptions to Statutory Financial Statements
Schedule 4.6(c) - Material Adverse Changes
Schedule 4.11 - Other Ventures; FMO Investments
Schedule 4.14 - Tax Matters
Schedule 4.15 - ERISA Matters
Schedule 4.16 - Litigation
Schedule 4.18 - Employment Matters
Schedule 4.19 - Patents and Trademarks
Schedule 4.24 - Insurance Licenses
Schedule 4.25 - Agreements with Affiliates
Schedule 4.26(a) - Material Reinsurance Agreements
Schedule 4.26(b) - Material Operating Contracts
Schedule 7.2 - Investment Guidelines
Schedule 10.9 - Authorized Signatures
LOAN AGREEMENT, dated as of May 17, 1996, between LIFE USA HOLDING,
INC., a Minnesota corporation having an office at Suite 95, Interchange North
Building, 300 South Highway 169, Minneapolis, Minnesota 55426 ("Borrower"), the
lenders ("Lenders") listed on the signature pages hereof, and EMPLOYERS
REASSURANCE CORPORATION, a Kansas corporation having its principal office at
5200 Metcalf, Overland Park, Kansas 66201 ("ERAC"), as agent for the Lenders
hereunder (ERAC, in such capacity, being "Agent").
W I T N E S S E T H :
WHEREAS, Borrower has requested Lenders to make secured term loans to
Borrower, of up to $30,000,000 in aggregate principal amount, which Borrower
will use as provided herein; and
WHEREAS, Lenders have agreed to make such secured term loans to
Borrower, but only upon the terms, and subject to the conditions contained
herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, the parties hereto agree as follows:
1. DEFINITIONS
In addition to the defined terms appearing above, capitalized terms
used in this Agreement shall have (unless otherwise provided elsewhere in this
Agreement) the following respective meanings when used herein:
"Affiliate" shall mean, with respect to any Person, (i) each Person
that, directly or indirectly, owns or controls, whether beneficially, or as a
trustee, guardian or other fiduciary, 5% or more of the Stock having ordinary
voting power in the election of directors of such Person, (ii) each Person that
controls, is controlled by or is under common control with such Person or any
Affiliate of such Person or (iii) each of such Person's officers, directors,
joint venturers and partners. For the purpose of this definition, "control" of a
Person shall mean the possession, directly or indirectly, of the power to direct
or cause the direction of its management or policies, whether through the
ownership of voting securities, by contract or otherwise. Notwithstanding the
foregoing, it is understood that as of the date hereof Allianz is not deemed to
be an Affiliate of Borrower and the Allianz Warrant and Allianz Subordinated
Debenture, to the extent not exercised or converted, shall not be deemed to be
ownership of the Common Stock which is issuable upon such exercise or
conversion.
"Agent" shall mean ERAC, as agent for Lenders hereunder, and any
successor Agent appointed pursuant to Section 9.6.
"Agreement" shall mean this Loan Agreement, including all amendments,
modifications and supplements hereto and any appendices, exhibits or schedules
to any of the foregoing, and shall refer to this Agreement, as the same may be
in effect at the time such reference becomes operative.
"Allianz" shall mean Allianz Life Insurance Company of North America, a
Minnesota corporation.
"Allianz Agreement" shall mean the joint marketing agreement, dated
February 16, 1995 between Borrower and Allianz, as such agreement may be
amended, supplemented or modified from time to time in accordance with the terms
of this Agreement.
"Allianz Subordinated Debenture" shall mean the Variable Rate
Convertible Subordinated Debenture due February 15, 2010 in the original
principal amount of $30,000,000 issued by Borrower pursuant to the Debenture
Purchase Agreement, as amended, modified or supplemented from time to time in
accordance with the terms of this Agreement.
"Allianz Warrant" shall have the meaning assigned to "Conversion
Protection Warrant" in the Debenture Purchase Agreement.
"Annual Statement" shall mean the annual financial statement of LifeUSA
or any Subsidiary thereof which is an insurance company which is required to be
filed with the insurance commissioner (or similar authority) of its state of
domicile, together with all exhibits or schedules filed therewith. References to
amounts on particular exhibits and schedules of the Annual Statement are based
on the format promulgated by the NAIC for 1995 Annual Statements. If such format
is changed in future years so that different information is contained in such
items or they no longer exist, it is understood that the reference is to
information consistent with that reported in the referenced item in the 1995
Annual Statement of LifeUSA or any Subsidiary thereof, it being understood,
however, that Borrower and Lenders shall in good faith attempt to agree upon
necessary amendments to this Agreement to give effect to such changes so as to
preserve the original intent of this Agreement.
"Applicable Rate" shall mean, at any date of determination, the sum of
(i) 3.15% plus (ii) the annual yield for treasury notes of the United States of
America maturing May, 2000 (constant maturity) (or the average of such yields if
more than one is published), as published by the Federal Reserve Bank of New
York in the issue of the Wall Street Journal (Eastern Edition) five Business
Days prior to the date of any Term Loan Advance or in the event such report
shall not so appear, in such other nationally recognized publication as Agent,
may, from time to time, specify to Borrower.
"AVR" shall mean, as to any Person at a particular date, mandatory
asset valuation reserve, computed in accordance with SAP.
"Borrower" shall mean Life USA Holding, Inc., a Minnesota corporation
having an office at Suite 95, Interchange North Building, 300 South Highway 169,
Minneapolis, Minnesota 55426.
"Business Day" shall mean any day that is not a Saturday, a Sunday or a
day on which banks are required or permitted to be closed in the State of New
York.
"Capital Expenditures" shall mean all payments for any fixed assets or
improvements or for replacements, substitutions or additions thereto, that have
a useful life of more than one year and which are required to be capitalized
under GAAP.
"Capital and Surplus" shall mean, as to any Person at a particular
date, the total amount shown on line 37, page 3, column 1 of the Annual
Statement of such Person, or (if such particular date is other than the date as
of which an Annual Statement is prepared) an amount determined in a consistent
manner for such date.
"Capital Lease" shall mean, with respect to any Person, any lease of
any property (whether real, personal or mixed) by such Person as lessee that, in
accordance with GAAP, either would be required to be classified and accounted
for as a capital lease on a balance sheet of such Person or otherwise be
disclosed as such in a note to such balance sheet, other than, in the case of
Borrower or a Subsidiary of Borrower, any such lease under which Borrower or
such Subsidiary is the lessor.
"Capital Lease Obligation" shall mean, with respect to any Capital
Lease, the amount of the obligation of the lessee thereunder that, in accordance
with GAAP, would appear on a balance sheet of such lessee in respect of such
Capital Lease or otherwise be disclosed in a note to such balance sheet.
"Cash Equivalents" shall mean, (i) marketable direct obligations issued
or unconditionally guaranteed by the United States of America or any agency
thereof maturing within one year from the date of acquisition thereof; (ii)
commercial paper maturing no more than 270 days from the date of creation
thereof and at the time of their acquisition having the highest rate obtainable
from either Standard & Poor's Corporation or Moody's Investors Services, Inc.;
and (iii) certificates of deposit, maturing no more than one year from the date
of creation thereof, issued by commercial banks incorporated under the laws of
the United States of America, each having combined capital, surplus and
undivided profits of not less than $200,000,000 and having a rating of "A" or
better by a nationally recognized rating agency.
"Cash Sources" shall mean, with respect to Borrower for any period, the
sum of (1) the fees received by Borrower from Allianz pursuant to the Allianz
Agreement, (2) the fees received by Borrower from LifeUSA pursuant to the
Management Agreement, (3) cash payments received on any investments (including,
without limitation, any FMO Investments and agent advances) held directly by
Borrower, excluding any realized gains and including returns of principal on FMO
Investments and agent advances, (4) dividends received from any Subsidiary of
Borrower and (5) solely for the purpose of Section 6 hereof, cash, Cash
Equivalents and marketable securities as of the date on which Cash Sources is
determined or as of the end of the period for which a measurement thereof is
made.
"Cash Sources to Cash Uses Ratio" shall mean, at any date of
calculation thereof, the ratio of (a) Cash Sources for the immediately preceding
four consecutive fiscal quarters to (b) Cash Uses.
"Cash Uses" shall mean, with respect to Borrower for any period, the
sum of (1) all interest and principal paid or required to be paid on
Indebtedness of Borrower, plus (2) paid or required to be paid Capital
Expenditures of the Borrower, plus (3) taxes paid or required to be paid by
Borrower and not reimbursed to Borrower from any Subsidiary of Borrower, plus
(4) solely for purposes of the definition of Excess Cash Flow, all capital
contributions made by Borrower to any Subsidiary and any purchases by Borrower
of capital stock of any Subsidiary of Borrower, plus (5) agent balances created,
plus (6) tax sharing payments from Borrower to any Subsidiary of Borrower, plus
(7) all other expenses paid or required to be paid, in each case during such
period, by Borrower; in each case, without any double counting for any payments
which are required to be paid in one period and paid in a subsequent period.
"Change of Control" shall mean: (i) any Person or any Persons acting
together that would constitute a "group" (for purposes of Section 13(d) of the
Exchange Act, or any successor provision thereto) (a "Group"), together with any
Affiliates thereof, shall beneficially own (as defined in Rule 13d-3 under the
Exchange Act, or any successor provision thereto) 50% or more of the Voting
Stock of Borrower; or (ii) during any period of two consecutive years,
individuals who at the beginning of such period constitute Borrower's Board of
Directors (together with any new Director whose election by Borrower's Board of
Directors or whose nomination for election by Borrower's stockholders was
approved by a vote of at least two-thirds of the Directors then still in office
who either were Directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute at least two-thirds of the Directors then in office.
"Charges" shall mean all federal, state, county, city, municipal,
local, foreign or other governmental (including, without limitation, PBGC) taxes
at the time due and payable, levies, assessments, charges, liens, claims or
encumbrances upon or relating to (i) the Collateral, (ii) the Obligations, (iii)
Borrower's or any of its Subsidiaries' employees, payroll, income or gross
receipts, (iv) Borrower's or any of its Subsidiaries' ownership or use of any of
its assets, or (v) any other aspect of Borrower's or any of the Subsidiaries'
business.
"Closing Date" shall mean that date as of which Lenders shall make the
initial Term Loan Advance.
"Code" shall mean the Uniform Commercial Code of the jurisdiction with
respect to which such term is used, as in effect from time to time.
"Collateral" shall mean the Pledged Collateral covered by Pledge
Agreement (as Pledged Collateral is defined in such document).
"Collateral Documents" shall mean the Pledge Agreement.
"Commitment Fee" shall have the meaning assigned to it in Section
2.6(b) hereof.
"Commitment Termination Date" shall mean the earlier of (i) the date
three years from the date hereof and (ii) the date of termination of the Term
Loan Commitments pursuant to Section 8.2.
"Commission Allowance" shall mean any commission which is paid or
payable by LifeUSA or its Subsidiaries as commissions under any Reinsurance
Agreement.
"Common Stock" shall mean the common stock par value $.01 per share, of
Borrower.
"Compensation" shall mean, with respect to any Person, all payments and
accruals commonly considered to be compensation, including, without limitation,
all wages, salary, deferred payment arrangements, bonus payments and accruals,
profit sharing arrangements, payments in respect of stock option or phantom
stock option or similar arrangements, stock appreciation rights or similar
rights, incentive payments, pension or employment benefit contributions or
similar payments, made to or accrued for the account of such Person or otherwise
for the direct or indirect benefit of such Person.
"Consolidated Net Worth" shall mean, with respect to any Person, at any
date, the total assets less the total liabilities of such Person and its
consolidated Subsidiaries, at such date determined in accordance with GAAP,
excluding (i) any adjustments required under FASB #115, (ii) any consideration
other than cash received after the date hereof for the issuance of Common Stock
and (iii) any net capital gains realized by Borrower and its Subsidiaries after
the date hereof.
"Convertible Subordinated Debentures" shall mean the Convertible
Subordinated Debentures due 2000 issued pursuant to the Indenture, as such
debentures may be amended, supplemented or modified from time to time in
accordance with the terms of this Agreement.
"Debenture Purchase Agreement" shall mean Debenture Purchase Agreement,
dated February 17, 1995 among Borrower and Allianz, pursuant to which the
Allianz Subordinate Debenture was issued, as such agreement may be amended,
modified or supplemented from time to time in accordance with the provisions of
this Agreement.
"Default" shall mean any event which, with the passage of time or
notice or both, would, unless cured or waived, become an Event of Default.
"Department" shall have the meaning assigned to it in Section 4.6(b)
hereof.
"Disposition" means any sale, lease or other disposition, or series of
sales or dispositions of any assets of Borrower or its Subsidiaries (including,
without limitation, by merger or consolidation, and whether by operation of law
or otherwise) other than in the ordinary course of business of Borrower and its
Subsidiaries or the issuance or sale of any Stock or debt of Borrower or of any
Stock of any Subsidiary of Borrower, except for the issuance of Common Stock
upon the conversion and/or exercise of (i) the Allianz Debenture, (ii) the
Allianz Warrant, (iii) the Convertible Subordinated Debentures or (iv) any
option or warrant now outstanding or hereafter granted in the ordinary course of
Borrower's business.
"DOL" shall mean the United States Department of Labor, or any
successor thereto.
"Environmental Laws" shall mean all federal, state and local laws,
statutes, ordinances and regulations, now or hereafter in effect, and in each
case as amended or supplemented from time to time, and any judicial or
administrative interpretation thereof, including, without limitation, any
applicable judicial or administrative order, consent decree or judgment,
relative to the applicable real estate owned or leased by Borrower or its
Subsidiaries, relating to the regulation and protection of human health, safety,
the environment and natural resources (including, without limitation, ambient
air, surface water, groundwater, wetlands, land surface or subsurface strata,
wildlife, aquatic species and vegetation). Environmental Laws include but are
not limited to the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended (42 U.S.C. ss. 9601 et seq.) ("CERCLA"); the
Hazardous Material Transportation Act, as amended (49 U.S.C. ss. 1801 et seq.);
the Federal Insecticide, Fungicide, and Rodenticide Act, as amended (7 U.S.C.
ss. 136 et seq.); the Resource Conservation and Recovery Act, as amended (42
U.S.C. ss. 6901 et seq.) ("RCRA"); the Toxic Substance Control Act, as amended
(15 U.S.C. ss. 2601 et seq.); the Clean Air Act, as amended (42 U.S.C. ss. 740
et seq.); the Federal Water Pollution Control Act, as amended (33 U.S.C. ss.
1251 et seq.); the Occupational Safety and Health Act, as amended (29 U.S.C. ss.
651 et seq.) ("OSHA"); and the Safe Drinking Water Act, as amended (42 U.S.C.
ss. 300f et seq.), and any and all regulations promulgated thereunder, and all
analogous state and local counterparts or equivalents and any transfer of
ownership notification or approval statutes such as the New Jersey Environmental
Cleanup Responsibility Act (N.J. Stat. Ann. ss. 13:1K-6 et seq.) ("ECRA").
"Environmental Liabilities and Costs" shall mean all liabilities,
obligations, responsibilities, remedial actions, losses, damages, punitive
damages, consequential damages, treble damages, costs and expenses (including,
without limitation, all fees, disbursements and expenses of counsel, experts and
consultants and costs of investigation and feasibility studies), fines,
penalties, sanctions and interest incurred as a result of any claim, suit,
action or demand by any person or entity, whether based in contract, tort,
implied or express warranty, strict liability, criminal or civil statute or
common law (including, without limitation, any thereof arising under any
Environmental Law, permit, order or agreement with any Governmental Authority)
and which relate to any health or safety condition regulated under any
Environmental Law or in connection with any other environmental matter or Spill
or the presence of a hazardous substance or threatened Spill or hazardous
substance.
"ERAC" shall mean Employers Reassurance Corporation, a Kansas
corporation having its principal office at 5200 Metcalf, Overland Park, Kansas
66201.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974
(or any successor legislation thereto), as amended from time to time and any
regulations promulgated thereunder.
"ERISA Affiliate" shall mean, with respect to Borrower, any trade or
business (whether or not incorporated) under common control with Borrower and
which, together with Borrower, are treated as a single employer within the
meaning of Section 414(b), (c), (m) or (o) of the IRC.
"ERISA Event" shall mean, with respect to Borrower or any ERISA
Affiliate, (i) a Reportable Event with respect to a Title IV Plan or a
Multiemployer Plan; (ii) the withdrawal of Borrower, any of its Subsidiaries or
any ERISA Affiliate from a Title IV Plan subject to Section 4063 of ERISA during
a plan year in which it was a substantial employer, as defined in Section
4001(a)(2) of ERISA; (iii) the complete or partial withdrawal of Borrower, any
of its Subsidiaries or any ERISA Affiliate from any Multiemployer Plan; (iv) the
filing of a notice of intent to terminate a Title IV Plan or the treatment of a
plan amendment as a termination under Section 4041 of ERISA; (v) the institution
of proceedings to terminate a Title IV Plan or Multiemployer Plan by the PBGC;
(vi) the failure to make required contributions to a Qualified Plan; or (vii)
any other event or condition which might reasonably be expected to constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Title IV Plan or Multiemployer Plan or the
imposition of any liability under Title IV of ERISA, other than PBGC premiums
due but not delinquent under Section 4007 of ERISA.
"Event of Default" shall have the meaning assigned to it in Section 8.1
hereof.
"Excess Cash Flow" shall mean, with respect to any Person for any
period, Cash Sources minus Cash Uses.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Federal Reserve Board" shall have the meaning assigned to it in
Section 4.13 hereof.
"FASB" shall mean the Financial Accounting Standards Board.
"Financials" shall mean the financial statements referred to in
Sections 4.6(a) and (b) hereof.
"Fiscal Year" shall mean the calendar year. Subsequent changes of the
fiscal year of Borrower shall not change the term "Fiscal Year," unless the
Required Lenders shall consent in writing to such changes.
"FMO" shall mean an independent marketing organization primarily
engaged in the business of marketing life insurance products.
"FMO Investment" shall mean any acquisition of, investment in, or loan
to, an FMO; provided that such acquisition, investment or loan complies with the
FMO investment guidelines set forth on Schedule 1 hereto.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time.
"Governmental Authority" shall mean any nation or government, any state
or other political subdivision thereof, and any agency, department or other
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Guaranteed Indebtedness" shall mean, as to any Person, any obligation
of such Person guaranteeing any indebtedness, lease, dividend, or other
obligation ("primary obligations") of any other Person (the "primary obligor")
in any manner including, without limitation, any obligation or arrangement of
such Person (a) to purchase or repurchase any such primary obligation, (b) to
advance or supply funds (i) for the purchase or payment of any such primary
obligation or (ii) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency or any balance sheet
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 to make payment of such primary
obligation, or (d) to indemnify the owner of such primary obligation against
loss in respect thereof.
"IMR" shall mean, as to any Person at a particular date, mandatory
investment maintenance reserve, computed in accordance with SAP.
"Indebtedness" of any Person shall mean (i) all indebtedness of such
Person for borrowed money or for the deferred purchase price of property or
services (including, without limitation, reimbursement and all other obligations
with respect to surety bonds, letters of credit and bankers' acceptances,
whether or not matured, but not including obligations to trade creditors
incurred in the ordinary course of business), (ii) all obligations evidenced by
notes, bonds, debentures or similar instruments, (iii) all indebtedness created
or arising under any conditional sale or other title retention agreements with
respect to property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default are limited
to repossession or sale of such property), (iv) all Capital Lease Obligations,
(v) all Guaranteed Indebtedness, (vi) all Indebtedness referred to in clause
(i), (ii), (iii), (iv) or (v) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon or in property (including, without limitation, accounts and
contract rights) owned by such Person, even though such Person has not assumed
or become liable for the payment of such Indebtedness, (vii) the Obligations,
and (viii) all liabilities under Title IV of ERISA.
"Indenture" shall mean the Indenture, dated as of April 1, 1991,
between Borrower and Continental Bank, National Association, pursuant to which
the Convertible Subordinated Debentures were issued, as such agreement may be
amended supplemented or modified from time to time in accordance with the terms
of this Agreement.
"Index Rate" shall mean the greater of (i) the highest prime or base
rate of interest publicly announced by any of Bankers Trust Company, Chemical
Bank, Citibank, N.A., Morgan Guaranty Trust Company of New York and The Chase
Manhattan Bank, N.A. (whether or not such rate is actually charged by any such
bank), and (ii) the most recent published annual yield on 90 day commercial
paper (or the average of such yields if more than one is published) placed by
dealers, as quoted either in the Federal Reserve Rate Report which customarily
appears in the Friday issue of the Wall Street Journal (Eastern Edition) under
"Money Rates" or in the event such report shall not so appear, in such other
nationally recognized publication as Agent may, from time to time, specify to
Borrower.
"Intentional Default" shall mean any action taken by any Loan Party or
omission by any of them to take any action with the intent to create, and which
shall have resulted in, a Default.
"Interest Charges" shall mean, with respect to Borrower for any period,
the amount which, in conformity with GAAP, would be set forth opposite the
caption "interest expense" (or any like caption) on an income statement of
Borrower for the relevant period ended on such date, which expenses are paid or
required to be paid during such period, without double counting for any payments
which are required to be paid in one period and are actually paid in a
subsequent period.
"Interest Coverage Ratio" shall mean, at any date of calculation
thereof, the ratio of (a) Cash Sources of Borrower for the immediately preceding
four consecutive fiscal quarters less all operating expenses of Borrower for
such period to (b) Interest Charges of Borrower for such period.
"Interest Payment Date" shall have the meaning assigned to such term in
Section 2.5(a) hereof.
"Investment Guidelines" shall have the meaning assigned to it in
Section 7.2(b) hereof.
"IRC" shall mean the Internal Revenue Code of 1986, as amended, and any
successor thereto.
"IRS" shall mean the Internal Revenue Service, or any successor
thereto.
"Lender" shall mean each Lender listed on the signature pages hereof
and any future holder of all or any portion of the Notes.
"Licenses" shall have the meaning assigned to it in Section 4.24
hereof.
"Lien" shall mean any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lien, Charge, claim, security interest,
easement or encumbrance, or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, any Capital Lease or title retention agreement, any financing lease
having substantially the same economic effect as any of the foregoing, and the
filing of, or agreement to give, any financing statement perfecting a security
interest under the Code or comparable law of any jurisdiction, but excluding any
operating lease which is considered a true lease and not a security interest
under the Code).
"LifeUSA" shall mean Life USA Insurance Company, a Minnesota
corporation and wholly owned Subsidiary of Borrower.
"Loan Documents" shall mean this Agreement, the Notes, the Collateral
Documents, and all other agreements, instruments, documents and certificates,
including, without limitation, pledges, powers of attorney, consents,
assignments, contracts, notices, and all other written matter whether
heretofore, now or hereafter executed by or on behalf of Borrower and delivered
to Agent or any Lender, in their capacity as such hereunder, in connection with
this Agreement or the transactions contemplated hereby.
"Loan Party" shall mean Borrower, LifeUSA and all other Subsidiaries of
Borrower.
"Management Agreement" shall mean the Amended and Restated Management
Agreement, dated as of June 27, 1994, between Borrower and LifeUSA, as such
agreement may be amended, modified from time to time in accordance with the
terms of this Agreement.
"Material Adverse Effect" shall mean a material adverse effect on (i)
the business, assets, operations, or financial condition of Borrower or Borrower
and its Subsidiaries taken as a whole, (ii) Borrower's ability to pay the
Obligations in accordance with the terms thereof, (iii) the Collateral or (iv)
Lenders' Liens on the Collateral or the priority of any such Lien.
"Material Reinsurance Agreement" shall mean any Reinsurance Agreement
or Retrocession Agreement involving Borrower or any of its Subsidiaries (1) with
respect to which there is reinsurance in force which exceeds $50 million; (2)
with respect to which the ceded premiums for the immediately preceding 12-month
period exceeds $500,000; (3) which has been in effect for less than one year,
but which Borrower or any of its Subsidiaries reasonably anticipates will result
in ceded premiums in excess of $100,000 for the initial 12-month period; (4)
which involves the cession of more than 50% of each ceding insurer's liabilities
(other than facultative cessions where the reinsurer has a right to reject the
risk); or (5) which applies to a market or product line in which Borrower and
its Subsidiaries are not presently engaged. Where more than one of the insurers
is a party to a Reinsurance Agreement or Retrocession Agreement, the total
exposures and premiums for all such insurers shall be utilized in determining
the applicability of clauses (1), (2) and (3).
"Maximum Lawful Rate" shall have the meaning assigned to it in Section
2.5(d) hereof.
"Maximum Term Loan" shall have the meaning assigned to it in Section
2.1(a) hereof.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA, and to which Borrower, any of its Subsidiaries or
any ERISA Affiliate is making, is obligated to make, has made or been obligated
to make, contributions on behalf of participants who are or were employed by any
of them.
"NAIC" shall mean the National Association of Insurance Commissioners
or any successor thereto.
"NAIC Tests" shall mean the ratios and other financial measurements
developed by NAIC under its Insurance Regulatory Information System or, in lieu
thereof, any successor thereto, replacement thereof or substitute implemented by
the NAIC.
"Net Cash Proceeds" shall mean, with respect to any Disposition, the
aggregate cash proceeds received by the Borrower or any of its Subsidiaries (to
the extent (a) such Subsidiary is permitted by applicable insurance laws to
dividend such funds to its Parent and each subsequent Parent until paid to
Borrower and (b) such dividend payment would not impair such Subsidiaries'
ability to pay dividends in an amount sufficient to allow Borrower to make
scheduled debt service payments during the succeeding 12 month period), net of
the direct costs relating to such sale (including, without limitation, legal,
accounting and investment banking fees, and sales commission), taxes paid or
payable as a result thereof (after taking into account any available tax credits
or deductions and any tax sharing arrangements), amounts required to be applied
to the repayment of Indebtedness secured by a Lien on the asset or assets the
subject of such sale and any reserve for adjustment in respect of the sale price
of such asset or assets.
"Notice of Term Loan Borrowing" shall have the meaning assigned to it
in Section 2.1(b) hereof.
"Obligations" shall mean all loans, advances, debts, liabilities, and
obligations, for monetary amounts (whether or not such amounts are liquidated or
determinable) owing by Borrower to Agent or Lenders, and all covenants and
duties regarding such amounts, of any kind or nature, present or future, whether
or not evidenced by any note, agreement or other instrument, arising under any
of the Loan Documents. This term includes, without limitation, all interest,
fees, charges, expenses, attorneys' fees and any other sum chargeable to
Borrower under any of the Loan Documents.
"Parent" shall mean, as to any corporate entity, the Person who owns
100% of the capital stock of such entity.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor thereto.
"Pension Plan" shall mean an employee pension benefit plan, as defined
in Section (3)(2) of ERISA (other than a Multiemployer Plan), which is not an
individual account plan, as defined in Section 3(34) of ERISA, and which
Borrower, any of its Subsidiaries or, if a Title IV Plan, any ERISA Affiliate
maintains, contributes to or has an obligation to contribute to on behalf of
participants who are or were employed by any of them.
"Permitted Encumbrances" shall mean the following encumbrances: (i)
Liens for taxes or assessments or other governmental charges or levies, either
not yet due and payable or to the extent that nonpayment thereof is permitted by
the terms of this Agreement; (ii) pledges or deposits securing obligations under
workmen's compensation, unemployment insurance, social security or public
liability laws or similar legislation; (iii) pledges or deposits securing bids,
tenders, contracts (other than contracts for the payment of money) or leases to
which Borrower or any of its Subsidiaries is a party as lessee made in the
ordinary course of business; (iv) deposits securing public or statutory
obligations of Borrower or any of its Subsidiaries; (v) workers, mechanics,
suppliers, carriers, warehousemen's or other similar liens arising in the
ordinary course of business and securing indebtedness aggregating not in excess
of $100,000 at any time outstanding, not yet due and payable or to the extent
payment thereof is being contested and such contest is permitted by this
Agreement; (vi) deposits securing or in lieu of surety, appeal or customs bonds
in proceedings to which Borrower or any of its Subsidiaries is a party; (vii)
any attachment or judgment Lien, unless the judgment it secures shall not,
within 60 days after the entry thereof, have been discharged or execution
thereof stayed pending appeal, or shall not have been discharged within 60 days
after the expiration of any such stay; and (viii) zoning restrictions,
easements, licenses, or other restrictions on the use of real property or other
minor irregularities in title (including leasehold title) thereto, so long as
the same do not materially impair the use, value, or marketability of such real
property, leases or leasehold estates.
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
limited liability company, institution, public benefit corporation, entity or
government (whether federal, state, county, city, municipal or otherwise,
including, without limitation, any instrumentality, division, agency, body or
department thereof).
"Plan" shall mean, with respect to Borrower or any ERISA Affiliate, at
any time, an employee benefit plan, as defined in Section 3(3) of ERISA, which
Borrower or any of its Subsidiaries maintains, contributes to or has an
obligation to contribute to on behalf of participants who are or were employed
by any of them.
"Pledge Agreement" shall mean the agreement entered into between Agent
and the Borrower substantially in the form attached hereto as Exhibit C,
including all amendments, modifications and supplements thereto, and shall refer
to the Pledge Agreement as the same may be in effect at the time such reference
becomes operative.
"Pre-Tax Statutory Operating Income" shall mean, with respect to
LifeUSA and its Subsidiaries in the aggregate for any period, the amount
reported as net gain from operations after dividends to policyholders and before
Federal income taxes on line 29, page 4, column 1 of the Annual Statement of
LifeUSA and its Subsidiaries on an aggregate basis with respect to the
applicable period in each instance determined in conformity with SAP, after
appropriate intercompany eliminations.
"Projections" shall mean the projections referred to in Section 4.7
hereof.
"Qualified Plan" shall mean an employee pension benefit plan, as
defined in Section 3(2) of ERISA, which is intended to be tax-qualified under
Section 401(a) of the IRC, and which Borrower, any of its Subsidiaries or any
ERISA Affiliate maintains, contributes to or has an obligation to contribute to
on behalf of participants who are or were employed by any of them.
"Ratable Portion" or ratably shall mean, with respect to any Lender,
the quotient obtained by dividing the Term Loan Commitment of such Lender by the
Term Loan Commitments of all Lenders.
"Reinsurance Agreement" shall mean any agreement, contract, treaty or
other arrangement (other than Surplus Relief Reinsurance) whereby either (i)
other insurers assume insurance from Borrower or any of its Subsidiaries or (ii)
Borrower or any of its Subsidiaries cedes insurance to other insures.
"Reportable Event" shall mean any of the events described in Section
4043(b)(1), (2), (3), (5), (6), (8) or (9) of ERISA.
"Required Lenders" shall mean, as of any date, the holders of Notes
evidencing at least a majority of the aggregate unpaid principal amount of the
Term Loan.
"Reserves" shall mean such reserves as may be established by Borrower
or any Subsidiary of Borrower or as may be otherwise required in accordance with
GAAP or SAP as applicable.
"Restricted Lease" shall mean, as at any date, any lease of property
(whether real, personal or mixed) other than Capital Leases.
"Restricted Payment" shall mean (i) the declaration of any dividends or
the incurrence of any liability to make any other payment or distribution of
cash or other property or assets in respect of Borrower's Stock (other than
shares of Borrower's Stock or rights to acquire such Stock) or (ii) any payment
on account of the purchase, redemption or other retirement of Borrower's Stock
or any other payment or distribution made in respect thereof, either directly or
indirectly.
"Retiree Welfare Plan" shall refer to any Welfare Plan providing for
continuing coverage or benefits for any participant or any beneficiary of a
participant after such participant's termination of employment, other than
continuation coverage provided pursuant to Section 4980B of the IRC and at the
sole expense of the participant or the beneficiary of the participant.
"Retrocession Agreement" shall mean any agreement, contract, treaty or
other arrangement (other than Surplus Relief Reinsurance) whereby either (i)
Borrower or any of its Subsidiaries cedes reinsurance to other insurers or (ii)
other insurers assume insurance from Borrower or any of its Subsidiaries.
"Risk-Based Capital Ratio" shall mean the ratio of (a) Total Adjusted
Capital, as typically reported on line 27, page 23 of the Annual Statement, to
(b) Authorized Control Level Risk Based Capital, as typically reported on line
28, page 23 of the Annual Statement. Such ratio shall be calculated according to
guidelines applicable to each Subsidiary of Borrower engaged in the life
insurance business established by the NAIC or any applicable insurance
regulatory authority.
"SAP" shall mean, as to any insurance company, the statutory accounting
practices prescribed or permitted by the insurance commissioner (or other
similar authority) in the jurisdiction of domicile of such insurance company for
the preparation of annual statements and other financial reports by insurance
corporations of the same type as such insurance company, as in effect from time
to time.
"Solvent" shall mean, when used with respect to any Person, that:
(a) the fair value of the property of such Person is greater
than the total amount of liabilities, including, without limitation,
contingent liabilities of such Person;
(b) the present fair salable value of such Person's assets is
in excess of the total amount of such Person's liabilities;
(c) such Person is able to pay its debts as they become due;
and
(d) such Person does not have unreasonably small capital to
carry on such Person's business as theretofore operated and all
businesses in which such Person is about to engage.
The amount of contingent liabilities at any time shall be computed as the amount
that, in the light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual or
matured liability.
"Spill" shall have the meaning assigned to it in Section 4.23.
"Stated Rate" shall have the meaning assigned to it in Section 2.5(a)
hereof.
"Statutory Financial Statements" shall have the meaning assigned to it
in Section 4.6(b)(i) hereof.
"Stock" shall mean all shares, options, warrants, general or limited
partnership interests, participations or other equivalents (regardless of how
designated) of or in a corporation, partnership or equivalent entity whether
voting or nonvoting, including, without limitation, common stock, preferred
stock, or any other "equity security" (as such term is defined in Rule 3a11-1 of
the General Rules and Regulations promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended).
"Subordinated Debt" shall mean, collectively, the Allianz Subordinated
Debenture, the Convertible Subordinated Debentures and any refinancing thereof
or other subordinated Indebtedness permitted to be incurred by Borrower under
this Agreement.
"Subsidiary" shall mean, with respect to any Person, (a) any
corporation of which an aggregate of more than 50% of the outstanding Stock
having ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether, at the time, Stock of any other class
or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time, directly or indirectly,
owned legally or beneficially by such Person and/or one or more Subsidiaries of
such Person, and (b) any partnership in which such Person and/or one or more
Subsidiaries of such Person shall have an interest (whether in the form of
voting or participation in profits or capital contribution) of more than 50%.
"Surplus Relief Reinsurance" shall mean any transaction in which
Borrower or any of its Subsidiaries either assumes or cedes business under a
reinsurance agreement that would be considered a "financing-type" reinsurance
agreement as determined in the Second Edition of the AICPA Audit Guide for Stock
Life Insurance Companies (pp. 91-92), as the same may be revised from time to
time.
"Taxes" shall have the meaning assigned to it in Section 2.14(a)
hereof.
"Term Loan Advance" shall have the meaning assigned to it in Section
2.1(a) hereof.
"Term Loan" shall mean the aggregate amount of Term Loan Advances
outstanding at any time.
"Term Loan Commitment" shall have the meaning assigned to it in Section
2.1(a).
"Term Loan Note" or "Notes" shall have the meaning assigned to it in
Section 2.1(a) hereof.
"Termination Date" shall mean the date on which the Term Loan and any
other Obligations hereunder and the obligations of the Lenders to make further
Term Loan Advances hereunder have been completely discharged.
"Title IV Plan" shall mean a Pension Plan, other than a Multiemployer
Plan, which is covered by Title IV of ERISA.
"Unfunded Pension Liability" shall mean, at any time, the aggregate
amount, if any, of the sum of (i) the amount by which the present value of all
accrued benefits under each Title IV Plan exceeds the fair market value of all
assets of such Title IV Plan allocable to such benefits in accordance with Title
IV of ERISA, all determined as of the most recent valuation date for each such
Title IV Plan using the actuarial assumptions in effect under such Title IV
Plan, and (ii) for a period of five (5) years following a transaction reasonably
likely to be covered by Section 4069 of ERISA, the liabilities (whether or not
accrued) that could be avoided by Borrower, any of its Subsidiaries or any ERISA
Affiliate as a result of such transaction.
"Voting Stock" of any Person shall mean capital Stock of such Person
which ordinarily has voting power for the election of directors (or persons
performing similar functions) of such Person, whether at all times or only so
long as no senior class of securities has such voting power by reason of any
contingency.
"Welfare Plans" shall mean any welfare plan, as defined in Section 3(1)
of ERISA, which is maintained or contributed to by Borrower, any of its
Subsidiaries or any ERISA Affiliate.
"Withdrawal Liability" means, at any time, the aggregate amount of the
liabilities, if any, pursuant to Section 4201 of ERISA, and any increase in
contributions pursuant to Section 4243 of ERISA with respect to all
Multiemployer Plans.
Any accounting term used in this Agreement shall have, unless otherwise
specifically provided herein, the meaning customarily given such term in
accordance with SAP or GAAP, and all financial computations hereunder shall be
computed, unless otherwise specifically provided herein, in accordance with SAP
or GAAP, in each case as in effect on the date hereof, consistently applied. If
any accounting principle or policy (whether GAAP or SAP or both) shall change
after the date hereof, and such change would impact the computations determining
compliance with Section 6.3 hereof, including the definitions used therein, then
each of the parties hereto agrees that it shall, at such time, negotiate in good
faith to make such changes deemed necessary or appropriate in light of the
change in accounting principle or policy. That certain terms or computations are
explicitly modified by the phrase "in accordance with GAAP" or "in accordance
with SAP", as the case may be shall in no way be construed to limit the
foregoing.
All other undefined terms contained in this Agreement shall, unless the
context indicates otherwise, have the meanings provided for by the Code as in
effect in the State of New York to the extent the same are used or defined
therein.
The words "herein," "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole, including the Exhibits and Schedules
hereto, as the same may from time to time be amended, modified or supplemented
and not to any particular section, subsection or clause contained in this
Agreement.
Wherever from the context it appears appropriate, each term stated in
either the singular or plural shall include the singular and the plural, and
pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, the feminine and the neuter.
2. AMOUNT AND TERMS OF CREDIT
2.1. Term Loan Advances. (a) Upon and subject to the terms and
conditions hereof, each Lender severally agrees to make available, from time to
time, until the Commitment Termination Date, for Borrower's use and upon the
request of Borrower therefor, advances (each, a "Term Loan Advance") which shall
not at any given time exceed the sum of the amount set forth opposite each
Lender's name on the signature pages hereof (collectively, the "Term Loan
Commitments"). The aggregate amount of the Term Loan Commitments is $30,000,000
(the "Maximum Term Loan"). The Term Loan Advances of each Lender shall be
evidenced by a promissory note to be executed and delivered by Borrower at the
time of each Term Loan Advance, the form of which is attached hereto as Exhibit
A (each, a "Term Loan Note").
(b) Each Term Loan Advance shall be made on notice, given by Borrower
to Agent and each Lender at least 15 days prior to the date of the proposed
borrowing. Each such notice from the Borrower (a "Notice of Term Loan
Borrowing") shall be in writing in substantially the form of Exhibit B hereto,
specifying therein the requested date and amount of such Term Loan Advance.
(c) Upon fulfillment of the applicable conditions set forth in Section
3 hereof, each Lender shall, before 2:00 P.M. (New York City time) on the date
of the proposed borrowing, make available to Borrower by wire transfer to a bank
designated by Borrower, in immediately available funds, such Lender's Ratable
Portion of the proposed aggregate amount of the Term Loan Advance.
(d) Each Notice of Term Loan Borrowing shall be irrevocable and binding
on Borrower.
(e) Each Term Loan Advance shall be in an aggregate amount of not less
than $5,000,000.
(f) Amounts prepaid pursuant to Sections 2.2 and 2.3 hereof may not be
reborrowed.
(g) The failure of any Lender to make its Term Loan Advance shall not
relieve any other Lender of its obligation, if any, hereunder to make its Term
Loan Advance, but no Lender shall be responsible for the failure of any other
Lender to make the Term Loan Advance to be made by such other Lender on the date
of any Term Loan Advance.
(h) Borrower shall repay the principal amount of each Term Loan Note in
eight (8) equal quarterly payments commencing June 30, 1999, in an amount equal
to 12.5% of the principal amount of the Term Loan outstanding on the Commitment
Termination Date.
(i) All repayments made pursuant to Section 2.1(h) shall be applied to
reduce the then outstanding principal amount of each Term Loan Advance on a pro
rata basis.
2.2. Mandatory Prepayment. (a) No later than June 30, 1999 and March
31, 2000, Borrower shall prepay the unpaid principal amount of the Term Loan,
together with accrued interest to the date of such prepayment, in an amount
equal to 25% of the Excess Cash Flow of Borrower for the prior Fiscal Year.
(b) Upon receipt by Borrower or its Subsidiaries of Net Cash Proceeds
from any Disposition, Borrower shall prepay the unpaid principal amount of the
Terms Loan, together with accrued interest to the date of such prepayment, in an
amount equal to 100% of such Net Cash Proceeds in excess of $2,000,000 realized
by Borrower or any Subsidiary of Borrower from any Disposition or series of
Dispositions from and after the date hereof. Borrower shall use all commercially
reasonably efforts to obtain all regulatory consents necessary to make any
dividend payments required to be made to comply with the provisions of this
Section 2.2(b).
(c) All prepayments made pursuant to this Section 2.2 shall be applied
in the inverse order of maturity of the Term Loan to be applied to reduce the
then outstanding principal amount of each Term Loan Advance on a pro rata basis.
(d) No prepayment fee shall be payable in respect of any mandatory
prepayment under this Section 2.2.
2.3. Optional Prepayment; Prepayment Premium. Borrower shall have the
right at any time or from time to time, on one Business Day's prior written
notice to Agent and each Lender, to voluntarily prepay all or a portion of the
Term Loan, without premium or penalty. Each prepayment shall be accompanied by
the payment of accrued and unpaid interest on the amount being prepaid, through
the date of prepayment and shall be applied as provided in Section 2.2(c) above.
2.4. Use of Proceeds. Borrower shall apply the proceeds of each Term
Loan Advance (i) to fund, or reimburse Borrower for payments made after April 1,
1996 for, the cash portion of any FMO Investment, (ii) to fund, or reimburse
Borrower for payments made after April 1, 1996 for, the Capital and Surplus of
LifeUSA (iii) to make, or reimburse Borrower for payments made after April 1,
1996 for, any Capital Expenditures permitted pursuant to Section 7.10 hereof or
investment permitted pursuant to Section 7.2 hereof.
2.5. Interest on Term Loan. (a) Borrower shall pay interest to the
Lenders on the unpaid principal amount of each Term Loan Advance until the
principal amount thereof shall have been paid in full, quarterly in arrears on
the last day of each calendar quarter, commencing on the first such date after
the date of the initial Term Loan Advance (each, an "Interest Payment Date"), at
a rate per annum equal to (i) on or prior to March 31, 2001, Applicable Rate
determined as of the date of each Term Loan Advance or (ii) after March 31, 2001
the higher of (x) the Applicable Rate for each Term Loan Note plus 2% and (y)
the Index Rate in effect from time to time plus 4% (collectively, the "Stated
Rate"). Such interest shall be calculated based on the daily outstanding balance
of the Term Loan and on a year of 360 days for the actual number of days
elapsed.
(b) The Index Rate shall be determined on a daily basis for the next
succeeding Business Day. If any payment on the Term Loan becomes due and payable
on a day other than a Business Day, the maturity thereof shall be extended to
the next succeeding Business Day and, with respect to payments of principal,
interest thereon shall be payable at the then applicable rate during such
extension.
(c) So long as any Event of Default shall be continuing prior to April
1, 2001, the interest rate applicable to the Term Loan shall be increased by 2%
per annum above the rate otherwise applicable and, to the extent permitted by
applicable law, shall be payable at such rate on any overdue interest payments.
(d) Notwithstanding anything to the contrary set forth in this Section
2.5, if at any time until payment in full of all of the Obligations in respect
of the Term Loan, the Stated Rate exceeds the highest rate of interest
permissible under any law which a court of competent jurisdiction shall, in a
final determination, deem applicable hereto (the "Maximum Lawful Rate"), then in
such event and so long as the Maximum Lawful Rate would be so exceeded, the rate
of interest payable hereunder shall be equal to the Maximum Lawful Rate;
provided, however, that if at any time thereafter the Stated Rate, is less than
the Maximum Lawful Rate, Borrower shall continue to pay interest hereunder at
the Maximum Lawful Rate until such time as the total interest received by
Lenders from the making of advances hereunder is equal to the total interest
which Lenders would have received had the Stated Rate been (but for the
operation of this paragraph) the interest rate payable since the Closing Date.
Thereafter, the interest rate payable hereunder shall be the Stated Rate unless
and until the Stated Rate again exceeds the Maximum Lawful Rate, in which event
this paragraph shall again apply. In no event shall the total interest received
by Lenders pursuant to the terms hereof exceed the amount which the Lenders
could lawfully have received had the interest due hereunder been calculated for
the full term hereof at the Maximum Lawful Rate. In the event the Maximum Lawful
Rate is calculated pursuant to this paragraph, such interest shall be calculated
at a daily rate equal to the Maximum Lawful Rate divided by the number of days
in the year in which such calculation is made. In the event that a court of
competent jurisdiction, notwithstanding the provisions of this Section 2.5(d),
shall make a final determination that any Lender has received interest hereunder
or under any of the Loan Documents in excess of the Maximum Lawful Rate, such
Lender shall, to the extent permitted by applicable law, promptly apply such
excess first to any interest due and not yet paid under its Term Loan Note, then
to the outstanding principal installments of the Term Loan Note in inverse order
of maturity (without premium or penalty), then to other unpaid Obligations and
thereafter shall refund any excess to Borrower or as a court of competent
jurisdiction may otherwise order.
2.6. Fees. (a) On the date hereof, Borrower shall pay to General
Electric Capital Corporation, for the account of its Equity Capital Group, a fee
equal to $300,000.
(b) Borrower agrees to pay to each Lender a commitment fee (the
"Commitment Fee") on the average daily unused portion of such Lender's Term Loan
Commitment from the date hereof until the Commitment Termination Date at the
rate of 1/4 of 1% per annum, payable on (i) the last day of each March, June,
September and December during the term of such Lender's Term Loan Commitment,
commencing June 30, 1996 and (ii) on the Commitment Termination Date. The
Commitment Fee shall be calculated on the basis of a 360-day year for the actual
number of days elapsed.
2.7. Receipt of Payment. Borrower shall make each payment under this
Agreement not later than 11:00 A.M. (New York City time) on the day when due in
lawful money of the United States of America in immediately available funds
directly to each Lender, ratably based on the respective principal amounts of
the Term Loan Notes held by each Lender, at the depository bank in the United
States as designated by each Lender from time to time. For purposes only of
computing interest hereunder, all payments shall be applied by each Lender to
its Term Loan Advances on the day payment has been credited to such Lender's
depository bank in immediately available funds.
2.8. Application of Payments. Borrower irrevocably waives the right to
direct the application of any and all payments at any time or times hereafter
received by Agent or any Lender from or on behalf of Borrower pursuant to the
terms of this Agreement, and Borrower irrevocably agrees that Agent and Lenders
shall have the continuing exclusive right to apply any and all such payments
against the then due and payable Obligations of Borrower and in repayment of the
Term Loan as they each may deem advisable. In the absence of a specific
determination by Agent and Lenders with respect thereto, the same shall be
applied in the following order: (i) then due and payable fees and expenses; (ii)
then due and payable interest payments on the Term Loan; and (iii) then due and
payable principal payments on the Term Loan. Agent is authorized to, and at its
option may, make advances on behalf of Borrower for payment of all fees,
expenses, charges, costs and interest incurred by Borrower hereunder when and as
Borrower fails to promptly pay any such amounts, but only to the extent of the
unused Term Loan Commitment on or prior to the Commitment Termination Date. At
Agent's option and to the extent permitted by law, any advances so made may be
deemed to constitute part of the Term Loan.
2.9. Sharing of Payments, Etc. If any Lender shall obtain any payment
(whether voluntary, involuntary, through the exercise of any right of set-off,
or otherwise) on account of the Term Loan made by it in excess of its ratable
share of payments on account of the Term Loan obtained by all Lenders, such
Lender shall forthwith purchase from each other Lender such participations in
the Term Loan made by it as shall be necessary to cause such purchasing Lender
to share the excess payment ratably with each other Lender; provided, however,
that if all or any portion of such excess payment is thereafter recovered from
such purchasing Lender, such purchase from each Lender shall be rescinded and
such Lender shall repay to the purchasing Lender the purchase price to the
extent of such recovery together with an amount equal to such Lender's ratable
share (according to the proportion of (i) the amount of such 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. Borrower agrees that any Lender so purchasing
a participation from another Lender pursuant to this Section 2.9 may, to the
fullest extent permitted by law, exercise all its rights of payment (including
the right of set-off) with respect to such participation as fully as if such
Lender were the direct creditor of Borrower in the amount of such participation.
2.10. Accounting. From the Closing Date through the last day of the
first fiscal quarter following the Commitment Termination Date, Agent will
provide a quarterly accounting of transactions under the Term Loan to Borrower
and each Lender. Each and every such accounting shall (absent manifest error) be
deemed final, binding and conclusive upon Borrower in all respects as to all
matters reflected therein, unless Borrower, within 30 days after the date any
such accounting is rendered, shall notify Agent in writing of any objection
which Borrower may have to any such accounting, describing the basis for such
objection with specificity. In that event, only those items expressly objected
to in such notice shall be deemed to be disputed by Borrower. Agent's
determination, based upon the facts available, of any item objected to by
Borrower in such notice shall (absent manifest error) be final, binding and
conclusive on Borrower, unless Borrower shall commence a judicial proceeding to
resolve such objection within 30 days following Agent's notifying Borrower of
such determination.
2.11. Indemnity. Borrower shall indemnify and hold Agent and each
Lender harmless from and against any and all suits, actions, proceedings,
claims, damages, losses, liabilities and expenses (including, without
limitation, reasonable attorneys' fees and disbursements, including those
incurred upon any appeal) which may be instituted or asserted against or
incurred by Agent or any Lender as the result of credit having been extended
under this Agreement or any other Loan Document or in connection with or arising
out of the transactions contemplated hereunder and thereunder, including any and
all Environmental Liabilities and Costs having entered into any of the Loan
Documents or extended credit hereunder; provided, however, that Borrower shall
not be liable for such indemnification to such indemnified Person to the extent
that any such suit, action, proceeding, claim, damage, loss, liability or
expense results from such indemnified Person's gross negligence or willful
misconduct.
2.12. Access. Agent and each Lender and any of their officers,
employees and/or agents shall have reasonable access during normal business
hours (or at such other times as may reasonably be requested by Agent or any
Lender (or representative)), to inspect the properties and facilities of
Borrower and its Subsidiaries and to inspect, audit and make extracts from all
of Borrower's and its Subsidiaries' records, files and books of account.
Borrower shall deliver any document or instrument reasonably requested for Agent
or any Lender (or representative), as any of them may request, to obtain records
from any service bureau maintaining records for Borrower or its Subsidiaries,
and shall maintain duplicate records or supporting documentation on media,
including, without limitation, computer tapes and discs owned by Borrower and
its Subsidiaries. Borrower shall instruct its and its Subsidiaries' banking and
other financial institutions to make available to Agent and each Lender such
information and records as Agent and each Lender (or representative) may
reasonably request.
2.13. Capital Adequacy. If any Lender shall determine that, after the
date hereof, the adoption of any applicable law, rule or regulation regarding
capital adequacy, or any change therein, or any change in the interpretation or
administration thereof by any Governmental Authority, central bank or comparable
agency charged with the interpretation or administration thereof or compliance
by such Lender (or its lending office) with any request or directive regarding
capital adequacy (whether or not having the force of law) of any such
Governmental Authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on such Lender's capital as a consequence
of its obligations hereunder or credit extended by it hereunder to a level below
that which such Lender could have achieved but for such adoption, change or
compliance by an amount deemed by such Lender to be material, then from time to
time as specified by such Lender, Borrower shall pay such additional amount or
amounts as will compensate such Lender for such reduction.
2.14. Taxes. (a) Any and all payments by Borrower hereunder or under
the Notes shall be made, in accordance with this Section 2.14, 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,
excluding taxes imposed on or measured by the net income of any Lender or Agent,
as the case may be, by the jurisdiction under the laws of which such Lender or
Agent is organized or any political subdivision thereof (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder or under any
Note to any Lender or Agent, (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 2.14) such Lender or
Agent, as the case may be, receives an amount equal to the sum it would have
received had no such deductions been made, (ii) Borrower shall make such
deductions, and (iii) Borrower shall pay the full amount deducted to the
relevant taxing or other authority in accordance with applicable law.
(b) In addition, Borrower agrees to pay any present or future stamp or
documentary taxes or any other sales, transfer, excise, mortgage recording or
property taxes, charges or similar levies that arise from any payment made
hereunder or under the Notes or from the execution, sale, transfer, delivery or
registration of, or otherwise with respect to, this Agreement or the Notes, the
Loan Documents and any other agreements and instruments contemplated thereby
(hereinafter referred to as "Other Taxes").
(c) Borrower shall indemnify each Lender and Agent for the full amount
of Taxes or Other Taxes (including without limitation, any Taxes or Other Taxes
imposed by any jurisdiction on amounts payable under this Section 2.14) paid by
such Lender or Agent and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or not such Taxes
or Other Taxes were correctly or legally asserted. This indemnification shall be
made within 30 days from the date such Lender or Agent makes written demand
therefor.
(d) Within 30 days after the date of any payment of Taxes, Borrower
shall furnish to Agent, at its address referred to in Section 10.11, the
original or a certified copy of a receipt evidencing payment thereof.
(e) Without prejudice to the survival of any other agreement of
Borrower hereunder, the agreements and obligations of Borrower contained in this
Section 2.14 shall survive the payment in full of principal and interest
hereunder and under the Notes and the termination of this Agreement.
(f)(i) Each Lender represents to Borrower that it is either (x) a
corporation organized under the laws of the United States of America or (y) is
entitled to complete exemption from United States withholding tax imposed on or
with respect to any payments, including interest, fees or principal, to be made
by Borrower pursuant to this Agreement.
(ii) Each assignee under Section 10.1 which is organized outside the
United States shall, upon such assignment, represent to the Borrower that it is
entitled to complete exemption from United States withholding tax imposed on or
with respect to any payments, including interest, fees or principal, to be made
by Borrower pursuant to this Agreement.
(g) Borrower shall not be required to pay any additional amounts to any
Lender (or assignee) in respect of United States withholding tax pursuant to
paragraph (a) above if the obligation to pay such additional amounts would not
have arisen but for a failure of the representation contained in paragraph (f)
above to be true, other than by reason of (i) a change in applicable law,
regulation or official interpretation thereof or (ii) an amendment, modification
or revocation of any applicable tax treaty or a change in official position
regarding the application or interpretation thereof, in each case after the date
hereof (and in the case of an assignee, after the date of assignment).
(h) If, as a result of an event described in clauses (i) or (ii) of
paragraph (g) after the date hereof (or, in the case of an assignee, after the
date of assignment), the representation contained in paragraph (f) above with
respect to a Lender (or assignee) fails to be true or a Lender (or an assignee)
makes any payment or becomes liable to make any payment on account of any Taxes
with respect to payments by Borrower hereunder, Borrower may, at its option,
either (A) require such Lender (or assignee) to assign its Term Loan Note and
Term Loan Commitment to (i) an assignee permitted by and pursuant to Section
10.1(c) hereof or (ii) to the Lender from whom such assignee (directly or
indirectly) received its interests if such Lender is an Affiliate of such
assignee, (B) continue to make payments to such Lender (or assignee) under the
terms of this Agreement, which payments shall be made in accordance with
paragraph (a) above.
2.15. Limitations on Section 2.13 and 2.14. Each Lender will promptly
notify Borrower after any adoption or change referred to in Sections 2.13 or
2.14 which would result in the requirement that the Borrower pay an additional
amount to such Lender. If any Lender fails to give such notice within thirty
days after such adoption or change, the liability of Borrower under Sections
2.13 or 2.14 shall commence on the date on which Borrower receives such notice.
3. CONDITIONS PRECEDENT
3.1. Conditions to Initial Term Loan. Notwithstanding any other
provision of this Agreement and without affecting in any manner the rights of
Agent or any Lender hereunder, Borrower shall have no rights under this
Agreement (but shall have all applicable obligations hereunder), and Lenders
shall not be obligated to make the initial Term Loan Advance under the Term
Loan, unless and until each of the following conditions precedent shall have
been fulfilled or (with the consent of the Lenders) waived, and Borrower shall
have delivered to Agent, in form and substance satisfactory to Agent and (unless
otherwise indicated) each dated the Closing Date:
(a) A Term Loan Note payable to the order of each Lender duly executed
by Borrower, in the amount of such Lender's respective Term Loan Commitment as
set forth on the signature pages hereof.
(b) A Notice of Term Loan Borrowing, duly executed by Borrower.
(c) Favorable opinion of Kaplan, Strangis and Kaplan, P.A. counsel to
the Loan Parties, substantially in form attached hereto as Exhibit D, it being
understood that to the extent that such opinion of counsel to the Loan Parties
shall rely upon any other opinion of counsel, each such other opinion shall be
in form and substance reasonably satisfactory to Agent and shall provide that
Agent and Lenders may rely thereon.
(d) Resolutions of the board of directors of Borrower, certified by the
Secretary or Assistant Secretary of Borrower, in each case as of the Closing
Date, to be duly adopted and in full force and effect on such date, authorizing
(i) the consummation of each of the transactions contemplated by the Loan
Documents to which it is a party and (ii) specific officers to execute and
deliver this Agreement and the other Loan Documents to which it is a party.
(e) Governmental certificates, dated the most recent practicable date
prior to the Closing Date, with telegram updates where available, showing that
Borrower and LifeUSA is organized and in good standing in the jurisdiction of
its organization and Borrower is qualified as a foreign corporation and in good
standing in all other jurisdictions in which it is qualified to transact
business.
(f) A copy of the organizational charter and all amendments thereto of
Borrower and LifeUSA, certified as of a recent date by the Secretary of State of
the jurisdiction of its organization, and copies of Borrower's and LifeUSA's
by-laws, certified by the Secretary or Assistant Secretary of such Loan Party as
true and correct as of the Closing Date.
(g) The Pledge Agreement, duly executed and delivered by Borrower
together with:
(i) acknowledgement copies of proper Financing Statements
(Form UCC-1) duly filed under the Uniform Commercial Code of each
jurisdiction as may be necessary or, in the opinion of Agent, desirable
to perfect the security interests created by the Pledge Agreement,
(ii) certified copies of Requests for Information or Copies
(Form UCC-11), or equivalent reports, listing the Financing Statements
referred to in paragraph (i) above and all other effective financing
statements which name Borrower (under its present name and any previous
name) as debtor and which are filed in the jurisdictions referred to in
said paragraph (i), together with copies of such other financing
statements (none of which shall cover the Collateral purported to be
covered by the Pledge Agreement),
(iii) evidence of the completion of all recordings and filings
of the Pledge Agreement as may be necessary or, in the opinion of
Agent, desirable to perfect the security interests and liens created by
the Pledge Agreement,
(iv) certificates representing the Pledged Securities referred
to in the Pledge Agreement and undated stock powers for such
certificates executed in blank, and
(v) evidence that all other actions necessary or, in the
opinion of Agent, desirable to perfect and protect the security
interests created by the Pledge Agreement have been taken.
(h) A certificate, on behalf of Borrower, by the chief financial
officer of Borrower that, to his knowledge Borrower and Borrower and its
Subsidiaries taken as a whole are Solvent after giving effect to the initial
Term Loan Advance, the application of proceeds thereof as contemplated by the
Loan Documents and the payment of all estimated legal, accounting and other fees
related hereto and thereto.
(i) A certificate, on behalf of Borrower by the chief executive officer
of Borrower satisfactory in form and substance to Agent, stating that, as of the
Closing Date, to his knowledge, no material adverse change has occurred in the
business, assets, operations or financial condition of Borrower and its
Subsidiaries taken as a whole since December 31, 1995.
(j) A certificate, on behalf of Borrower, of the chief executive
officer of Borrower or the chief financial officer, satisfactory in form and
substance to Agent, stating that, to his knowledge, all of the representations
and warranties of Borrower contained herein or in any of the Loan Documents are
correct in all material respects on and as of the Closing Date as though made on
and as of such date, and no event has occurred and is continuing, or would
result from the initial Term Loan Advance which constitutes or would constitute
a Default or an Event of Default.
(k) Payment by Borrower of all reasonable fees and expenses of Agent's
outside counsel, Weil, Gotshal & Manges LLP, to the extent not previously paid;
provided, however, the aggregate amount payable by Borrower for all such fees
and expenses shall not exceed $75,000.
(l) Certificates of the Secretary or an Assistant Secretary of
Borrower, dated the Closing Date, as to the incumbency and signatures of the
officers or representatives of Borrower executing this Agreement, the Term Loan
Notes, any of the other Loan Documents and any other certificate or other
document to be delivered pursuant hereto or thereto, together with evidence of
the incumbency of such Secretary or Assistant Secretary.
(m) Such additional information and materials as Agent may reasonably
request, including, without limitation copies of any debt agreements, security
agreements and other material contracts.
3.2. Further Conditions to each Term Loan Advance. The funding of the
initial and each subsequent Term Loan Advance shall be subject to the further
conditions precedent that:
(a) On the date of each Term Loan Advance, Agent and Borrower shall
confirm in writing the Applicable Rate applicable to such Term Loan Advance.
(b) On the date of each Term Loan Advance, LifeUSA's rating by A.M.
Best & Co. shall be at least "B++".
(c) The following statements shall be true on the date of each such
funding:
(i) All of the representations and warranties of Borrower
contained herein or in any of the Loan Documents shall be correct in
all material respects on and as of the Closing Date and the date of
each such Term Loan Advance as though made on and as of such date,
except to the extent that any such representation or warranty expressly
relates to an earlier date and for changes therein permitted or
contemplated by this Agreement.
(ii) No event shall have occurred and be continuing, or would
result from the funding of the Term Loan Advance which constitutes or
would constitute a Default or an Event of Default.
(iii) The aggregate unpaid principal amount of the Term Loan
after giving effect to such funding shall not exceed the Term Loan
Commitments.
The acceptance by Borrower of the proceeds of any Term Loan shall be
deemed to constitute, as of the date of such acceptance, (i) a representation
and warranty by Borrower that the conditions in this Section 3.2 hereof have
been satisfied and (ii) a confirmation by Borrower of the granting and
continuance of Agent's Lien pursuant to the Collateral Documents.
4. REPRESENTATIONS AND WARRANTIES
To induce Lenders to make the Term Loan Advances, Borrower makes the
following representations and warranties to Lenders, each and all of which shall
be true and correct as of the date of execution and delivery of this Agreement,
and shall survive the execution and delivery of this Agreement:
4.1. Corporate Existence; Compliance with Law. Borrower and each
Subsidiary of Borrower (i) is a corporation duly organized, validly existing and
in good standing under the laws of its state of incorporation; (ii) is duly
qualified to do business and is in good standing under the laws of each
jurisdiction where its ownership or lease of property or the conduct of its
business requires such qualification (except for jurisdictions in which such
failure to so qualify or to be in good standing would not have a Material
Adverse Effect); (iii) has the requisite corporate power and authority and the
legal right to own, pledge, mortgage or otherwise encumber and operate its
properties, to lease the property it operates under lease, and to conduct its
business as now, heretofore and proposed to be conducted; (iv) has all material
licenses, permits, consents or approvals from or by, and has made all material
filings with, and has given all material notices to, all Governmental
Authorities having jurisdiction, to the extent required for such ownership,
operation and conduct; (v) is in compliance with its certificate of
incorporation and by-laws; and (vi) is in compliance with all applicable
provisions of law where the failure to comply would have a Material Adverse
Effect.
4.2. Executive Offices. The current location of Borrower's executive
offices and principal place of business is set forth on Schedule 4.2 hereto.
4.3. Subsidiaries. As of the date hereof, there currently exist no
Subsidiaries of Borrower other than as set forth on Schedule 4.3 hereto, which
sets forth such Subsidiaries, together with their respective jurisdictions of
organization, and the authorized and outstanding capital Stock of each such
Subsidiary, by class and number and percentage of each class legally owned by
Borrower or a Subsidiary of Borrower or any other Person. There are no options,
warrants, rights to purchase or similar rights covering capital Stock for any
such Subsidiary.
4.4. Corporate Power; Authorization; Enforceable Obligations. The
execution, delivery and performance by Borrower of the Loan Documents and all
instruments and documents to be delivered by Borrower hereunder and thereunder
and the creation of all Liens provided for herein and therein: (i) are within
Borrower's corporate power; (ii) have been duly authorized by all necessary or
proper corporate action; (iii) are not in contravention of any provision of
Borrower's certificate or articles of incorporation or by-laws; (iv) will not
violate any law or regulation, or any order or decree of any court or
governmental instrumentality; (v) will not conflict with or result in the breach
or termination of, constitute a default under or accelerate any performance
required by, any indenture, mortgage, deed of trust, lease, agreement or other
instrument to which Borrower or any of its Subsidiaries is a party or by which
Borrower or any of its Subsidiaries or any of their property is bound; (vi) will
not result in the creation or imposition of any Lien upon any of the property of
Borrower or any of its Subsidiaries other than those in favor of Lenders, all
pursuant to the Loan Documents; and (vii) do not require the consent or approval
of any Governmental Authority or any other Person, all of which will have been
duly obtained, made or complied with prior to the Closing Date. At or prior to
the Closing Date, each of the Loan Documents shall have been duly executed and
delivered for the benefit of or on behalf of Borrower and each shall then
constitute a legal, valid and binding obligation of Borrower, enforceable
against it in accordance with its terms.
4.5. Solvency. After giving effect to the initial funding of the Term
Loan and the payment of all estimated legal, accounting and other fees related
hereto and thereto, Borrower, LifeUSA and Borrower and its Subsidiaries taken as
a whole will be Solvent as of and on the Closing Date.
4.6. Financial Statements. (a) The audited consolidated balance sheets
of Borrower and its Subsidiaries as of December 31, 1995 and December 31, 1994
and the related consolidated statements of income and cash flows of Borrower and
its Subsidiaries for the years then ended, copies of which have been furnished
to the Lenders prior to the date of this Agreement, have been prepared in
accordance with GAAP, consistently applied, and present fairly in all material
respects the consolidated financial position, results of operations and cash
flows of Borrower and its Subsidiaries at such dates and for such periods.
(b) (i) The annual statutory financial statements of Borrower and its
Subsidiaries including, without limitation, the provisions made therein for
investments and the valuation thereof, Reserves, policy and contract claims and,
as filed with the appropriate Governmental Authority of its state of domicile
(the "Department") and delivered to Lenders prior to the execution and delivery
of this Agreement, as of, and for the fiscal years ended, December 31, 1995
(unaudited) and 1994 (audited) (collectively, the "Statutory Financial
Statements"), have been prepared in accordance with SAP applied on a consistent
basis. Each such Statutory Financial Statement was in compliance with applicable
law when filed. The Statutory Financial Statements present fairly in all
material respects the assets, liabilities, surplus and other funds, summary of
operations and cash flow of such companies as of and for the respective dates
and periods indicated therein in accordance with SAP applied on a consistent
basis, except as set forth on Schedule 4.6(b) hereto. Except for liabilities and
obligations, including, without limitation, Reserves, policy and contract
claims, AVR and IMR (all of which have been computed in accordance with commonly
accepted actuarial standards), disclosed or provided for in the Statutory
Financial Statements, none of such companies had, as the respective dates of
each of such financial statements, any material liabilities or obligations
(whether absolute or contingent and whether due or to become due) which, in
conformity with SAP, applied on a consistent basis, would have been required to
be or should be disclosed or provided for in such financial statements. All
books of account of each such company fairly disclose in all material respects
all of the transactions, properties, assets, investments, liabilities and
obligations of such company and all of such books of account are in the
possession of such company and are true, correct and complete in all material
respects.
(ii) The investments of Borrower and its Subsidiaries reflected in
each such company's Annual Statement filed with the Department with respect to
the Statutory Financial Statements for the fiscal years ended December 31, 1994
and December 31, 1995 (collectively, the "1994 and 1995 Annual Statements")
comply in all material respects with all applicable requirements of the law of
its state of domicile as well as those of any other applicable jurisdiction
relating to investments in respect of which it may invest its funds.
(iii) The provisions made in the 1994 and 1995 Annual Statements for
Reserves, policy and contract claims, AVR and IMR are in compliance in all
material respects with the requirements of the appropriate Department as well as
those of any other applicable jurisdiction, and have been computed in accordance
with commonly accepted actuarial standards.
(iv) Marketable securities and short term investments reflected in
the 1994 and 1995 Annual Statements are valued at cost, amortized cost or market
value, as required by applicable law.
(c) Except as set forth on Schedule 4.6(c) hereto, there has been no
material adverse change in the business, assets, operations or financial
condition of Borrower and its Subsidiaries taken as a whole since December 31,
1995 (it being understood that, subsequent to the Closing Date, this
representation and warranty shall be subject to the fact that Borrower shall
have incurred the Obligations hereunder and otherwise conducted its business as
permitted by this Agreement). No dividends or other distributions have been
declared, paid or made upon any shares of capital stock of Borrower or any of
its Subsidiaries nor have any shares of capital stock of Borrower or any of its
Subsidiaries been redeemed, retired, purchased or otherwise acquired for value
by Borrower or the Subsidiaries since December 31, 1995 to the date hereof.
4.7. Projections. The SAP projections of LifeUSA's and the GAAP
projections of Borrower's (i) quarterly income statements, balance sheets, cash
flows and budgets on a consolidated basis for the year ending December 31, 1996
and (ii) annual income statements, balance sheets and cash flows on a
consolidated basis for the fiscal years ending on December 31, 1996 through 2001
copies of which have been delivered to Lenders (collectively, the
"Projections"), disclose all material assumptions made with respect to general
economic, financial and market conditions in formulating the Projections. As of
the date hereof, no facts to the knowledge of Borrower exist which would result
in any material change in any of the Projections. The Projections were, when
delivered to Lenders and as of the date hereof based upon reasonable estimates
and assumptions, all of which were, at that time and as at the date hereof,
reasonably believed by Borrower to be fair in light of the then current
conditions, have been prepared on the basis of the assumptions stated therein,
and reflect the reasonable estimate of Borrower of the results of operations and
other information projected therein. The Projections have been prepared in a
manner consistent with SAP and GAAP in all material respects.
4.8. No Default. Neither Borrower nor any of its Subsidiaries is in
default, nor to Borrower's knowledge is any third party in default, under or
with respect to any contract, agreement, lease or other instrument to which it
is a party, except for any default which (either individually or collectively
with other defaults arising out of the same event or events) would not have a
Material Adverse Effect. No Default or Event of Default has occurred and is
continuing.
4.9. Burdensome Restrictions. No contract, lease, agreement or other
instrument to which Borrower or any of its Subsidiaries is a party or is bound
and no provision of applicable law or governmental regulation has a Material
Adverse Effect, or insofar as Borrower can reasonably foresee may have a
Material Adverse Effect.
4.10. Labor Matters. There are no strikes or other labor disputes
against Borrower or any of its Subsidiaries pending or, to Borrower's knowledge,
threatened which could reasonably be expected to have a Material Adverse Effect.
As of the date hereof, neither Borrower nor any of its Subsidiaries has any
obligation under any collective bargaining agreement or any employment
agreement. As of the date hereof, there is no organizing activity involving
Borrower or any of its Subsidiaries pending or, to Borrower's knowledge,
threatened by any labor union or group of employees. As of the date hereof,
there are no representation proceedings pending or threatened with the National
Labor Relations Board, and no labor organization or group of employees of
Borrower or any of its Subsidiaries has made a pending demand for recognition.
4.11. Other Ventures; FMO Investments. Except for investments permitted
pursuant to the Investment Guidelines, advances of agent commissions in the
ordinary course of business, investments in Subsidiaries and FMO Investments,
which existing FMO Investments as of the date hereof are listed on Schedule 4.11
hereto, neither Borrower nor any Subsidiary is engaged in any joint venture or
partnership with any other Person or has any FMO Investments nor does Borrower
or any of its Subsidiaries own any equity interest or other investment in an
Affiliate of Borrower or such Subsidiary.
4.12. Investment Company Act. Neither Borrower nor any Subsidiary is an
"investment company" or an "affiliated person" of, or "promoter" or (except for
LifeUSA Securities, Inc.) "principal underwriter" for, an "investment company,"
as such terms are defined in the Investment Company Act of 1940, as amended. The
making of the Term Loan Advances by Lenders, the application of the proceeds and
repayment thereof by Borrower and the consummation of the transactions
contemplated by this Agreement and the other Loan Documents will not violate any
provision of such Act or any rule, regulation or order issued by the Securities
and Exchange Commission thereunder.
4.13. Margin Regulations. Borrower does not own any "margin security,"
as that term is defined in Regulations G and U of the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board"), and the proceeds of the
Term Loan Advances will be used only for the purposes contemplated hereunder. No
Term Loan Advances will be used, directly or indirectly, for the purpose of
purchasing or carrying any margin security, for the purpose of reducing or
retiring any indebtedness which was originally incurred to purchase or carry any
margin security or for any other purpose which might cause any of the loans
under this Agreement to be considered a "purpose credit" within the meaning of
Regulations G, T, U or X of the Federal Reserve Board. Borrower will not take or
permit any agent acting on its behalf to take any action which might cause this
Agreement or any document or instrument delivered pursuant hereto to violate any
regulation of the Federal Reserve Board.
4.14. Taxes. All federal, state, local and foreign tax returns, reports
and statements required to be filed by Borrower and its Subsidiaries have been
filed with the appropriate Governmental Authority and all Charges and other
impositions shown thereon to be due and payable have been paid (other than
non-material amounts) prior to the date on which any fine, penalty, interest or
late charge may be added thereto for nonpayment thereof, or any such fine,
penalty, interest, late charge or loss has been paid. Proper and accurate
amounts have been withheld by Borrower and its Subsidiaries from their
respective employees for all periods in compliance in all material respects with
the tax, social security and unemployment withholding provisions of applicable
federal, state, local and foreign law and such withholdings have been timely
paid to the respective governmental agencies. Schedule 4.14 hereto sets forth,
for each of Borrower and its Subsidiaries, those taxable years for which its tax
returns are being audited by the IRS or any other applicable Governmental
Authority as of the date hereof. Except as described in Schedule 4.14 hereto,
neither Borrower nor any of its Subsidiaries has executed or filed with the IRS
or any other Governmental Authority prior to the date hereof and which is, as of
the date hereof, in effect any agreement or other document extending, or having
the effect of extending, the period for assessment or collection of any Charges.
Neither Borrower nor any of its Subsidiaries has filed a consent pursuant to IRC
Section 341(f) or agreed to have IRC Section 341(f)(2) apply to any dispositions
of subsection (f) assets (as such term is defined in IRC Section 341(f)(4)).
None of the property owned by Borrower or any of its Subsidiaries is property
which such company is required to treat as being owned by any other Person
pursuant to the provisions of IRC Section 168(f)(8) of the Internal Revenue Code
of 1954, as amended, and in effect immediately prior to the enactment of the Tax
Reform Act of 1986 or is "tax-exempt use property" within the meaning of IRC
Section 168(h). Except as set forth on Schedule 4.14 hereto, neither Borrower
nor any of its Subsidiaries has agreed or has been requested to make any
adjustment under IRC Section 481(a) by reason of a change in accounting method
or otherwise. Except as set forth on Schedule 4.14 hereto, neither Borrower nor
any of its Subsidiaries has any obligation under any written tax sharing
agreement.
4.15. ERISA. (a) Schedule 4.15 hereto lists, as of the date hereof, all
Plans maintained or contributed to by Borrower and its Subsidiaries and all
Qualified Plans maintained or contributed to by any ERISA Affiliate, and
separately identifies the Title IV Plans, Multiemployer Plans, any multiple
employer plans subject to Section 4064 of ERISA, unfunded Pension Plans and
Retiree Welfare Plans.
(b) Each Qualified Plan has been determined by the IRS to qualify under
Section 401 of the IRC, and the trusts created thereunder have been determined
to be exempt from tax under the provisions of Section 501 of the IRC, and to the
best knowledge of Borrower nothing has occurred which would cause the loss of
such qualification or tax-exempt status.
(c) Each Plan is in compliance in all material respects with the
applicable provisions of ERISA and the IRC, including the filing of reports
required under the IRC or ERISA which are true and correct in all material
respects as of the date filed, and with respect to each Plan, other than a
Qualified Plan, all required contributions and benefits have been paid in
accordance with the provisions of each such Plan.
(d) None of Borrower, its Subsidiaries or any ERISA Affiliate, with
respect to any Qualified Plan, has failed to make any contribution or pay any
amount due as required by Section 412 of the IRC or Section 302 of ERISA or the
terms of any such plan.
(e) No Title IV Plan has any Unfunded Pension Liability.
(f) None of the Welfare Plans are Retiree Welfare Plans.
(g) Each Pension Plan is a Qualified Plan.
(h) There has been no and nor is there reasonably expected to occur any
ERISA Event or event described in Section 4062(e) of ERISA with respect to any
Title IV Plan.
(i) There are no pending, or to the knowledge of Borrower or any of its
Subsidiaries, threatened claims, actions or lawsuits (other than claims for
benefits in the normal course), asserted or instituted against (i) any Plan or
its assets, (ii) any fiduciary with respect to any Plan or (iii) Borrower, any
of its Subsidiaries or any ERISA Affiliate with respect to any Plan, in each
instance, which could reasonably be expected to have a Material Adverse Effect.
(j) None of Borrower, any of its Subsidiaries or any ERISA Affiliate
has incurred or reasonably expects to incur any Withdrawal Liability (and no
event has occurred which, with the giving of notice under Section 4219 of ERISA,
would result in such liability) under Section 4201 of ERISA as a result of a
complete or partial withdrawal from a Multiemployer Plan.
(k) Within the last five years none of Borrower, any of its
Subsidiaries or any ERISA Affiliate has engaged in a transaction which resulted
in a Title IV Plan with Unfunded Liabilities being transferred outside of the
"controlled group" (within the meaning of Section 4001(a)(14) of ERISA) of any
such entity.
(l) No plan which is a Welfare Plan, provides for continuing benefits
or coverage for any participant or any beneficiary of a participant after such
participant's termination of employment (except as may be required by Section
4980B of the IRC and at the sole expense of the participant or the beneficiary
of the participant). Borrower, its Subsidiaries and each ERISA Affiliate are in
good faith compliance with the notice and continuation coverage requirements of
Section 4980B of the IRC and the regulations thereunder.
(m) Neither Borrower nor any of its Subsidiaries has engaged in a
prohibited transaction, as defined in Section 4975 of the IRC or Section 406 of
ERISA, in connection with any Plan, which would subject Borrower or any of its
Subsidiaries (after giving effect to any exemption) to a material tax on
prohibited transactions imposed by Section 4975 of the IRC or any other material
liability.
(n) No liability under any Plan has been funded, nor has such
obligation been satisfied with, the purchase of a contract from an insurance
company that is not rated AAA by Standard & Poor's Corporation and the
equivalent by each other nationally recognized rating agency, except as
disclosed on Schedule 4.15.
(o) Any individual who performs services for Borrower or any of its
Subsidiaries (other than through a contract with an organization other than such
individual) and who is not treated as an employee for federal income tax
purposes by Borrower or any of its Subsidiaries is not an employee for such
purposes and such individual has been properly excluded from participation in
the Plans.
4.16. No Litigation. Except as set forth on Schedule 4.16 hereto, no
action, claim or proceeding is now pending or, to the knowledge of Borrower,
threatened against Borrower or any of its Subsidiaries, at law, in equity or
otherwise, before any court, board, commission, agency or instrumentality of any
federal, state, or local government or of any agency or subdivision thereof, or
before any arbitrator or panel of arbitrators, which, could reasonably be likely
to have a Material Adverse Effect. Except as expressly set forth on Schedule
4.16 hereto, none of the matters set forth therein questions the validity of any
of the Loan Documents or any action taken or to be taken pursuant thereto, or
would have either individually or in the aggregate a Material Adverse Effect.
4.17. Brokers. No broker or finder acting on behalf of Borrower brought
about the obtaining, making or closing of the loans made pursuant to this
Agreement and Borrower has no obligation to any Person in respect of any
finder's or brokerage fees in connection with the loans contemplated by this
Agreement, except as provided in this Agreement.
4.18. Employment and Labor Agreements. Except as set forth on Schedule
4.18 hereto, there are, as of the date hereof, no employment, consulting or
management agreements covering any executive officer of Borrower or any of its
Subsidiaries and there are no collective bargaining agreements or other labor
agreements covering any employees of Borrower or any of its Subsidiaries. A true
and complete copy of each such agreement has been furnished to Agent.
4.19. Patents, Trademarks, Copyrights and Licenses. Borrower and its
Subsidiaries own or has the right to use all material licenses, patents, patent
applications, copyrights, service marks, trademarks, trademark applications, and
trade names necessary to continue to conduct their business as heretofore
conducted by them now conducted by them and proposed to be conducted by them.
Each service mark, trademark, trade application and trade name which has as of
the date hereof, been filed with the Patent and Trademark Office is listed on
Schedule 4.19 hereto. Borrower and its Subsidiaries conduct their respective
businesses without infringement or claim of infringement of any license, patent,
copyright, service mark, trademark, trade name, trade secret or other
intellectual property right of others, except where such infringement or claim
of infringement would not have a Material Adverse Effect. As of the date hereof
and to Borrower's knowledge there is no infringement or claim of infringement by
others of any material license, patent, copyright, service mark, trademark,
trade name, trade secret or other intellectual property right of Borrower or any
of its Subsidiaries.
4.20. Full Disclosure. (a) No information contained in this Agreement,
the other Loan Documents, the Statutory Financial Statements, or any written
statement furnished by or on behalf of Borrower or its Subsidiaries pursuant to
the terms of this Agreement contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained herein
or therein not misleading in light of the circumstances under which made.
(b) The Borrower has filed all reports required to be filed by it
within the last 12 months under the Exchange Act on a timely basis, or has
received a valid extension of such time of filing. Borrower's Annual Report on
Form 10-K for the Fiscal Year ended December 31, 1995, including, without
limitation, any financial statements or financial schedules included therein,
complied as to form in all material respects with the rules and regulations of
the Securities and Exchange Commission under the Exchange Act on the dates of
filing and as of such dates and did not contain any untrue statement of a
material fact or omit to state material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
4.21. Liens. The Liens granted to Agent and Lenders pursuant to the
Collateral Documents will at the Closing Date be fully perfected first priority
Liens in and to the Collateral described therein.
4.22. No Material Adverse Effect. No event (excluding any legislative
or regulatory proposal) has occurred since December 31, 1995 and is continuing
which has had or could reasonably be expected to have a Material Adverse Effect.
4.23. Environmental Protection. All real property owned and, to
Borrower's knowledge, real property leased by Borrower or any of Borrower's
Subsidiaries is free of contamination from any substance or material currently
identified to be toxic or hazardous pursuant to the Environmental Laws,
including, without limitation, any asbestos, pcb, radioactive substance,
methane, volatile hydrocarbons, industrial solvents, or any other material or
substance which has in the past or could at any time in the future cause or
constitute a material health, safety, or environmental hazard to any Person or
property. Neither Borrower nor any of Borrower's Subsidiaries has caused or
suffered to occur any discharge, spillage, uncontrolled loss, release,
migration, seepage, or filtration of oil or petroleum or chemical liquids or
solids, liquid or gaseous products, or hazardous waste or hazardous substance in
violation of the Environmental Laws (a "Spill") at, under, or within any real
property owned or leased by any such Person. Neither Borrower nor any of
Borrower's Subsidiaries is involved in operations which could lead to the
imposition of any material liability or Lien on any such Person or any owner of
any premises occupied by such Person under the Environmental Laws and neither
Borrower nor any of Borrower's Subsidiaries permitted any tenant or occupant of
such premises to engage in any such activity.
4.24. Insurance Licenses. Schedule 4.24 attached hereto lists all of
the jurisdictions in which LifeUSA and any of its Subsidiaries hold active
licenses (including, without limitation, licenses or certificates of authority
from applicable insurance departments), permits or authorizations to transact
insurance and reinsurance business (collectively, the "Licenses"). Except as set
forth on Schedule 4.24 hereto, as of the date hereof, (i) no such License is the
subject of a proceeding for suspension or revocation or any similar proceedings,
(ii) there is no sustainable basis for such a suspension or revocation, and
(iii) to Borrower's knowledge no such suspension or revocation has been
threatened by any licensing authority. Schedule 4.24 hereto indicates the line
or lines of insurance which is permitted to be engaged in with respect to each
License therein listed. Neither LifeUSA nor any of its respective Subsidiaries
transacts any insurance business, directly or indirectly, in any state other
than those enumerated on Schedule 4.24 hereto.
4.25. Agreements with Affiliates. Except as set forth on Schedule 4.25
hereto, neither the Borrower nor any of its Subsidiaries is as of the date
hereof a party to any marketing agreement, general services agreement or similar
agreement with any Affiliate of Borrower or any of its Subsidiaries.
4.26. Reinsurance Agreements; Operating Contracts. (a) Schedule 4.26(a)
sets forth as of the date hereof all Material Reinsurance Agreements of LifeUSA
and Borrower. Such Material Reinsurance Agreements are consistent with the
Projections.
(b) Except as set forth on Schedule 4.26(b), neither Borrower nor any
of its Subsidiaries is party to any material operating contract as of the date
hereof.
4.27. A.M. Best Rating. As of the date hereof, LifeUSA's rating by A.M.
Best & Co. is "B++".
5. FINANCIAL STATEMENTS AND INFORMATION
5.1. Reports and Notices. Borrower covenants and agrees that from and
after the date hereof and until the Termination Date, it shall deliver to each
Lender:
(a) GAAP Financial Statements:
(i) Within 45 days after the end of each fiscal quarter, (A) a copy
of the unaudited consolidated and consolidating balance sheets of Borrower and
its Subsidiaries as of the close of such quarter and the related consolidated
and consolidating statements of income and cash flows for that portion of the
Fiscal Year ending as of the close of such quarter, and (B) a copy of the
unaudited consolidated and consolidating statements of income of Borrower and
its Subsidiaries for such quarter, all prepared in accordance with GAAP (subject
to normal year-end adjustments) and accompanied by (x) a statement in reasonable
detail showing the calculations used in determining the financial covenants
under Sections 6.3(a) and 7.10 hereof, and (y) the certification on behalf of
Borrower by the chief executive officer or chief financial officer of Borrower
that, to such officer's knowledge, all such financial statements are complete
and correct in all material respects and present fairly in accordance with GAAP
(subject to the omission of footnotes and normal year-end adjustments) the
consolidated and consolidating financial position, the consolidated and
consolidating results of operations and the cash flows of Borrower and its
Subsidiaries as at the end of such quarter and for the period then ended, and
that, to such officer's knowledge, there was no Default or Event of Default in
existence as of the date of such certificate.
(ii) Within 90 days after the close of each Fiscal Year, a copy of
the annual audited consolidated and unaudited consolidating financial statements
of Borrower and its Subsidiaries, consisting of consolidated and consolidating
balance sheets and consolidated and consolidating statements of income and
retained earnings and cash flows, setting forth in comparative form in each case
the consolidated and consolidating figures for the previous Fiscal Year, which
financial statements shall be prepared in accordance with GAAP, together with an
opinion (only with respect to the consolidated financial statements) without
qualification by either the independent certified public accountants regularly
retained by Borrower, by any other "Big 6" firm of independent certified public
accountants or by any other firm of independent certified public accountants of
recognized national standing selected by Borrower and acceptable to Agent, and
accompanied by (A) a schedule in reasonable detail showing the calculations used
in determining the financial covenants under Sections 6.3(a) and 7.10 hereof,
(B) a report from such accountants to the effect that in connection with their
audit examination, nothing has come to their attention to cause them to believe
that a Default or Event of Default had occurred and (C) a certification on
behalf of Borrower by the chief executive officer or chief financial officer of
Borrower that, to such officer's knowledge, all such financial statements are
complete and correct in all material respects and present fairly in accordance
with GAAP the consolidated and consolidating financial position, the
consolidated and consolidating results of operations and the cash flows of
Borrower and its Subsidiaries as at the end of such year and for the period then
ended, and that, to such officer's knowledge, there was no Default or Event of
Default in existence as of the date of such certificate.
(iii) As soon as practicable, but in any event within two (2)
Business Days after a responsible officer of Borrower becomes aware of the
existence of any Default or Event of Default, or any development or other
information which would have a Material Adverse Effect, telephonic or
telegraphic notice specifying the nature of such Default or Event of Default or
development or information, including the anticipated effect thereof, which
notice shall be promptly confirmed in writing within five (5) days.
(iv) Such other information respecting Borrower's or any of its
Subsidiaries' business, financial condition or operations as any Lender may,
from time to time, reasonably request.
(b) SAP Financial Statements:
(i) As soon as possible, but in any event within 60 days after the
end of each Fiscal Year of LifeUSA, a copy of the Annual Statements of LifeUSA
and its Subsidiaries, for such Fiscal Year, with a certification on behalf of
Borrower by its chief financial officer and as soon as possible, but in any
event within 180 days after the end of such Fiscal Year, audited Annual
Statements, each such statement to be accompanied by a statement in reasonable
detail showing the calculations used in determining the financial covenants
under Sections 6.3(b) and 7.10 hereof; and
(ii) As soon as possible, but in any event within 45 days after the
end of each of the first three quarterly fiscal periods of each Fiscal Year of
LifeUSA, a copy of the unaudited Quarterly Statements of LifeUSA and its
Subsidiaries filed with the appropriate Department for such fiscal quarter, each
such statement to be accompanied by a statement in reasonable detail showing the
calculations used in determining the financial covenants under Sections 6.3(b)
and 7.10 hereof.
(c) Other Reports:
(i) As soon as possible copies of all quarterly management operating
reports prepared for either senior management or the Board of Directors of
Borrower or LifeUSA.
5.2. Certificates; Other Information. Borrower covenants and agrees
that until the Termination Date, it shall deliver:
(a) to each Lender, (x) not later than thirty days prior to the end of
each Fiscal Year of Borrower, a copy of the preliminary projections of Borrower
and its Subsidiaries of (i) the operating budget, (ii) new business plans, and
(iii) quarterly SAP cash flow of LifeUSA for the next succeeding Fiscal Year and
quarterly GAAP cash flow of Borrower for the next succeeding Fiscal Year, such
projections and business plan to be in a format reasonably acceptable to Agent
if materially different from the format of the Projections referred to in
Section 4.7 and to be accompanied by a certificate on behalf of Borrower by the
chief financial officer to the effect that such projections have been prepared
on the basis of sound financial planning and insurance practice and that such
projections are based upon reasonable estimates and assumptions, all of which
are reasonably believed to be at the time such projections are delivered fair in
light of the then current conditions, have been prepared on the basis of the
assumptions stated therein, and reflect the reasonable estimate of Borrower of
the results of operations and other information projected therein and (y) not
later than January 15th of each year a final form of the projections delivered
pursuant to Section 5.2(a)(x) hereof or a letter from the chief financial
officer of Borrower certifying that the projections delivered pursuant to
Section 5.2(a)(x) hereof shall be treated as the final projections for such
year;
(b) if requested by the Required Lenders, cooperate in the preparation
of a valuation report as of the end of any fiscal quarter of Borrower, to be
prepared by independent accountants or an independent actuarial firm analyzing
the information set forth above in subsection (a) and such other information as
Agent or Lenders shall reasonably request; provided, however, that (i) Borrower
shall not be required to cooperate in the preparation of more than one such
report in any 12 month period, (ii) the cost of such report shall be paid by
Lenders, (iii) the accounting or actuarial firm selected by the Required Lenders
executes a confidentiality agreement in form and substance reasonably
satisfactory to Borrower and (iv) a copy of such report is provided to Borrower.
(c) to each Lender, quarterly investment updates of Borrower and its
Subsidiaries listing all FMO Investments and other investments prepared in a
manner consistent with Schedule 4.11 hereto;
(d) to each Lender, promptly after the end of each Fiscal Year of
LifeUSA, (i) a copy of the final report to its Subsidiaries from NAIC for such
year, as to such company's compliance or noncompliance with each of the NAIC
Tests, and (ii) a copy of A.M. Best's rating analysis for such company for such
year;
(e) to each Lender, promptly after received, (i) copies of all notices
of alleged violations received by Borrower and any of its Subsidiaries from any
Governmental Authority which could reasonably be expected to have a Material
Adverse Effect, (ii) a copy of any and all financial examination reports or
market conduct examination reports (including any drafts thereof) by a
Governmental Authority with respect to LifeUSA and any Subsidiary; (iii) a copy
of the annual cash flow memorandum filed by LifeUSA with a Governmental
Authority of its state of domicile; and (iv) a copy of any notice of termination
or cancellation of any Reinsurance or Retrocession Agreement or arrangement to
which LifeUSA or any Subsidiary is a party to the extent such termination or
cancellation could reasonably be expected to have a Material Adverse Effect;
(f) to each Lender, copies of all Insurance Holding Company System Act
filings with Governmental Authorities by LifeUSA or any Subsidiary not later
than seven days after such filings are made;
(g) to each Lender, promptly after received, notice of actual or
threatened suspension, termination or revocation of any License of LifeUSA or
any of its Subsidiaries by any Governmental Authority, including any request by
Governmental Authorities which commits LifeUSA or such Subsidiary to take, or
refrain from taking, any action or which otherwise affects the authority of
LifeUSA or such Subsidiary to conduct its business;
(h) to each Lender, promptly after received, notice of any actual
material changes in the insurance laws enacted in the state of domicile of any
insurance company Subsidiary; and
(i) to each Lender, as soon as available, but in any event within 100
days after the end of each Fiscal Year, a certificate of the chief executive
officer or chief financial officer of Borrower detailing the computations used
by Borrower in determining compliance with the provisions of Section 2.2(a)
hereof; and
(j) promptly after the same are received by Borrower, a copy of each
management letter provided to the Board of Directors of Borrower by its
independent certified public accountants in connection with their examination of
Borrower's annual audited consolidated financial statements which refers in
whole or in part to any inadequacy, defect, problem, qualification or other lack
of fully satisfactory accounting controls utilized by Borrower or any of its
Subsidiaries.
5.3. Communication with Accountants. Borrower authorizes Agent and each
Lender to communicate directly with its independent certified public accountants
and tax advisors and authorizes those accountants to disclose to Agent and each
Lender any and all financial statements and other supporting financial documents
and schedules including copies of any management letter with respect to the
business, financial condition and other affairs of Borrower and any of its
Subsidiaries. On the date hereof,, Borrower shall deliver a letter addressed to
such accountants and tax advisors instructing them to comply with the provisions
of this Section 5.3.
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, unless the Required Lenders shall
otherwise consent in writing, from and after the date hereof and until the
Termination Date:
6.1. Maintenance of Existence and Conduct of Business. Borrower shall,
and shall cause each of its Subsidiaries to: (a) do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence and its rights, licenses, privileges and franchises; (b) continue to
conduct its business substantially as now conducted or as otherwise permitted
hereunder; (c) at all times maintain, preserve and protect all of its trademarks
and trade names, and maintain its tangible assets used or useful in the conduct
of its business and keep the same in good repair, working order and condition
(taking into consideration ordinary wear and tear and obsolete assets) and from
time to time make, or cause to be made, all needful and proper repairs, renewals
and replacements, betterments and improvements thereto consistent with insurance
industry practices, so that the business carried on in connection therewith may
be properly and advantageously conducted at all times; and (d) transact business
only pursuant to its current corporate name, or such other names as Borrower or
any Subsidiary of Borrower shall specify to Agent in writing not less than
thirty days prior to the first date such name is used by Borrower or any
Subsidiary of Borrower.
6.2. Payment of Obligations. (a) Subject to Section 6.2(b) and (c)
below, Borrower shall, and shall cause each of its Subsidiaries to, (i) pay and
discharge or cause to be paid and discharged all its Indebtedness, including,
without limitation, all the Obligations and the obligations with respect to the
Subordinated Debt, subject to the subordination provisions thereof, as and when
due and payable, and (ii) pay and discharge or cause to be paid and discharged
promptly all (A) Charges imposed upon it, its income and profits, or any of its
property (real, personal or mixed), and (B) lawful claims for labor, materials,
supplies and services or otherwise before any thereof shall become in default.
(b) Borrower and its Subsidiaries may in good faith contest, by proper
legal actions or proceedings, the validity or amount of any Charges or claims
arising under Section 6.2(a)(i) or (ii) hereof, provided that at the time of
commencement of any such action or proceeding, and during the pendency thereof
(i) no Default or Event of Default shall have occurred; (ii) adequate Reserves
with respect thereto are maintained on the books of Borrower or such Subsidiary,
in accordance with GAAP (or SAP if applicable); (iii) such contest operates to
suspend collection of the contested Charges or claims and is maintained and
prosecuted continuously with diligence; (iv) none of the Collateral would be
subject to forfeiture or loss or any Lien by reason of the institution or
prosecution of such contest; (v) Borrower or such Subsidiary shall promptly pay
or discharge such contested Charges and all additional charges, interest,
penalties and expenses, if any, and shall deliver to Agent evidence acceptable
to Agent of such compliance, payment or discharge, if such contest is terminated
or discontinued adversely to Borrower or such Subsidiary; and (vi) Agent has not
advised Borrower in writing that Agent reasonably believes that nonpayment or
nondischarge thereof would have a Material Adverse Effect.
(c) Notwithstanding anything to the contrary contained in Section
6.2(b) above, Borrower and each of its Subsidiaries shall have the right to pay
the Charges or claims arising under Section 6.2(a)(ii) hereof and in good faith
contest, by proper legal actions or proceedings, the validity or amount of such
Charges or claims.
6.3. Financial Covenants. Borrower shall comply with the following
covenants:
(a) GAAP Covenants.
(i) Borrower shall maintain at all times, such maintenance to
be evidenced as at the end of each fiscal quarter of Borrower
commencing with the fiscal quarter ending June 30, 1996, an Interest
Coverage Ratio equal to or greater than 2.50: 1.0.
(ii) Borrower shall maintain at all times, such maintenance to
be evidenced as at the end of each fiscal quarter of Borrower, a Cash
Sources to Cash Uses Ratio equal to or greater than 1.00:1.00. For
purposes of this Section 6.3(a)(ii), the Cash Sources to Cash Uses
Ratio shall be calculated at the end of each fiscal quarter in the
Fiscal Year ending June 30, 1996, for a period from the beginning of
such fiscal quarter through the last day of such fiscal quarter.
(iii) Borrower shall maintain at all times, such maintenance
to be evidenced as at the end of each Fiscal Year, Consolidated Net
Worth of not less than $144,000,000.
(b) SAP Covenants.
(i) Borrower shall use its commercially reasonable efforts to
(A) cause LifeUSA at all times to maintain a rating by A.M. Best & Co.
of "B+" or better; and (B) cause LifeUSA's rating to be reinstated to
"B+" or better should LifeUSA fail to maintain at least a "B+" rating
at any time (which failure shall be deemed to include a "Not Assigned"
rating).
(ii) The Capital and Surplus plus AVR of LifeUSA as set forth
in its respective Annual Statements shall be equal to or greater than
$81,000,000.
(iii) Borrower shall cause LifeUSA to maintain at all times,
such maintenance to be evidenced as at the end of each fiscal quarter
of LifeUSA, a Risk-Based Capital Ratio of at least 3.25: to 1.0.
6.4. Books and Records. Borrower shall, and shall cause each of its
Subsidiaries to, keep adequate records and books of account in all material
respects with respect to its business activities, in which proper entries,
reflecting all of their financial transactions, are made in accordance with GAAP
and on a basis consistent with the Financials referred to in Section 4.6(b)
hereof.
6.5. Litigation. Borrower shall notify Agent in writing, promptly upon
learning thereof, of any litigation commenced against Borrower and/or any of the
Subsidiaries, and of the institution against any of them of any suit or
administrative proceeding that could reasonably be expected to have a Material
Adverse Effect.
6.6. Insurance. Borrower shall and shall cause each Subsidiary of
Borrower to maintain insurance covering, without limitation, fire, theft,
burglary, public liability, property damage, product liability, workers'
compensation and insurance on all property and assets, all in amounts customary
for the industry and as is usually carried by companies engaged in similar
businesses and owning similar properties in the same general areas in which
Borrower or such Subsidiary operates and under policies issued by responsible
insurers and in any event in compliance with any insurance requirements under
any of the Loan Documents and with a lender's loss payable clause in favor of
Agent for the benefit of Lenders. Borrower shall, and shall cause each of its
Subsidiaries to, pay all insurance premiums payable by them.
6.7. Compliance with Law. Borrower shall and shall cause each of its
Subsidiaries to comply with all federal, state and local laws and regulations
applicable to it, including, without limitation, ERISA, those regarding the
collection, payment and deposit of employees' income, unemployment and social
security taxes and those relating to environmental matters where the failure to
comply could reasonably be expected to have a Material Adverse Effect.
6.8. Agreements. Borrower shall and shall cause each of its
Subsidiaries to perform, within all required time periods (after giving effect
to any applicable grace periods), all of its obligations and enforce all of its
rights under each agreement to which it is a party, including, without
limitation, any leases to which any such company is a party, where the failure
to so perform and enforce could reasonably be expected to have a Material
Adverse Effect. Borrower shall not and shall cause each of its Subsidiaries not
to terminate or modify in any manner adverse to any such party any provision of
any agreement to which it is a party which termination or modification could
reasonably be expected to have a Material Adverse Effect.
6.9. Supplemental Disclosure. From time to time as may be necessary (in
the event that such information is not otherwise delivered by Borrower to
Lenders pursuant to this Agreement), so long as there are Obligations
outstanding hereunder, Borrower will supplement each Schedule or representation
herein with respect to any matter hereafter arising which, if existing or
occurring at the date of this Agreement, would have been required to be set
forth or described in such Schedule or as an exception to such representation or
which is necessary to correct any information in such Schedule or representation
which has been rendered inaccurate thereby; provided, however, that such
supplement to such Schedule or representation shall not be deemed an amendment
thereof unless otherwise consented to by the Required Lenders.
6.10. Employee Plans. (a) With respect to other than a Multiemployer
Plan, for each Qualified Plan hereafter adopted or maintained by Borrower, any
of its Subsidiaries or any ERISA Affiliate, Borrower shall (i) seek, or cause
its Subsidiaries or ERISA Affiliates to seek, and receive determination letters
from the IRS to the effect that such Qualified Plan is qualified within the
meaning of Section 401(a) of the IRC; and (ii) from and after the adoption of
any such Qualified Plan, cause such plan to be qualified within the meaning of
Section 401(a) of the IRC and to be administered in all material respects in
accordance with the requirements of ERISA and Section 401(a) of the IRC.
(b) With respect to each Welfare Plan hereafter adopted or maintained
by Borrower, any of its Subsidiaries or any ERISA Affiliate, Borrower shall
comply, or cause its Subsidiaries or ERISA Affiliates to comply, with the notice
and continuation coverage requirements of Section 4980B of the IRC and the
regulations thereunder.
(c) (i) Promptly and in any event within thirty (30) days after
Borrower, any of its Subsidiaries or any ERISA Affiliate knows or has reason to
know that any ERISA Event has occurred, and (ii) promptly and in any event
within ten (10) days after Borrower, any of its Subsidiaries or any ERISA
Affiliate knows or has reason to know that a request for a minimum funding
waiver under Section 412 of the IRC has been filed with respect to any Qualified
Plan, Borrower shall furnish to Agent a written statement of the chief financial
officer or other appropriate officer of Borrower describing such ERISA Event or
waiver request and the action, if any, which Borrower, any of its Subsidiaries
or any ERISA Affiliate proposes to take with respect thereto and a copy of any
notice filed with the PBGC or the IRS pertaining thereto.
(d) Promptly and in any event within thirty (30) days after the filing
thereof by Borrower, any of its Subsidiaries or any ERISA Affiliate, Borrower
shall furnish to Agent a copy of each annual report (Form 5500 Series, including
Schedule B thereto) with respect to each Pension Plan, and upon request by the
Agent, with respect to any other Plan.
(e) Promptly and in any event within thirty (30) days after receipt
thereof, Borrower shall furnish to Agent a copy of any adverse notice,
determination letter, ruling or opinion Borrower, any of its Subsidiaries or any
ERISA Affiliate receives from the PBGC, DOL or IRS with respect to any Qualified
Plan.
(f) Promptly and in any event within ten (10) Business Days after
receipt thereof, Borrower shall furnish to Agent a copy of any correspondence
Borrower, any of its Subsidiaries or any ERISA Affiliate receives from the plan
sponsor (as defined by Section 4001(a)(10) of ERISA) of any Multiemployer Plan
concerning potential Withdrawal Liability of Borrower, any of its Subsidiaries
or any ERISA Affiliate, or notice of any reorganization, with respect to any
Multiemployer Plan, together with a written statement of the chief financial
officer or other appropriate officer of Borrower of the action which Borrower,
any of its Subsidiaries or any ERISA Affiliate proposes to take with respect
thereto.
(g) Promptly and in any event within thirty (30) Business Days after
the adoption thereof, Borrower shall furnish to Agent notice of (i) any
amendment to a Title IV Plan which results in an increase in benefits or the
adoption of any new Title IV Plan and (ii) any amendment to a, or adoption of a
new, Welfare Plan which Borrower or any of its Subsidiaries maintains,
contributes or has an obligation to contribute to, and which results in an
increase in benefits.
(h) Promptly and in any event after receipt of written notice of
commencement thereof, Borrower shall furnish to Agent notice of any action, suit
or proceeding before any court or other governmental authority affecting
Borrower, any of its Subsidiaries or any ERISA Affiliate with respect to any
Plan, except those which, in the aggregate, if adversely determined, could not
have a Material Adverse Effect.
(i) Promptly and in any event within thirty (30) days after notice or
knowledge thereof, Borrower shall furnish to Agent notice that Borrower or any
of its Subsidiaries becomes subject to the tax on prohibited transactions
imposed by Section 4975 of the IRC, together with a copy of Form 5330.
6.11. Compliance with Taxes. Borrower shall pay all transfer, excise,
mortgage recording or similar taxes (but excluding income or franchise taxes) in
connection with the issuance, sale, delivery or transfer by Borrower to Lenders
of the Term Loan Notes, and the execution and delivery of the Loan Documents and
any other agreements and instruments contemplated thereby, and shall save Agent
and each Lender harmless without limitation as to time against any and all
liabilities with respect to such taxes. Borrower shall not be responsible for
any taxes in connection with the transfer of the Term Loan Note by the holder
thereof. The obligations of Borrower under this Section 6.12 shall survive the
payment, prepayment or redemption of the Term Loan Notes and the termination of
this Agreement.
6.12. Environmental Matters. (a) Borrower shall and shall cause each of
its Subsidiaries to (i) comply in all material respects with the Environmental
Laws applicable to it, (ii) notify Agent promptly after knowledge in the event
of any Spill upon any premises owned or occupied by such Person, and (iii)
promptly forward to Agent a copy of any order, notice, permit, application, or
any other communication or report received by Borrower or any of its
Subsidiaries in connection with any such Spill or any other matter relating to
the Environmental Laws as they may affect such premises.
(b) Borrower shall indemnify Agent and Lenders and hold Agent and
Lenders harmless from and against any loss, liability, damage, or expense,
including attorneys' fees, suffered or incurred by any Lender, (i) under or on
account of the Environmental Laws applicable to Borrower or any of its
Subsidiaries (ii) with respect to any Spill affecting such premises, whether or
not the same originates or emanates from such premises or any contiguous real
estate, including any loss of value of such premises as a result of a Spill;
(iii) with respect to any liability for personal injury or property damage
applicable to Borrower or any of its Subsidiaries arising under any statutory or
common law tort theory, including, without limitation, damages assessed for the
maintenance of public or private nuisance of the carrying on of an abnormally
dangerous activity at or near any real estate owned or leased by Borrower or its
Subsidiaries; and (iv) with respect to any other Environmental Liabilities and
Costs with respect to any other matter affecting such premises within the
jurisdiction of any federal, state, or municipal official administering the
Environmental Laws applicable to Borrower or any of its Subsidiaries.
(c) In the event of any Spill affecting any premises occupied by
Borrower or any of its Subsidiaries, whether or not the same originates or
emanates from such premises or any contiguous real estate, and if Borrower or
such Subsidiary shall fail to comply with any of the requirements of the
Environmental Laws, if required to do so under the applicable lease, Agent or
any Lender may, but shall not be obligated to, give such notices or cause such
work to be performed or take any and all actions deemed necessary or desirable
to remedy such Spill or cure such failure to comply and any amounts paid as a
result thereof, together with interest thereon at the rate set forth in Section
2.5 hereof, shall be immediately due and payable by Borrower and, until paid,
shall be added to the Obligations.
The provisions of this Section 6.12 shall apply whether or not the
Environmental Protection Agency, any other federal agency or any state or local
environmental agency has taken or threatened any action in connection with the
presence of any Spills or hazardous substances.
6.13. SEC Filings; Certain Other Notices. Borrower shall furnish to
Agent promptly after the filing thereof with the Securities and Exchange
Commission, a copy of each report, notice or other filing by Borrower with the
Securities and Exchange Commission.
6.14. Reinsurance and Surplus Relief Reinsurance. Borrower shall and
shall cause each of its Subsidiaries:
(a) to furnish Agent with quarterly statements describing (i) any
Material Reinsurance Agreement entered into after the date hereof; (ii) any
termination, commutation, renewal, extension, material change or modification to
any Reinsurance Agreements, whether entered into before or after the date hereof
including Reinsurance Agreements which are in a runoff mode on the date hereof;
and (iii) any pending or to Borrower's knowledge threatened dispute, litigation
or arbitration arising out of any Reinsurance Agreement to which LifeUSA or any
Subsidiary thereof is a party which could reasonably be expected to have a
Material Adverse Effect; and shall furnish Lenders with such financial,
actuarial and other information with respect to such Reinsurance Agreements as
Agent may request; and
(b) to cause all Material Reinsurance Agreements to which LifeUSA is a
party, to be effected in accordance with all applicable insurance laws and
regulations, including any requirements that such agreements or arrangements be
approved by applicable Governmental Authorities.
6.15. Portfolio Management. Borrower and LifeUSA shall at all times
retain at least one investment advisor who is not an Affiliate of Borrower as of
the date hereof for the management of the investment portfolio of Borrower and
LifeUSA. Any contract with such investment advisor shall be for a term of not
more than one year. Each investment advisor must be approved by the board of
directors of Borrower or Life USA and the investment portfolio must be reviewed
and reaffirmed by such board of directors on an annual basis
6.16. Pledge of FMO Investments and Intellectual Property. If requested
by Agent at any time after the date hereof, Borrower shall pledge to Agent for
the ratable benefit of Lenders any or all FMO Investments pursuant to an
amendment to the Pledge Agreement in form and substance satisfactory to Agent
and its counsel.
7. NEGATIVE COVENANTS
Borrower covenants and agrees that, without the Required Lenders' prior
written consent, from and after the date hereof and until the Termination Date:
7.1. Mergers, Etc. Neither Borrower nor any Subsidiary of Borrower
shall directly or indirectly, by operation of law or otherwise, merge with,
consolidate with, acquire all or substantially all of the assets or capital
stock of, or otherwise combine with, any Person or a division of any Person nor
form any Subsidiary, except for permitted FMO Investments pursuant to Section
7.2 hereof.
7.2. Investments; Loans and Advances. (a) Except as otherwise permitted
by Sections 7.2(b), 7.3 or 7.4 hereof, Borrower shall not and shall not permit
any Subsidiary of Borrower to make any investment in, or make or accrue loans or
advances of money to any Person, through the direct or indirect holding of
securities or otherwise; provided, however, that Borrower shall be permitted
hereunder and may permit hereunder its Subsidiaries to (i) make one or more
investments in, or make or accrue loans or advances of money to, Borrower,
LifeUSA or LifeUSA Securities, Inc., (ii) make investments in Cash Equivalents
and (iii) make agent commission advances in the ordinary course of business.
(b) Borrower shall not, and shall not permit any Subsidiary to make or
commit to make, any advance, loan, extension of credit or capital contribution
to, or purchase of any stock, bonds, notes, debentures or other securities of
any Person (including, without limitation, any such Person which would
constitute a Subsidiary), or make any other investment in, any Person or
otherwise engage in any investment activities, except for (i) FMO Investments by
Borrower provided that the aggregate amount of cash used by Borrower to make
such investments shall not exceed $25,000,000 outstanding at any one time, (ii)
those investments and investment activities set forth on Schedule 7.2 hereto
(the "Investment Guidelines") and (iii) as permitted by subsection (a) hereof.
7.3. Indebtedness. (a) Except as otherwise expressly permitted by this
Section 7.3 or by any other section of this Agreement, Borrower shall not, nor
shall it permit any of its Subsidiaries to, create, incur, assume or permit to
exist any Indebtedness, except (i) Indebtedness secured by Liens permitted under
Section 7.9 hereof, (ii) the Term Loan, (iii) the Allianz Subordinated
Debentures in an original principal amount not to exceed $30,000,000, (iv) the
Convertible Subordinated Debentures in an original principal amount not to
exceed $15,000,000, (v) all deferred taxes, (vi) all unfunded pension fund and
other employee benefit plan obligations and liabilities but only to the extent
they are permitted to remain unfunded under applicable law and (vii) any other
Indebtedness incurred by Borrower at any time after Fiscal Year 1996 in an
outstanding principal amount at the time of each such incurrence not in excess
of the lesser of (x) 2% of the Consolidated Net Worth of Borrower at such time
and (y) $5,000,000.
(b) Except as permitted by Section 7.11, Borrower shall not and shall
not permit any Subsidiary of Borrower to sell or transfer, either with or
without recourse, any assets, of any nature whatsoever, in respect of which a
Lien is granted or to be granted pursuant to any Loan Document or engage in any
sale-leaseback or similar transaction involving any of such assets.
7.4. Employee Loans. Borrower shall not and shall not permit any
Subsidiary of Borrower to make or accrue any loans or other advances of money to
any employee of Borrower or such Subsidiary in excess at any one time of
$500,000 in the aggregate for all such loans, provided that such loans are made
only in the ordinary course of Borrower's or such Subsidiary's business.
7.5. Capital Structure. (a) Borrower shall not permit any Subsidiary of
Borrower to issue or agree to issue any of their respective authorized but not
outstanding shares of Stock (including treasury shares) to any Person other than
Borrower or LifeUSA.
(b) Borrower shall not make or permit any Subsidiary of Borrower to
make any changes in its capital structure, amend its certificate of
incorporation or by-laws, or make or permit any Subsidiary of Borrower to make
any changes in any of its business objectives, purposes, or operations which
might in any way adversely affect the repayment of the Obligations or have a
Material Adverse Effect.
7.6. Maintenance of Business. Borrower shall not and shall not permit
any Subsidiary of Borrower to engage in any line of risk assuming business that
it is not consistent with the products currently offered by LifeUSA or the
business currently conducted by LifeUSA Securities, Inc.
7.7. Transactions with Affiliates. (a) Borrower shall not and shall not
permit any Subsidiary of Borrower to enter into or be a party to any transaction
with any Affiliate of Borrower or such Subsidiary, except for the Management
Agreement and as otherwise provided herein or in the ordinary course of and
pursuant to the reasonable requirements of Borrower's or such Subsidiary's
business and upon fair and reasonable terms that are fully disclosed to the
Lenders.
(b) Borrower shall not consent to any amendments, modifications,
cancellation or extensions of the Management Agreement.
(c) Borrower shall not and shall not permit any Subsidiary of Borrower
to enter into any agreement or transaction to pay to any Person any management
or similar fee based on or related to Borrower's or any of its Subsidiaries'
operating performance or income or any percentage thereof, nor pay any
management or similar fee to an Affiliate, except for (i) the Management
Agreement, (ii) employee and agent bonuses paid in the ordinary course, and
(iii) bonuses paid in connection with any FMO Investment.
7.8. Guaranteed Indebtedness. Borrower shall not and shall not permit
any Subsidiary of Borrower to incur any Guaranteed Indebtedness except (i) by
endorsement of instruments or items of payment for deposit to the general
account of Borrower or such Subsidiary, and (ii) for Guaranteed Indebtedness
incurred for the benefit of Borrower or any Subsidiary of Borrower if the
primary obligation is permitted by this Agreement and (iii) to the extent such
Indebtedness may be incurred directly pursuant to Section 7.3(a)(vii).
7.9. Liens. Borrower shall not and shall not permit any Subsidiary of
Borrower to create or permit any Lien on any of its properties or assets except:
(a) presently existing or hereafter created Liens in favor of Agent and
Lenders;
(b) purchase money liens, including Capital Leases, securing
Indebtedness which may be incurred pursuant to Section 7.3(a) (vii); and
(c) Permitted Encumbrances.
7.10. Capital Expenditures. Borrower shall not and shall not permit any
of its Subsidiaries to make Capital Expenditures that, in the aggregate, exceed
(i) for the Fiscal Year 1996, $3,000,000 plus the cost of remodeling and
leasehold improvements incurred in such Fiscal Year, and (ii) for each Fiscal
Year thereafter, $3,000,000.
7.11. Sales of Assets. Borrower shall not and shall not permit any
Subsidiary of Borrower to sell, transfer, convey or otherwise dispose of any
material assets or properties; provided, however, that the foregoing shall not
prohibit (i) the sale of investments in the ordinary course of business, (ii)
the sale or other disposition of surplus or obsolete assets or assets being
replaced and (iii) transfers resulting from any casualty or condemnation of
assets or properties.
7.12. Cancellation of Indebtedness. Borrower shall not and shall not
permit any Subsidiary of Borrower to cancel any claim or debt owing to it,
except for reasonable consideration and in the ordinary course of business.
7.13. Events of Default. Borrower shall not and shall not permit any
Subsidiary of Borrower to take or omit to take any action, which act or omission
would constitute (i) a default or an event of default pursuant to, or
non-compliance with any of, the terms of any of the Loan Documents or (ii) a
material default or an event of default pursuant to, or noncompliance with any
other contract, lease, mortgage, deed of trust or instrument to which it is a
party or by which it or any of its property is bound, or any document creating a
Lien, unless such default, event of default or non-compliance would not have a
Material Adverse Effect.
7.14. Restricted Payments. Borrower shall not and shall not permit any
Subsidiary of Borrower to make any Restricted Payments, except that during any
Fiscal Year commencing with the year beginning January 1, 1998, Borrower may pay
dividends in an amount up to 25% of Excess Cash Flow for the prior Fiscal Year
provided, (i) no Default or Event of Default has occurred and is continuing or
would result from the making of such Restricted Payment and (ii) Borrower's
Consolidated Net Worth after giving effect to such Restricted Payment shall
equal at least $207,000,000.
7.15. ERISA. Borrower shall not, directly or indirectly, and shall not
permit its Subsidiaries or any ERISA Affiliate to directly or indirectly by
reason of an amendment or amendments to, or the adoption of, one or more Title
IV Plans, permit the present value of all benefit liabilities, as defined in
Title IV of ERISA (using the actuarial assumptions utilized by the PBGC upon
termination of a plan), to increase by more than $500,000; provided that this
limitation shall not be applicable to the extent that the fair market value of
assets allocable to such benefits, all determined as of the most recent
valuation date for each such Title IV Plan, is in excess of the benefit
liabilities, or to increase to the extent security must be provided to any Title
IV Plan under Section 401(a)(29) of the IRC. Neither Borrower nor any of its
Subsidiaries shall establish or become obligated to any new Retiree Welfare
Plan, or modify any existing Retiree Welfare Plan which would result in the
present value of future liabilities under any such plans to increase by more
than $500,000. Neither Borrower nor any of its Subsidiaries shall establish or
become obligated to any new unfunded Pension Plan, or modify any existing
unfunded Pension Plan, which would result in the present value of future
liabilities under any such plans to increase by more than $500,000. Except as
disclosed in Schedule 4.15, Borrower shall not directly or indirectly, and shall
not permit its Subsidiaries or any ERISA Affiliate to (a) satisfy any liability
under any Qualified Plan by purchasing annuities from an insurance company or
(b) invest the assets of any Qualified Plan with an insurance company, unless,
in each case, such insurance company is rated AAA by Standard & Poor's
Corporation and the equivalent by each other nationally recognized rating agency
at the time of the investment.
7.16. Payment or Modification of Subordinated Obligations. (a) Borrower
shall not, and shall not permit any of its Subsidiaries to, make any payments
on, or with respect to, any Subordinated Debt, including any payments in
redemption or repurchase thereof, except mandatory payments of principal,
interest, fees and expenses required by the terms of the agreement governing or
instrument evidencing such indebtedness but only to the extent permitted under
the subordination provisions applicable thereto.
(b) Borrower shall not, and shall not permit any Subsidiary of Borrower
to, amend, supplement or otherwise modify any of the provisions of any agreement
or instrument evidencing the Subordinated Debt:
(i) which amends or modifies the subordination provisions
contained therein,
(ii) which shortens the fixed maturity or increases the
principal amount of, or increases the rate or shortens the time of
payment of interest on, or increases the amount or shortens the time of
payment of any principal or premium payable whether at maturity, at a
date fixed for prepayment or by acceleration or otherwise of the
Subordinated Debt, or increases the amount of, or accelerates the time
of payment of, any fees payable in connection therewith,
(iii) which relates to the affirmative or negative covenants,
events of default or remedies under the documents or instruments
evidencing the Subordinated Debt and the effect of which is to subject
Borrower or any of its Subsidiaries, to any more onerous or more
restrictive provisions, or
(iv) which adversely affects the interests of Lenders as
senior creditors with respect to the Subordinated Debt or the interests
of Lenders under this Agreement or any other Loan Document in any
respect.
7.17. Modification of Allianz Agreement. Borrower shall not and shall
not permit any Subsidiary to amend, supplement, waive or otherwise modify any
provision of the Allianz Agreement if such amendment, supplement, waiver or
modification has the effect of either reducing (i) the fees or other
compensation payable by Allianz to Borrower thereunder as of the date hereof or
(ii) the term of such agreement from the term in effect as of the date hereof.
7.18. Restrictions on Retrocession Agreements and Surplus Relief
Reinsurance and Reinsurance Agreements. Borrower shall not and shall not
permit any Subsidiary to:
(a) enter into any Retrocession Agreement in any Fiscal Year under
which Borrower or such Subsidiary retrocedes any reinsurance coverage which was
written or assumed in another Fiscal Year;
(b) enter into, or suffer to exist, any Surplus Relief Reinsurance
agreement; or
(c) enter into any Reinsurance Agreement other than those required so
as not to exceed the retention limits (i.e., the maximum insurance exposure on
any one life insurance policy) of $250,000.
7.19. Reserves. Borrower shall not permit LifeUSA to materially alter
its methodology and procedures for establishing Reserves, except in accordance
with SAP.
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
8.1. Events of Default. The occurrence of any one or more of the
following events (regardless of the reason therefor) shall constitute an "Event
of Default" hereunder:
(a) Borrower shall fail to make any payment of principal of, or
interest on or any other amount owing in respect of, the Term Loan, or any of
the other Obligations when due and payable or declared due and payable, except
that with respect to expenses payable under this Agreement, or other Obligations
owing under any Loan Document other than this Agreement, such failure shall have
remained unremedied for a period of five (5) days after Borrower has received
notice of such failure from Agent.
(b) Borrower shall fail or neglect to perform, keep or observe any of
the provisions of Section 6.3 ("Financial Covenants") or Section 7 of this
Agreement.
(c) Borrower shall fail or neglect to perform, keep or observe any
other provision of this Agreement or of any of the other Loan Documents and the
same shall remain unremedied for a period of twenty (20) days after Borrower
shall receive written notice of any such failure from Agent.
(d) A default shall occur under any other agreement, document or
instrument to which any Loan Party is a party or by which any such Loan Party or
any such Loan Party's property is bound, and such default (i) involves the
failure to make any payment (whether of principal, interest or otherwise) due
(whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise) in respect of any Indebtedness of any Loan Party in an aggregate
amount exceeding $500,000, or (ii) causes (or permits any holder of such
Indebtedness or a trustee to cause) such Indebtedness or a portion thereof in an
aggregate amount exceeding $500,000, to become due prior to its stated maturity
or prior to its regularly scheduled dates of payment.
(e) Any representation or warranty herein or in any Loan Document or in
any written statement pursuant thereto or hereto, report, financial statement or
certificate made or delivered to Agent or any Lender by Borrower shall be untrue
or incorrect in any material respect, as of the date when made or deemed made
(including those made or deemed made pursuant to Section 3.2 hereof).
(f) Any material assets of any Loan Party shall be attached, seized,
levied upon or subjected to a writ or distress warrant, or come within the
possession of any receiver, trustee, custodian or assignee for the benefit of
creditors of any Loan Party and shall remain unstayed or undismissed for sixty
(60) consecutive days; or any Person other than any Loan Party shall apply for
the appointment of a receiver, trustee or custodian for any of the assets of any
Loan Party and such application shall remain unstayed or undismissed for sixty
(60) consecutive days; or any Loan Party shall have concealed, removed or
permitted to be concealed or removed, any part of its property, with intent to
hinder, delay or defraud its creditors or any of them or made or suffered a
transfer of any of its property or the incurring of an obligation which may be
fraudulent under any bankruptcy, fraudulent conveyance or other similar law.
(g) A case or proceeding shall have been commenced against any Loan
Party in a court having competent jurisdiction seeking a decree or order in
respect of such Loan Party (i) under title 11 of the United States Code, as now
constituted or hereafter amended, or any other applicable federal, state or
foreign bankruptcy or other similar law, (ii) appointing a custodian, receiver,
liquidator, assignee, trustee or sequestrator (or similar official) of such Loan
Party or of any substantial part of its or their properties, or (iii) ordering
the winding-up or liquidation of the affairs of such Loan Party and such case or
proceeding shall remain undismissed or unstayed for sixty (60) consecutive days
or such court shall enter a decree or order granting the relief sought in such
case or proceeding.
(h) Any Loan Party shall (i) file a petition seeking relief under title
11 of the United States Code, as now constituted or hereafter amended, or any
other applicable federal, state or foreign bankruptcy or other similar law, (ii)
consent to the institution of proceedings thereunder or to the filing of any
such petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or similar official) of
Borrower or such Loan Party or of any substantial part of its properties, (iii)
fail generally to pay its debts as such debts become due, or (iv) take any
corporate action in furtherance of any such action.
(i) Final judgment or judgments (after the expiration of all times to
appeal therefrom) for the payment of money in excess of $500,000 in the
aggregate shall be rendered against Borrower or any of its Subsidiaries and the
same shall not be (i) fully covered by insurance in accordance with Section 6.7
hereof, or (ii) vacated, stayed, bonded, paid or discharged for a period of
fifteen (15) days.
(j) Any other event shall have occurred and be continuing which would
have a Material Adverse Effect and Agent shall have given Borrower at least
sixty (60) days notice thereof.
(k) (i) With respect to any Plan, a prohibited transaction within the
meaning of Section 4975 of the IRC or Section 406 of ERISA occurs which in the
reasonable determination of the Agent could result in direct or indirect
liability to Borrower or any of its Subsidiaries, (ii) with respect to any Title
IV Plan, the filing of a notice to voluntarily terminate any such plan in a
distress termination, (iii) with respect to any Multiemployer Plan, Borrower,
any of its Subsidiaries or any ERISA Affiliate shall incur any Withdrawal
Liability, (iv) with respect to any Qualified Plan, Borrower, any of its
Subsidiaries or any ERISA Affiliate shall incur an accumulated funding
deficiency or request a funding waiver from the IRS, or (v) with respect to any
Title IV Plan or Multiemployer Plan which has an ERISA Event not described in
clauses (ii) - (iv) hereof, in the reasonable determination of the Agent there
is a reasonable likelihood for termination of any such plan by the PBGC;
provided, however, that the events listed in clauses (i) - (v) hereof shall
constitute Events of Default only if the liability, deficiency or waiver request
of Borrower, any of its Subsidiaries or any ERISA Affiliate, whether or not
assessed, exceeds $500,000 in any case set forth in (i) - (v) above, or exceeds
$500,000 in the aggregate for all such cases.
(l) Any provision of any Collateral Document, after delivery thereof
pursuant to Section 3.1 hereof, shall for any reason cease to be valid or
enforceable in accordance with its terms, or any security interest created under
any Collateral Document shall cease to be a valid and perfected first priority
security interest or Lien (except as otherwise stated therein) in any of the
Collateral purported to be covered thereby other than by reason of any action of
the Agent or any Lender.
(m) A Change of Control shall have occurred.
8.2. Remedies. If any Event of Default specified in Section 8.1 shall
have occurred and be continuing, Agent shall at the request, or may with the
consent, of the Required Lenders, without notice, (i) terminate this facility
with respect to further Term Loan Advances, whereupon no further Term Loan
Advance may be made hereunder, and/or (ii) declare all Obligations to be
forthwith due and payable, whereupon all such Obligations
shall become and be due and payable, without presentment, demand, protest or
further notice of any kind, all of which are expressly waived by Borrower;
provided, however, that upon the occurrence of an Event of Default specified in
Section 8.1(f), (g) or (h) hereof, such Obligations shall become due and payable
without declaration, notice or demand by Agent or any Lender.
Agent shall take such action with respect to any Default or Event of
Default specified in Section 8.1 hereof as shall be directed by the Required
Lenders; provided, that unless and until Agent shall have received such
directions, 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 Agent, and Lenders
taken as a whole, including any action (or the failure to act) pursuant to the
Loan Documents.
8.3. Waivers by Borrower. Except as otherwise provided for in this
Agreement and applicable law, Borrower waives (i) presentment, demand and
protest and notice of presentment, dishonor, notice of intent to accelerate and
notice of acceleration, (ii) all rights to notice and a hearing prior to Agent's
or any Lender's taking possession or control of, or to Agent's or any Lender's
replevy, attachment or levy upon, the Collateral or any bond or security which
might be required by any court prior to allowing Agent or any Lender to exercise
any of its remedies, and (iii) the benefit of all valuation, appraisal and
exemption laws. Borrower acknowledges that it has been advised by counsel of its
choice with respect to this Agreement, the other Loan Documents and the
transactions evidenced by this Agreement and the other Loan Documents.
8.4. Right of Set-Off. Upon the occurrence and during the continuance
of any Event of Default, each Lender is hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to set off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by such Lender to or for
the credit or the account of Borrower against any and all of the obligations of
Borrower now or hereafter existing under this Agreement, and the Notes held by
such Lender irrespective of whether or not such Lender shall have made any
demand under this Agreement or any such Note and although such obligations may
be unmatured. Each Lender agrees promptly to notify Borrower after any such
set-off and application made by such Lender; provided, however, that the failure
to give such notice shall not affect the validity of such set-off and
application. The rights of each Lender under this Section are in addition to
other rights and remedies (including, without limitation, other rights of
set-off) which such Lender may have.
9. THE AGENT
9.1. Authorization and Action. Each Lender hereby appoints and
authorizes Agent to take such action on its behalf and to exercise such powers
under this Agreement and the other Loan Documents as are delegated to Agent by
the terms hereof and thereof, together with such powers as are reasonably
incidental thereto. As to any matters not expressly provided for by this
Agreement and the other Loan Documents (including, without limitation,
enforcement or collection of the Notes), Agent shall not be required to exercise
any discretion or take any action, but shall be required to act or to refrain
from acting (and shall be fully protected in so acting or refraining from
acting) upon the instructions of the Required Lenders, and such instructions
shall be binding upon all Lenders; provided, however, that Agent shall not be
required to take any action which exposes Agent to personal liability or which
is contrary to this Agreement or the other Loan Documents or applicable law.
Agent agrees to give each Lender prompt notice of each notice given to it by
Borrower pursuant to the terms of this Agreement and the other Loan Documents.
9.2. Agent's Reliance, Etc. Neither Agent nor any of its directors,
officers, agents employees or Affiliates shall be liable for any action taken or
omitted to be taken by it or them under or in connection with this Agreement or
the other Loan Documents, except for its or their own gross negligence or wilful
misconduct. Without limitation of the generality of the foregoing, Agent: (i)
may treat the payee of any Note as the holder thereof until Agent receives
written notice of the assignment or transfer thereof signed by such payee and in
form satisfactory to Agent; (ii) may consult with legal counsel (including
counsel for any Loan Party), independent public accountants and other experts
selected by it 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; (iii) makes no warranty or representations to any Lender
and shall not be responsible to any Lender for any statements, warranties or
representations made in or in connection with this Agreement or the other Loan
Documents; (iv) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement or the other Loan Documents on the part of Borrower or to inspect the
property (including the books and records) of any Loan Party; (v) shall not be
responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or the other
Loan Documents or any other instrument or document furnished pursuant hereto or
thereto; and (vi) shall incur no liability under or in respect of this Agreement
or the other Loan Documents by acting upon any notice, consent, certificate or
other instrument or writing (which may be by telecopy, telegram, cable or telex)
believed by it to be genuine and signed or sent by the proper party or parties.
9.3. ERAC and Affiliates. With respect to its commitment hereunder to
make the Term Loan made by it, ERAC shall have the same rights and powers under
this Agreement and the other Loan Documents as any other Lender and may exercise
the same as though it were not Agent; and the term "Lender" or "Lenders" shall,
unless otherwise expressly indicated, include ERAC in its individual capacity.
ERAC and its affiliates may lend money to, and generally engage in any kind of
business with, any Loan Party and any Person who may do business with or own
securities of any Loan Party, all as if ERAC were not Agent and without any duty
to account therefor to Lenders.
9.4. Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon Agent or any of its Affiliates or any
other Lender and based on the financial statements referred to in Section 4.6
hereof and such other documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement. Each
Lender also acknowledges that it will, independently and without reliance upon
Agent or any of its Affiliates 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 decisions in taking or not taking action under this Agreement.
9.5. Indemnification. Lenders agree to indemnify Agent and its
Affiliates (to the extent not reimbursed by Borrower), ratably according to the
respective principal amounts of the (or their respective Term Loan Commitments
if they hold no Notes) from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by, or asserted against Agent or any Affiliates of Agent in any way relating to
or arising out of this Agreement or any other Loan Document or any action taken
or omitted by Agent or any Affiliate of Agent under this Agreement, provided
that no Lender shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from Agent's of such Affiliate's gross negligence or
willful misconduct. Without limiting the foregoing, each Lender agrees to
reimburse Agent promptly upon demand for its ratable shares of any out-of-pocket
expenses (including counsel fees) incurred by Agent in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement
and each other Loan Document, to the extent that Agent is not reimbursed for
such expenses by Borrower.
9.6. Successor Agent. Agent may resign at any time by giving written
notice thereof to Lenders and Borrowers. Upon any such resignation, the Required
Lenders shall have the right to appoint a successor Agent. If no successor Agent
shall have been so appointed by the Required Lenders, and shall have accepted
such appointment, within 30 days after the retiring Agent's giving notice of
resignation, then the retiring Agent may, on behalf of the Lenders, appoint a
successor Agent, which shall be a commercial bank organized under the laws of
the United States of America or of any state thereof and having a combined
capital and surplus of at least $50,000,000. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations under this Agreement and the other Loan
Documents. After any retiring Agent's resignation hereunder as Agent, the
provisions of this Section 9 shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Agent under this Agreement and the
other Loan Documents.
10. MISCELLANEOUS
10.1. Complete Agreement; Modification of Agreement; Sale of Interest.
(a) The Loan Documents constitute the complete agreement between the parties
with respect to the subject matter hereof and may not be modified, altered or
amended except by an agreement in writing signed by Borrower and Lenders in
accordance with Section 10.1(d) hereof. Borrower may not sell, assign or
transfer any of the Loan Documents or any portion thereof, including, without
limitation, Borrower's rights, title, interests, remedies, powers and duties
hereunder or thereunder. Borrower hereby consents to Agent's and any Lender's
sale of participations, assignment, transfer or other disposition, at any time
or times, of any of the Loan Documents or of any portion thereof or interest
therein, including, without limitation, Agent's and any Lender's rights, title,
interests, remedies, powers or duties thereunder, whether evidenced by a writing
or not. Borrower agrees that it will use its reasonable efforts to assist and
cooperate with Agent in any manner reasonably requested by Agent to effect the
sale of participations in or assignments of any of the Loan Documents or of any
portion thereof or interest therein, including, without limitation, assistance
in the preparation of appropriate disclosure documents or placement memoranda.
(b) In the event any Lender assigns or otherwise transfers all or any
part of its Term Loan Note, Borrower shall, upon the request of Agent or such
Lender issue new Term Loan Notes, as the case may be, to effectuate such
assignment or transfer.
(c) Each Lender may sell, assign, transfer or negotiate to one or more
other Lenders, commercial banks, insurance companies, other financial
institutions or any other Person acceptable to Agent all or a portion of its
rights and obligations under any Note and its Term Loan Commitment held by such
Lender and this Agreement; provided, however, that (i) each such sale,
assignment, transfer or negotiation shall be of a constant, and not a varying,
percentage of all of the assigning Lender's rights and obligations under such
Note, Term Loan Commitment and this Agreement, (ii) any such sale, assignment,
transfer or negotiation shall not require Borrower to file a registration
statement with the Securities and Exchange Commission or apply to qualify the
Notes under the blue sky law of any state, (iii) any such sale, assignment or
transfer shall be in an aggregate principal amount of not less than $5,000,000
and (iv) acceptance of such assignment by any assignees shall constitute the
agreement of such assignee to be bound by the terms of this Agreement applicable
to the assigning Lender. From and after the effective date of such an
assignment, (x) the assignees thereunder shall, in addition to the rights and
obligations hereunder held by it immediately prior to such effective date, have
the rights and obligations hereunder that have been assigned to it pursuant to
such assignment and (y) the assignor Lender thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
assignment, relinquish its rights and be released from its obligations under the
Agreement (and, in the case of an assignment and acceptance covering all or the
remaining portion of an assigning Lender's rights and obligations under this
Agreement, such Lender shall cease to be a party hereto).
(d) No amendment or waiver of any provision of this Agreement or the
Notes or any other Loan Document, nor consent to any departure by Borrower
therefrom, nor release of any Collateral, shall in any event be effective unless
the same shall be in writing and signed by the Required Lenders, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that no amendment, waiver
or consent shall, unless in writing and signed by each Lender affected thereby
do any of the following: (i) subject the Lender to any additional obligations,
(ii) reduce the principal of, or interest on, the Notes or other amounts payable
hereunder or release or discharge Borrower from its obligations to make such
payments, (iii) postpone any date fixed for any payment of principal of, or
interest on, the Notes or other amounts payable hereunder, (iv) change the
aggregate unpaid principal amount of the Notes, or the number of Lenders, which
shall be required for the Lenders or any of them to take any action hereunder,
or (v) amend this Section 10.1(d); and provided further, however, that no
amendment, waiver or consent shall, unless in writing and signed by the Agent in
addition to the Required Lenders required above to take such action, affect the
rights or duties of the Agent under this Agreement, any Note or any Loan
Document.
10.2. Fees and Expenses. Borrower shall pay all reasonable
out-of-pocket expenses of Agent in connection with the preparation of the Loan
Documents and the administration of the loans made pursuant hereto (including
the reasonable fees and expenses of all of its counsel and advisors retained in
connection with the Loan Documents and the transactions contemplated thereby and
advice in connection therewith) in an aggregate amount not to exceed $75,000.
If, at any time or times, regardless of the existence of an Event of Default
(except with respect to paragraphs (iii) and (iv) below, which shall be subject
to an Event of Default having occurred and be continuing), Agent (or in the case
of paragraphs (iii) and (iv) below, any Lender) shall employ counsel or other
advisors for advice or other representation or shall incur reasonable legal or
other costs and expenses in connection with:
(i) any amendment, modification or waiver, or consent with
respect to, any of the Loan Documents or advice in connection with the
administration of the loans made pursuant hereto or its rights
hereunder or thereunder;
(ii) any litigation, contest, dispute, suit, proceeding or
action (whether instituted by Agent or any Lender, Borrower, any
Subsidiary of Borrower or any other Person) in any way relating to the
Collateral, any of the Loan Documents or any other agreements to be
executed or delivered in connection herewith, unless Borrower or any of
its Subsidiaries prevails therein against Agent or such Lender;
(iii) any attempt to enforce any rights of Agent or any Lender
against Borrower, any Subsidiary of Borrower or any other Person, that
may be obligated to any Lender by virtue of any of the Loan Documents;
(iv) any attempt to verify, protect, collect, sell, liquidate
or otherwise dispose of the Collateral;
then, and in any such event, the attorneys' and other parties' fees arising from
such services, including those of any appellate proceedings, and all expenses,
costs, charges and other fees incurred by such counsel and others in any way or
respect arising in connection with or relating to any of the events or actions
described in this Section shall be payable, on demand, by Borrower to Agent or
such Lender and shall be additional Obligations secured under this Agreement
and the other Loan Documents. Without limiting the generality of the foregoing,
such expenses, costs, charges and fees may include: paralegal fees, costs and
expenses; accountants' and investment bankers' fees, costs and expenses; court
costs and expenses; photocopying and duplicating expenses; court reporter fees,
costs and expenses; long distance telephone charges; air express charges;
telegram charges; secretarial overtime charges; and expenses for travel, lodging
and food paid or incurred in connection with the performance of such legal
services.
10.3. No Waiver by Agent or Any Lender. Agent's or any Lender's
failure, at any time or times, to require strict performance by any Loan Party
of any provision of this Agreement and any of the other Loan Documents shall not
waive, affect or diminish any right of Agent or such Lender thereafter to demand
strict compliance and performance therewith. Any suspension or waiver by Agent
or Lenders of an Event of Default by Borrower under the Loan Documents shall not
suspend, waive or affect any other Event of Default by Borrower under this
Agreement and any of the other Loan Documents whether the same is prior or
subsequent thereto and whether of the same or of a different type. None of the
undertakings, agreements, warranties, covenants and representations of Borrower
contained in this Agreement or any of the other Loan Documents and no Event of
Default by Borrower under this Agreement or under any of the other Loan
Documents shall be deemed to have been suspended or waived by Agent or Lenders,
unless such suspension or waiver is by an instrument in writing signed by an
officer of Agent and the Required Lenders and directed to Borrower specifying
such suspension or waiver.
10.4. Remedies. Agent's and Lender's rights and remedies under this
Agreement shall be cumulative and non-exclusive of any other rights and remedies
which Agent and Lenders may have under any other agreement, including without
limitation, the Loan Documents, by operation of law or otherwise. Recourse to
the Collateral shall not be required.
10.5. Waiver of Jury Trial. The parties hereto waive all right to trial
by jury in any action or proceeding to enforce or defend any rights under the
Loan Documents.
10.6. Severability. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
10.7. Parties. This Agreement and the other Loan Documents shall be
binding upon, and inure to the benefit of, the successors of Borrower, Agent and
Lenders and the assigns, transferees and endorsees of Agent and Lenders.
10.8. Conflict of Terms. Except as otherwise provided in this Agreement
or any of the other Loan Documents by specific reference to the applicable
provisions of this Agreement, if any provision contained in this Agreement is in
conflict with, or inconsistent with, any provision in any of the other Loan
Documents, the provision contained in this Agreement shall govern and control.
10.9. Authorized Signature. Until Agent shall be notified by Borrower
to the contrary, the signature upon any document or instrument delivered
pursuant hereto of an officer of Borrower listed in Schedule 10.9 hereto shall
bind Borrower and be deemed to be the act of Borrower, affixed pursuant to and
in accordance with resolutions duly adopted by Borrower's Board of Directors.
10.10. Governing Law. Except as otherwise expressly provided in any of
the Loan Documents, in all respects, including all matters of construction,
validity and performance, this Agreement and the Obligations arising hereunder
shall be governed by, and construed and enforced in accordance with, the laws of
the State of New York applicable to contracts made and performed in such state,
without regard to the principles thereof regarding conflict of laws, and any
applicable laws of the United States of America. Agent, each Lender and Borrower
agree to submit to personal jurisdiction and to waive any objection as to venue
as to federal or New York State courts located in the County of New York, State
of New York. Service of process on Borrower, Agent or Lender in any action
arising out of or relating to any of the Loan Documents shall be effective if
mailed to such party at the address listed in Section 10.11 hereof. Nothing
herein shall preclude Agent, any Lender or Borrower from bringing suit or taking
other legal action in any other jurisdiction.
10.11. Notices. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by another, or whenever any of the parties desires to give or serve upon
another any communication with respect to this Agreement, each such notice,
demand, request, consent, approval, declaration or other communication shall be
in writing and either shall be delivered in person with receipt acknowledged or
by registered or certified mail, return receipt requested, postage prepaid, or
telecopied and confirmed by telecopy answerback addressed as follows:
(a) If to Agent at:
Employers Reassurance Corporation
5200 Metcalf
Overland Park, Kansas 66201
Attention: James D. Maughn
Telecopy Number: (913) 676-6273
With a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Ted S. Waksman, Esq.
Telecopy Number: (212) 310-8007
(b) If to Borrower at:
Life USA Holding, Inc.
Suite 600
Interchange North Building
300 South Highway 169
Minneapolis, Minnesota 55426
Attention: Mark A. Zesbaugh,
Chief Financial Officer
Telecopy Number: (612) 525-6000
With a copy to:
Kaplan, Strangis and Kaplan, P.A.
5500 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402
Attention: Bruce J. Parker, Esq.
Telecopy Number: (612) 375-1143
(c) If to any Lender, at its address indicated on Schedule 2 hereto
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
with receipt acknowledged, telecopied and confirmed by telecopy answerback or
three (3) Business Days after the same shall have been deposited in the United
States mail. Failure or delay in delivering copies of any notice, demand,
request, consent, approval, declaration or other communication to the persons
designated above to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration or
other communication.
10.12. Confidentiality. Borrower agrees, and shall cause its
Subsidiaries, to keep the terms of this Agreement confidential, except to the
extent that based upon advice of Borrower's counsel, disclosure of the terms
hereof or the filing of this Agreement is required by law, regulation or
judicial order and in each instance, Borrower notifies Lenders of such
disclosure or filing. Further, Borrower agrees that it shall not use this
Agreement or any of the terms hereof for any promotional purpose without the
prior written consent of the Required Lenders. The foregoing shall not prohibit
ordinary course oral disclosures by Borrower, including to any rating agency or
financial analyst, of information concerning this Agreement which is available
in public files.
10.13. Survival. The representations and warranties of Borrower in
this Agreement shall survive the execution, delivery and acceptance hereof by
the parties hereto and the closing of the transactions described herein or re-
lated hereto.
10.14. Section Titles. The Section titles and Table of Contents
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of the agreement between the
parties hereto.
10.15. Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which shall, collectively and separately,
constitute one agreement.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first written above.
LIFE USA HOLDING, INC.
By: \s\ Mark A. Zesbaugh
Name: Mark A. Zesbaugh
Title: Executive Vice President
Chief Financial Officer
EMPLOYERS REASSURANCE CORPORATION,
as Agent
By: \s\ James D. Maughn
Name: James D. Maughn
Title:
LENDERS:
Term Loan EMPLOYERS REASSURANCE CORPORATION
Commitment
$15,000,000
By: \s\ James D. Maughn
Name: James D. Maughn
Title:
Term Loan REPUBLIC-VANGUARD LIFE INSURANCE COMPANY
Commitment
$15,000,000
By: \s\ A. Gordon Jardin
Name: A. Gordon Jardin
Title: President
EXHIBIT 2
EXECUTION COPY
STOCK PLEDGE AGREEMENT
STOCK PLEDGE AGREEMENT, dated as of May 17, 1996, between
LifeUSA HOLDING, INC., a Minnesota corporation ("Pledgor"), and EMPLOYERS
REASSURANCE CORPORATION, a Missouri corporation, as agent (in such capacity,
"Agent") for itself and the lenders party to the Loan Agreement referred to
below ("Lenders").
W I T N E S S E T H:
WHEREAS, Pledgor is the record and beneficial owner of the
shares of common stock described in Schedule I hereto (the "Pledged Securities")
issued by LifeUSA Insurance Company, a Colorado corporation ("LifeUSA"); and
WHEREAS, Borrower, Agent and Lenders have entered into a Loan
Agreement, dated as of May 17, 1996 (as at any time amended, modified or
supplemented, the "Loan Agreement"), pursuant to which Lenders have agreed to
make Term Loan Advances (as defined in the Loan Agreement) to Borrower the
proceeds of which are to be used as provided in the Loan Agreement; and
WHEREAS, in connection with the making of the Term Loan
Advances under the Loan Agreement and as security for all of the Obligations of
Borrower under the Loan Agreement, Lenders are requiring that Pledgor shall have
executed and delivered this Pledge Agreement and granted the security interest
contemplated hereby;
NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained and to induce Lenders to make the Term Loan
Advances under the Loan Agreement, it is agreed as follows:
1. Definitions. Unless otherwise defined herein, terms defined
in the Loan Agreement are used herein as therein defined, and the following
shall have (unless otherwise provided elsewhere in this Stock Pledge Agreement)
the following respective meanings (such meanings being equally applicable to
both the singular and plural form of the terms defined):
"Agreement" shall mean this Stock Pledge Agreement, including
all amendments, modifications and supplements and any exhibits or schedules to
any of the foregoing, and shall refer to this Agreement as the same may be in
effect at the time such reference becomes operative.
"Bankruptcy Code" shall mean title 11, United States Code, as
amended from time to time, and any successor statute thereto.
"Pledged Collateral" shall have the meaning assigned to such
term in Section 2 hereof.
"Secured Obligations" shall have the meaning assigned to such
term in Section 3 hereof.
2. Pledge. Pledgor hereby pledges to Agent, for its benefit
and for the ratable benefit of Lenders, and grants to Agent, for its benefit and
for the ratable benefit of Lenders, a first priority security interest in, all
of the following (collectively, the "Pledged Collateral"):
(a) the Pledged Securities and the certificates representing
the Pledged Securities, and all dividends, distributions, cash, instruments and
other property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the Pledged
Securities; and
(b) all additional shares of capital stock of LifeUSA, from
time to time acquired by Pledgor in any manner (which shares shall be deemed to
be part of the Pledged Securities), and the certificates representing such
additional shares, and all dividends, distributions, cash, instruments and other
property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such shares.
3. Security for Obligations. This Agreement secures, and the
Pledged Collateral is security for, the prompt payment in full when due, whether
at stated maturity, by acceleration or otherwise, and performance of the
Obligations, whether for principal, premium, interest, fees, costs and expenses,
and all obligations of Pledgor now or hereafter existing under this Agreement
(collectively, the "Secured Obligations").
4. Delivery of Pledged Collateral. All certificates
representing or evidencing the Pledged Securities shall be delivered to and held
by or on behalf of Agent pursuant hereto and shall be accompanied by duly
executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to Agent. Agent shall have the right, at any time in its
discretion and without notice to Pledgor, to transfer to or to register in the
name of Agent or any of its nominees any or all of the Pledged Securities. In
addition, Agent shall have the right at any time to exchange certificates or
instruments representing or evidencing Pledged Securities for certificates or
instruments of smaller or larger denominations.
5. Representations and Warranties. Pledgor represents and
warrants to Agent and Lenders that:
(a) Pledgor is, and at the time of delivery of the Pledged
Securities to Agent pursuant to Section 4 hereof will be, the sole holder of
record and the sole beneficial owner of the Pledged Collateral pledged hereunder
free and clear of any Lien thereon or affecting the title thereto, except for
the Lien created by this Agreement.
(b) All of the Pledged Securities have been duly authorized,
validly issued and are fully paid and non-assessable.
(c) Pledgor has the right and requisite authority to pledge,
assign, transfer, deliver, deposit and set over the Pledged Collateral to Agent
as provided herein.
(d) None of the Pledged Securities has been issued or
transferred in violation of the securities registration, securities disclosure
or similar laws of any jurisdiction to which such issuance or transfer may be
subject.
(e) The authorized capital stock of LifeUSA listed on Schedule
I hereto consists of the number of shares of Stock, with the number of shares
issued and outstanding, that are described in Schedule I hereto. As of the date
hereof, there are no existing options, warrants, calls or commitments of any
character whatsoever relating to any capital stock of LifeUSA.
(f) No consent, approval, authorization or other order of any
Person and no consent, authorization, approval, or other action by, and no
notice to or filing with, any Governmental Authority is required either (i) for
the pledge by Pledgor of the Pledged Collateral pursuant to this Agreement or
for the execution, delivery or performance of this Agreement by Pledgor or (ii)
for the exercise by Agent of the voting or other rights provided for in this
Agreement or the remedies in respect of the Pledged Collateral pursuant to this
Agreement, except for (i) the filing of a Form B by Borrower with the Minnesota
Insurance Department within 15 days after the end of the month in which this
Agreement is executed, (ii) compliance with applicable state insurance
regulatory approvals which may be required in connection with the exercise of
Agent's rights hereunder, including the right to vote or dispose of the Pledged
Collateral upon an Event of Default, and (iii) as may be required in connection
with such disposition by laws affecting the offering and sale of securities
generally.
(g) The pledge, assignment and delivery of the Pledged
Collateral pursuant to this Agreement will create a valid first priority Lien on
and a first priority perfected security interest in the Pledged Collateral
pledged by Pledgor, and the proceeds thereof, securing the payment of the
Secured Obligations, subject to no other Lien or security interest.
(h) This Agreement has been duly authorized, executed and
delivered by Pledgor and constitutes a legal, valid and binding obligation of
Pledgor enforceable in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, or other similar laws affecting the rights
of creditors generally or by the application of general equity principles.
The representations and warranties set forth in this Section 5
shall survive the execution and delivery of this Agreement.
6. Covenants. Pledgor covenants and agrees that until the
Termination Date:
(a) Without the prior written consent of Agent, Pledgor will
not sell, assign, transfer, pledge, or otherwise encumber any of its rights in
or to the Pledged Collateral or any unpaid dividends or other distributions or
payments with respect thereto or grant a Lien in any therein except as otherwise
permitted by the Loan Agreement.
(b) Pledgor will, at its expense, promptly execute,
acknowledge and deliver all such instruments and take all such action as Agent
from time to time may request in order to ensure to Agent the benefits of the
Liens in and to the Pledged Collateral intended to be created by this Agreement,
including the filing of any necessary Uniform Commercial Code financing
statements, which may be filed by Agent with or without the signature of
Pledgor, and will cooperate with Agent, at Pledgor's expense, in obtaining all
necessary approvals and making all necessary filings under federal or state law
in connection with such Liens or any sale or transfer of the Pledged Collateral.
(c) Pledgor has and will defend the title to the Pledged
Collateral and the Liens of Agent thereon against the claim of any Person and
will maintain and preserve such Liens until the Termination Date.
(d) Pledgor will, upon obtaining any additional shares of
LifeUSA, which shares are not already Pledged Collateral, promptly (and in any
event within three (3) Business Days) deliver to Agent a Pledge Amendment, duly
executed by Pledgor, in substantially the form of Schedule II hereto (a "Pledge
Amendment"), in respect of the additional Pledged Securities which are to be
pledged pursuant to this Agreement. Pledgor hereby authorizes Agent to attach
each Pledge Amendment to this Agreement and agrees that all Pledged Securities
listed on any Pledge Amendment delivered to Agent shall for all purposes
hereunder be considered Pledged Collateral.
7. Pledgor's Rights. As long as no Event of Default shall have
occurred and be continuing and until written notice shall be given to Pledgor in
accordance with Section 8(a) hereof,
(a) Pledgor shall have the right, from time to time, to vote
and give consents with respect to the Pledged Collateral or any part thereof for
all purposes not inconsistent with the provisions of this Agreement, the Loan
Agreement, and any other agreement; provided, however, that no vote shall be
cast, and no consent shall be given or action taken, which would have the effect
of impairing the position or interest of Agent in respect of the Pledged
Collateral or which would authorize or effect (except as and to the extent
expressly permitted by the Loan Agreement) (i) the dissolution or liquidation,
in whole or in part, of any of its Subsidiaries, (ii) the consolidation or
merger of any of its Subsidiaries with any other Person, (iii) the sale,
disposition or encumbrance of all or substantially all of the assets of any of
its Subsidiaries, (iv) any change in the authorized number of shares, the stated
capital or the authorized share capital of any of its Subsidiaries or the
issuance of any additional shares of its Stock, or (v) the alteration of the
voting rights with respect to the Stock of any of its Subsidiaries;
(b) (i) Pledgor shall be entitled, from time to time, to
collect and receive for its own use all cash dividends paid in respect of the
Pledged Securities to the extent not in violation of the Loan Agreement other
than any and all (A) dividends paid or payable other than in cash in respect of,
and instruments and other property received, receivable or otherwise distributed
in respect of, or in exchange for, any Pledged Collateral, (B) dividends and
other distributions paid or payable in cash in respect of any Pledged Collateral
in connection with a partial or total liquidation or dissolution, and (C) cash
paid, payable or otherwise distributed in redemption of, or in exchange for, any
Pledged Collateral; provided, however, that until actually paid all rights to
such distributions shall remain subject to the Lien created by this Agreement;
and
(ii) all dividends (other than such cash dividends as are
permitted to be paid to Pledgor in accordance with clause (i) above) and all
other distributions in respect of any of the Pledged Securities, whenever paid
or made, shall be delivered to Agent to hold as Pledged Collateral and shall, if
received by Pledgor, be received in trust for the benefit of Agent, be
segregated from the other property or funds of Pledgor, and be forthwith
delivered to Agent as Pledged Collateral in the same form as so received (with
any necessary indorsement).
8. Defaults and Remedies. (a) Upon the occurrence of an Event
of Default and during the continuation of such Event of Default, then or at any
time after such declaration (provided that such declaration is not rescinded by
Agent) and following written notice to Pledgor, Agent (personally or through an
agent) is hereby authorized and empowered, to transfer and register in its name
or in the name of its nominee the whole or any part of the Pledged Collateral,
to exchange certificates or instruments representing or evidencing Pledged
Securities for certificates or instruments of smaller or larger denominations,
to exercise the voting rights with respect thereto, to collect and receive all
cash dividends and other distributions made thereon, to sell in one or more
sales after seven (7) days' notice of the time and place of any public sale or
of the time after which a private sale is to take place (which notice Pledgor
agrees is commercially reasonable), but without any previous notice or
advertisement, the whole or any part of the Pledged Collateral and to otherwise
act with respect to the Pledged Collateral as though Agent was the outright
owner thereof, Pledgor hereby irrevocably constituting and appointing Agent as
the proxy and attorney-in-fact of Pledgor, with full power of substitution to do
so, and which shall remain in effect until the Secured Obligations are paid in
full; provided, however, Agent shall not have any duty to exercise any such
right or to preserve the same and shall not be liable for any failure to do so
or for any delay in doing so. Any sale shall be made at a public or private sale
at Agent's place of business, or at any public building in Overland Park, Kansas
or elsewhere to be named in the notice of sale, either for cash or upon credit
or for future delivery at such price as Agent may deem fair, and Agent or any
Lender may be the purchaser of the whole or any part of the Pledged Collateral
so sold and hold the same thereafter in its own right free from any claim of
Pledgor or any right of redemption. Each sale shall be made to the highest
bidder, but Agent reserves the right to reject any and all bids at such sale
which, in its discretion, it shall deem inadequate. Demands of performance,
except as otherwise herein specifically provided for, notices of sale,
advertisements and the presence of property at sale are hereby waived and any
sale hereunder may be conducted by an auctioneer or any officer or agent of
Agent.
(b) If, at the original time or times appointed for the sale
of the whole or any part of the Pledged Collateral, the highest bid, if there be
but one sale, shall be inadequate to discharge in full all the Secured
Obligations, or if the Pledged Collateral be offered for sale in lots, if at any
of such sales, the highest bid for the lot offered for sale would indicate to
Agent, in its discretion, the unlikelihood of the proceeds of the sales of the
whole of the Pledged Collateral being sufficient to discharge all the Secured
Obligations, Agent may, on one or more occasions and in its discretion, postpone
any of said sales by public announcement at the time of sale or the time of
previous postponement of sale, and no other notice of such postponement or
postponements of sale need be given, any other notice being hereby waived;
provided, however, that any sale or sales made after such postponement shall be
after seven (7) days' notice to Pledgor.
(c) In the event of any sales hereunder Agent shall, after
deducting all costs or expenses of every kind (including reasonable attorneys'
fees and disbursements) for care, safekeeping, collection, sale, delivery or
otherwise, apply the residue of the proceeds of the sales to the payment or
reduction, either in whole or in part, of the Secured Obligations in accordance
with the agreements and instruments governing and evidencing such Secured
Obligations, returning the surplus, if any, to Pledgor.
(d) If, at any time when Agent in its sole discretion
determines, following the occurrence and during the continuance of an Event of
Default, that, in connection with any actual or contemplated exercise of its
rights (when permitted under this Section 8) to sell the whole or any part of
the Pledged Collateral hereunder, it is necessary or advisable to effect a
public registration of all or part of the Pledged Collateral pursuant to the
Securities Act of 1933, as amended (or any similar statute then in effect) (the
"Act"), Pledgor shall, in an expeditious manner, cause its Subsidiaries to:
(i) Prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement with respect to the
Pledged Collateral and use its best efforts to cause such registration statement
to become and remain effective.
(ii) Prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the Act with respect to the sale
or other disposition of the Pledged Collateral covered by such registration
statement whenever Agent shall desire to sell or otherwise dispose of the
Pledged Collateral.
(iii) Furnish to Agent such numbers of copies of a
prospectus and a preliminary prospectus, in conformity with the requirements of
the Act, and such other documents as Agent may request in order to facilitate
the public sale or other disposition of the Pledged Collateral by Agent.
(iv) Use its best efforts to register or qualify the
Pledged Collateral covered by such registration statement under such other
securities or blue sky laws of such jurisdictions within the United States and
Puerto Rico as Agent shall request, and do such other reasonable acts and things
as may be required of it to enable Agent to consummate the public sale or other
disposition in such jurisdictions of the Pledged Collateral by Agent.
(v) Furnish, at the request of Agent, on the date that
shares of the Pledged Collateral are delivered to the underwriters for sale
pursuant to such registration or, if the security is not being sold through
underwriters, on the date that the registration statement with respect to such
shares of Pledged Collateral becomes effective, (A) an opinion, dated such date,
of the independent counsel representing such registrant for the purposes of such
registration, addressed to the underwriters, if any, and in the event the
Pledged Collateral is not being sold through underwriters, then to Agent, in
customary form and covering matters of the type customarily covered in such
legal opinions; and (B) a comfort letter, dated such date, from the independent
certified public accountants of such registrant, addressed to the underwriters,
if any, and in the event the Pledged Collateral is not being sold through
underwriters, then to Agent, in a customary form and covering matters of the
type customarily covered by such comfort letters and as the underwriters or
Agent shall reasonably request. The opinion of counsel referred to above shall
additionally cover such other legal matters with respect to the registration in
respect of which such opinion is being given as Agent may reasonably request.
The letter referred to above from the independent certified public accountants
shall additionally cover such other financial matters (including information as
to the period ending not more than five (5) Business Days prior to the date of
such letter) with respect to the registration in respect of which such letter is
being given as Agent may reasonably request.
(vi) Otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, but not later than 18
months after the effective date of the registration statement, an earnings
statement covering the period of at least 12 months beginning with the first
full month after the effective date of such registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the Act.
(e) All expenses incurred in complying with Section 8(d)
hereof, including, without limitation, all registration and filing fees
(including all expenses incident to filing with the National Association of
Securities Dealers, Inc.), printing expenses, fees and disbursements of counsel
for the registrant, the fees and expenses of counsel for Agent, expenses of the
independent certified public accountants (including any special audits incident
to or required by any such registration) and expenses of complying with the
securities or blue sky laws or any jurisdictions, shall be paid by Pledgor.
(f) If, at any time when Agent shall determine to exercise its
right to sell the whole or any part of the Pledged Collateral hereunder, such
Pledged Collateral or the part thereof to be sold shall not, for any reason
whatsoever, be effectively registered under the Act, Agent may, in its
discretion (subject only to applicable requirements of law), sell such Pledged
Collateral or part thereof by private sale in such manner and under such
circumstances as Agent may deem necessary or advisable, but subject to the other
requirements of this Section 8, and shall not be required to effect such
registration or to cause the same to be effected. Without limiting the
generality of the foregoing, in any such event Agent in its discretion (x) may,
in accordance with applicable securities laws, proceed to make such private sale
notwithstanding that a registration statement for the purpose of registering
such Pledged Collateral or part thereof could be or shall have been filed under
said Act (or similar statute), (y) may approach and negotiate with a single
possible purchaser to effect such sale, and (z) may restrict such sale to a
purchaser who will represent and agree that such purchaser is purchasing for its
own account, for investment and not with a view to the distribution of such
Pledged Collateral or part thereof. In addition to a private sale as provided
above in this Section 8, if any of the Pledged Collateral shall not be freely
distributable to the public without registration under the Act (or similar
statute) at the time of any proposed sale pursuant to this Section 8, then Agent
shall not be required to effect such registration or cause the same to be
effected but, in its discretion (subject only to applicable requirements of
law), may require that any sale hereunder (including a sale at auction) be
conducted subject to restrictions (i) as to the financial sophistication and
ability of any Person permitted to bid or purchase at any such sale, (ii) as to
the content of legends to be placed upon any certificates representing the
Pledged Collateral sold in such sale, including restrictions on future transfer
thereof, (iii) as to the representations required to be made by each Person
bidding or purchasing at such sale relating to that Person's access to financial
information about Pledgor and such Person's intentions as to the holding of the
Pledged Collateral so sold for investment, for its own account, and not with a
view to the distribution thereof, and (iv) as to such other matters as Agent
may, in its discretion, deem necessary or appropriate in order that such sale
(notwithstanding any failure so to register) may be effected in compliance with
title 11 of the United States Code, as now constituted or hereafter amended, and
other laws affecting the enforcement of creditors' rights and the Act and all
applicable state securities laws.
(g) Pledgor acknowledges that notwithstanding the legal
availability of a private sale or a sale subject to the restrictions described
above in paragraph (f), Agent may, in its discretion, elect to register any or
all the Pledged Collateral under the Act (or any applicable state securities
law) in accordance with its rights hereunder. Pledgor, however, recognizes that
Agent may be unable to effect a public sale of any or all the Pledged Collateral
and may be compelled to resort to one or more private sales thereof. Pledgor
also acknowledges that any such private sale may result in prices and other
terms less favorable to the seller than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. Agent shall be
under no obligation to delay a sale of any of the Pledged Collateral for the
period of time necessary to permit the registrant to register such securities
for public sale under the Act, or under applicable state securities laws, even
if Pledgor would agree to do so.
(h) Pledgor agrees that following the occurrence and during
the continuance of an Event of Default it will not at any time plead, claim or
take the benefit of any appraisal, valuation, stay, extension, moratorium or
redemption law now or hereafter in force in order to prevent or delay the
enforcement of this Agreement, or the absolute sale of the whole or any part of
the Pledged Collateral or the possession thereof by any purchaser at any sale
hereunder, and Pledgor waives the benefit of all such laws to the extent it
lawfully may do so. Pledgor agrees that it will not interfere with any right,
power and remedy of Agent provided for in this Agreement or now or hereafter
existing at law or in equity or by statute or otherwise, or the exercise or
beginning of the exercise by Agent of any one or more of such rights, powers or
remedies. No failure or delay on the part of Agent to exercise any such right,
power or remedy and no notice or demand which may be given to or made upon
Pledgor by Agent with respect to any such remedies shall operate as a waiver
thereof, or limit or impair Agent's right to take any action or to exercise any
power or remedy hereunder, without notice or demand, or prejudice its rights as
against Pledgor in any respect.
(i) Pledgor further agrees that a breach of any of the
covenants contained in this Section 8 will cause irreparable injury to Agent,
that Agent has no adequate remedy at law in respect of such breach and, as a
consequence, agrees that each and every covenant contained in this Section 8
shall be specifically enforceable against Pledgor, and Pledgor hereby waives and
agrees not to assert any defenses against an action for specific performance of
such covenants except for a defense that the Secured Obligations are not then
due and payable in accordance with the agreements and instruments governing and
evidencing such obligations. Pledgor further acknowledges the impossibility of
ascertaining the amount of damages which would be suffered by Agent by reason of
a breach of any of such covenants and, consequently, agrees that, if Agent shall
sue for damages for breach, it shall pay, as liquidated damages and not as a
penalty, an amount equal to the lesser of (i) the value of the Pledged
Collateral pledged by Pledgor on the date Agent shall demand compliance with
this Section 8, and (ii) the amount required to pay in full the Secured
Obligations.
(j) The parties acknowledge that the exercise of certain
remedies hereunder upon the occurrence of an Event of Default, including the
voting or sale of the Pledged Collateral are subject to applicable state
insurance laws and regulations, including notice to and approval by the
Minnesota Insurance Department so long as LifeUSA is domiciled in the State of
Minnesota.
9. Application of Proceeds. Any cash held by Agent as Pledged
Collateral and all cash proceeds received by Agent in respect of any sale of,
liquidation of, or other realization upon all or any part of the Pledged
Collateral shall be applied by Agent as follows:
first, to Agent in an amount sufficient to pay in full the
expenses of Agent in connection with such sale, disposition or other
realization, including all expenses, liabilities and advances incurred
or made by Agent in connection therewith, including, without
limitation, attorney's fees;
next, to the payment of the Secured Obligations in
accordance with the terms of the Loan Agreement; and
finally, after payment in full of all Secured Obligations, to
pay to Pledgor, or its successors or assigns, or to whomsoever may be
lawfully entitled to receive the same, or as a court of competent
jurisdiction may direct, any surplus then remaining from such proceeds.
10. Waiver. No delay on Agent's part in exercising any power
of sale, Lien, option or other right hereunder, and no notice or demand which
may be given to or made upon Pledgor by Agent with respect to any power of sale,
Lien, option or other right hereunder, shall constitute a waiver thereof, or
limit or impair Agent's right to take any action or to exercise any power of
sale, Lien, option, or any other right hereunder, without notice or demand, or
prejudice Agent's rights as against Pledgor in any respect.
11. Assignment. Agent or any Lender may assign, indorse or
transfer any instrument evidencing all or any part of the Secured Obligations as
provided in, and in accordance with, the Loan Agreement, and the holder of such
instrument shall be entitled to the benefits of this Agreement.
12. Termination. Immediately following the payment of all
Secured Obligations, Agent shall deliver to Pledgor the Pledged Collateral
pledged by Pledgor at the time subject to this Agreement and all instruments of
assignment executed in connection therewith, free and clear of the Liens hereof
and, except as otherwise provided herein, all of Pledgor's obligations hereunder
shall at such time terminate.
13. Lien Absolute. All rights of Agent hereunder, and all
obligations of Pledgor hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the Loan
Agreement, the Notes, any other Loan Document or any other agreement or
instrument governing or evidencing any Secured Obligations;
(b) any change in the time, manner or place of payment of, or
in any other term of, all or any part of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Loan Agreement,
the Notes, any other Loan Document or any other agreement or instrument
governing or evidencing any Secured Obligations;
(c) any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to departure
from any guaranty, for all or any of the Secured Obligations; or
(d) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, Pledgor.
14. Release. Pledgor consents and agrees that Agent and
Lenders may at any time, or from time to time, in their discretion (a) renew,
extend or change the time of payment, and/or the manner, place or terms of
payment of all or any part of the Secured Obligations and (b) exchange, release
and/or surrender all or any of the Pledged Collateral, or any part thereof, by
whomsoever deposited, which is now or may hereafter be held by Agent in
connection with all or any of the Secured Obligations; all in such manner and
upon such terms as Agent and Lenders may deem proper, and without notice to or
further assent from Pledgor, it being hereby agreed that Pledgor shall be and
remain bound upon this Agreement, irrespective of the existence, value or
condition of any of the Pledged Collateral, and notwithstanding any such change,
exchange, settlement, compromise, surrender, release, renewal or extension, and
notwithstanding also that the Secured Obligations may, at any time, exceed the
aggregate principal amount thereof set forth in the Loan Agreement, or any other
agreement governing any Secured Obligations. Pledgor hereby waives notice of
acceptance of this Agreement, and also presentment, demand, protest and notice
of dishonor of any and all of the Secured Obligations, and promptness in
commencing suit against any party hereto or liable hereon, and in giving any
notice to or of making any claim or demand hereunder upon Pledgor. No act or
omission of any kind on Agent's part shall in any event affect or impair this
Agreement.
15. Indemnification. Pledgor agrees to indemnify and hold
Agent and each Lender harmless from and against any taxes, liabilities, claims
and damages, including reasonable attorney's fees and disbursements, and other
expenses incurred or arising by reason of the taking or the failure to take
action by Agent, in good faith, in respect of any transaction effected under
this Agreement or in connection with the Lien provided for herein, including,
without limitation, any taxes payable in connection with the delivery or
registration of any of the Pledged Collateral as provided herein. Whether or not
the transactions contemplated by this Agreement shall be consummated and subject
to the provisions of the Loan Agreement, Pledgor agrees to pay to Agent all
reasonable out-of-pocket costs and expenses incurred in connection with the
enforcement of this Agreement (including, without limitation, reasonable counsel
fees), and all reasonable fees, expenses and disbursements, including
registration costs under the Act (or similar statute) and the reasonable fees of
Agent's agents or representatives, incurred in connection with the execution and
delivery of this Agreement and the performance by Agent of the provisions of
this Agreement and of any transactions effected in connection with this
Agreement. The obligations of Pledgor under this Section 15 shall survive the
termination of this Agreement.
16. Reinstatement. This Agreement shall remain in full force
and effect and continue to be effective should any petition be filed by or
against Pledgor for liquidation or reorganization, should Pledgor become
insolvent or make an assignment for the benefit of creditors or should a
receiver or trustee be appointed for all or any significant part of Pledgor's
assets, and shall continue to be effective or be reinstated, as the case may be,
if at any time payment and performance of the Secured Obligations, or any part
thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must
otherwise be restored or returned by any obligee of the Secured Obligations,
whether as a "voidable preference", "fraudulent conveyance", or otherwise, all
as though such payment or performance had not been made. In the event that any
payment, or any part thereof, is rescinded, reduced, restored or returned, the
Secured Obligations shall be reinstated and deemed reduced only by such amount
paid and not so rescinded, reduced, restored or returned.
17. Miscellaneous. (a) Agent has been appointed as Agent
hereunder by Lenders under, and shall be entitled to the benefits of, the Loan
Agreement. Agent shall be obligated, and shall have the right hereunder to make
demands, to give notices, to exercise or refrain from exercising any rights and
to take or refrain from taking action (including, without limitation, the
release or substitution of Pledged Collateral) solely in accordance with this
Agreement and the Loan Agreement, and Lenders shall be bound thereby; the sole
right of Lenders with respect to this Agreement shall be for Lenders to receive
the payments provided for in Section 9 hereof. Agent may execute any of its
duties hereunder by or through agents or employees and shall be entitled to
advice of counsel concerning all matters pertaining to its duties hereunder.
(b) Neither Agent nor any Lender nor any of their respective
officers, directors, employees, agents or counsel shall be liable for any action
lawfully taken or omitted to be taken by it or them hereunder or in connection
herewith, except for its or their own gross negligence or willful misconduct.
(c) This Agreement shall be binding upon Pledgor and its
successors and assigns, and shall inure to the benefit of, and be enforceable
by, Agent and its successors and assigns, and shall be governed by, and
construed and enforced in accordance with, the internal laws in effect in the
State of New York without giving effect to principles of conflict of laws, and
none of the terms or provisions of this Agreement may be waived, altered,
modified or amended except in writing duly signed for and on behalf of Agent and
Pledgor.
18. Severability. If for any reason any provision or
provisions hereof are determined to be invalid and contrary to any existing or
future law, such invalidity shall not impair the operation of or effect those
portions of this Agreement which are valid.
19. Notices. Except as otherwise provided herein, whenever it
is provided herein that any notice, demand, request, consent, approval,
declaration or other communication shall or may be given to or served upon any
of the parties by any other party, or whenever any of the parties desires to
give or serve upon any other a communication with respect to this Agreement,
each such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and either shall be delivered in person with
receipt acknowledged or sent by registered or certified mail, return receipt
requested, postage prepaid, or by telecopy and confirmed by telecopy answerback
addressed as follows:
(a) If to Agent, at:
Employers Reassurance Corporation
5200 Metcalf
Overland Park, Kansas 66201
Attention: James D. Maughn
Telecopy: (913) 676-6273
With a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Ted S. Waksman, Esq.
Telecopy: (212) 310-8007
(b) If to Pledgor, at
LifeUSA Holding, Inc.
Suite 600
Interchange North Building
300 South Highway 169
Minneapolis, Minnesota 55426
Attention: Mark A. Zesbaugh,
Chief Financial Officer
Telecopy: (612) 525-6141
With a copy to:
Kaplan, Strangis & Kaplan
5500 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402
Attention: Bruce Parker, Esq.
Telecopy: (612) 375-1143
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
with receipt acknowledged, telecopied and confirmed by telecopy answerback or
three (3) Business Days after the same shall have been deposited in the United
States mail. Failure or delay in delivering copies of any notice, demand,
request, consent, approval, declaration or other communication to the persons
designated above to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration or
other communication.
20. Section Titles. The Section titles contained in this
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.
21. Counterparts. This Agreement may be executed in any number
of counterparts, which shall, collectively and separately, constitute one
agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Stock
Pledge Agreement to be duly executed as of the date first written above.
LifeUSA HOLDING, INC.
By: /s/ Mark A. Zesbaugh
Name: Mark A. Zesbaugh
Title: Executive Vice President
Chief Financial Officer
Accepted and Acknowledged by:
EMPLOYERS REASSURANCE CORPORATION,
as Agent
By: /s/ James D. Maughn
Name: James D. Maughn
Title:
SCHEDULE I
Attached to and forming a part of that certain Stock Pledge
Agreement, dated as of May 17, 1996, by Pledgor to Employers Reassurance
Corporation, as Agent for Lenders.
<TABLE>
<CAPTION>
Class of Certificate Number of Number of Shares
Issuer Stock Number(s) Shares Issued and Outstanding
- ------ ----- --------- ------ ----------------------
<S> <C> <C> <C> <C>
LifeUSA Insurance Company Common 6 25,000 25,000
</TABLE>
SCHEDULE II
to the Stock Pledge Agreement
PLEDGE AMENDMENT
This Pledge Amendment, dated __________ __, 19__ is delivered
pursuant to Section 6(d) of the Stock Pledge Agreement referred to below. The
undersigned hereby agrees that this Pledge Amendment may be attached to that
certain Stock Pledge Agreement, dated as of May 17, 1996, by the undersigned, as
Pledgor, to Employers Reassurance Corporation as Agent for Lenders, and that the
Pledged Securities listed on this Pledge Amendment shall be and become a part of
the Pledged Collateral referred to in said Stock Pledge Agreement and shall
secure all Secured Obligations referred to in said Stock Pledge Agreement.
LifeUSA HOLDING, INC.
By:_________________________
Name:
Title:
<TABLE>
<CAPTION>
Class of Certificate Number of Number of Shares
Issuer Stock Number(s) Shares Issued and Outstanding
- ------ ----- --------- ------ ----------------------
<S> <C> <C> <C> <C>
</TABLE>
EXHIBIT 3
Date: May 20, 1996
Contact: Mark Zesbaugh
(612) 525-6013
FOR IMMEDIATE RELEASE
LIFE USA HOLDING, INC. COMPLETES $30 MILLION LINE OF CREDIT AGREEMENT
MINNEAPOLIS, May 20 -- Life USA Holding, Inc. today announced
that it has signed an agreement with two of its reinsurers under which Life USA
will receive a long term line of credit. The only change to the agreement, first
announced on April 18, 1996, is that the credit line has been increased from $25
to $30 million. Specific terms of the agreement were not disclosed.
Life USA indicated that any funds drawn against the line will
be used to fund acquisitions that the company may make, capital contributions to
LifeUSA Insurance Company or for capital expenditures.
LifeUSA Insurance Company is a wholly owned subsidiary of Life
USA Holding, Inc. LifeUSA Insurance company is licensed to issue business in all
states except New York and is represented by 120 marketing organizations. The
stock of Life USA Holding, Inc. is traded on the Nasdaq National Market tier of
the Nasdaq Stock Market under the symbol LUSA.
