<PAGE> 1
UNITED STATES
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
(DATE OF EARLIEST EVENT REPORTED)
DECEMBER 17, 1999
HCC INSURANCE HOLDINGS, INC.
(EXACT NAME OR REGISTRANT AS SPECIFIED IN ITS CHARTER)
STATE OR OTHER COMMISSION IRS EMPLOYER
JURISDICTION FILE NUMBER: IDENTIFICATION
OF INCORPORATION: NUMBER:
DELAWARE 0-20766 76-0336636
13403 NORTHWEST FREEWAY
HOUSTON, TEXAS 77040-6094
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER,
INCLUDING AREA CODE - (713) 690-7300
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ITEM 5. OTHER EVENTS.
On December 17, 1999, HCC Insurance Holdings, Inc. ("HCC") executed a
Loan Agreement ($300,000,000 Revolving Loan Facility) (the "Facility") with a
syndicate of financial institutions led by Wells Fargo Bank (Texas), National
Association ("Wells Fargo"), as administrative agent, lead arranger and lender,
Bank of America, N.A. as documentation agent and lender, The Bank of New York as
senior managing agent and lender, Bank One, N.A. as co-agent and lender, First
Union National Bank as syndications agent and lender and Dresdner Bank AG, New
York and Grand Cayman Branches, as co-agent and a lender. Under the Facility,
borrowings may be made from time-to-time by HCC for general corporate purposes
until the expiration of the Facility on December 17, 2004. The Facility will
reduce by $25,000,000 on each of June 30, 2003 and June 30, 2004. Outstanding
loans under the Facility bear interest at HCC's option at rates related to
current LIBOR or the announced prime rate of Wells Fargo. The loan is secured in
part by the pledge of the stock of Avemco Insurance Company, Houston Casualty
Company and U. S. Specialty Insurance Company, three of HCC's insurance company
subsidiaries, and by the pledge of stock in and guaranties entered into by HCC's
principal agency subsidiaries. HCC has made standard affirmative and negative
covenants consistent with facilities of this type. The initial funding from the
Facility will be used, among other things, to refinance existing outstanding
loans under a $150,000,000 revolving credit facility and a $100,000,000 short
term revolving credit facility with Wells Fargo and other lenders. HCC also
executed a $80,000,000 Promissory Note dated December 17, 1999 payable to Wells
Fargo (the "Acquisition Bridge Facility"). Under the Acquisition Bridge Facility
a borrowing will be made in the amount of $79,000,000 to be used to finance the
acquisition of The Centris Group, Inc. The outstanding loan under the
Acquisition Bridge Facility will bear interest related to the announced prime
rate of Wells Fargo. The Acquisition Bridge Facility is unsecured and matures on
March 13, 2000, but may be pre-paid without penalty at any time.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
10.1 Loan Agreement ($300,000,000 Revolving Loan Facility) dated as of
December 17, 1999 among HCC Insurance Holdings, Inc. as borrower, Wells Fargo
Bank (Texas), National Association, as administrative agent, lead arranger and
lender, Bank of America, N.A. as documentation agent and lender, Bank of New
York as senior managing agent and lender, Bank One, N.A. as co-agent and lender,
First Union National Bank as syndications agent and lender and Dresdner Bank AG,
New York and Grand Cayman Branches, as co-agent and a lender.
10.2 $80,000,000 Note dated December 17, 1999 executed by HCC
Insurance Holdings, Inc. and payable to the order of Wells Fargo Bank (Texas),
National Association.
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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.
Dated: December 20, 1999 HCC INSURANCE HOLDINGS, INC.
By: /s/ FRANK J. BRAMANTI
-------------------------------------------
Frank J. Bramanti, Executive Vice President
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.1 Loan Agreement ($300,000,000 Revolving Loan Facility) dated as of
December 17, 1999 among HCC Insurance Holdings, Inc. as borrower,
Wells Fargo Bank (Texas), National Association, as administrative
agent, lead arranger and lender, Bank of America, N.A. as
documentation agent and lender, Bank of New York as senior managing
agent and lender, Bank One, N.A. as co-agent and lender, First Union
National Bank as syndications agent and lender and Dresdner Bank AG,
New York and Grand Cayman Branches, as co-agent and a lender.
10.2 $80,000,000 Note dated December 17, 1999 executed by HCC Insurance
Holdings, Inc. and payable to the order of Wells Fargo Bank (Texas),
National Association.
</TABLE>
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EXHIBIT 10.1
LOAN AGREEMENT
($300,000,000 REVOLVING LOAN FACILITY)
DATED AS OF DECEMBER 17, 1999
AMONG
HCC INSURANCE HOLDINGS, INC.
AS BORROWER,
WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION,
AS ADMINISTRATIVE AGENT AND LEAD ARRANGER AND AS A LENDER,
FIRST UNION NATIONAL BANK,
AS SYNDICATIONS AGENT AND AS A LENDER,
BANK OF AMERICA, N.A.,
AS DOCUMENTATION AGENT AND AS A LENDER,
THE BANK OF NEW YORK,
AS SENIOR MANAGING AGENT AND AS A LENDER,
BANK ONE, NA,
AS CO-AGENT AND AS A LENDER
DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES,
AS CO-AGENT AND AS A LENDER
AND
THE OTHER LENDERS NOW OR HEREAFTER
PARTIES HERETO
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
1. Definitions....................................................................1
1.1 Certain Defined Terms...............................................1
1.2 Miscellaneous......................................................17
2. Commitments and Loans.........................................................17
2.1 Loans..............................................................17
2.2 Terminations or Reductions of Commitments..........................17
2.3 Commitment Fees....................................................17
2.4 Several Obligations................................................18
2.5 Notes..............................................................18
2.6 Use of Proceeds....................................................18
3. Borrowings, Payments, Prepayments and Interest Options........................18
3.1 Borrowings.........................................................18
3.2 Prepayments........................................................19
3.3 Interest Options...................................................19
3.4 Capital Adequacy...................................................23
3.5 Limitation on Charges; Substitute Lenders; Non-Discrimination......24
4. Payments; Pro Rata Treatment; Computations, Etc...............................24
4.1 Payments...........................................................24
4.2 Pro Rata Treatment.................................................26
4.3 Certain Actions, Notices, Etc......................................26
4.4 Non-Receipt of Funds by Agent......................................27
4.5 Sharing of Payments, Etc...........................................27
5. Conditions Precedent..........................................................27
5.1 Initial Loans......................................................27
5.2 All Loans..........................................................29
6. Representations and Warranties................................................30
6.1 Organization.......................................................30
6.2 Financial Statements...............................................30
6.3 Enforceable Obligations; Authorization.............................30
6.4 Other Debt.........................................................31
6.5 Litigation.........................................................31
6.6 Title..............................................................31
6.7 Taxes..............................................................31
6.8 Regulations U and X................................................31
6.9 Subsidiaries.......................................................31
6.10 No Untrue or Misleading Statements.................................31
6.11 ERISA..............................................................32
6.12 Investment Company Act.............................................32
</TABLE>
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<TABLE>
<S> <C> <C>
6.13 Public Utility Holding Company Act................................32
6.14 Solvency..........................................................32
6.15 Fiscal Year.......................................................32
6.16 Compliance........................................................32
6.17 Environmental Matters.............................................32
6.18 Property and Earnings of Material Subsidiaries....................33
6.19 Year 2000 Compliance..............................................33
7. Affirmative Covenants........................................................33
7.1 Taxes, Existence, Regulations, Property, Etc......................33
7.2 Financial Statements and Information..............................34
7.3 Financial Tests...................................................35
7.4 Inspection........................................................35
7.5 Further Assurances................................................36
7.6 Books and Records.................................................36
7.7 Insurance.........................................................36
7.8 Notice of Certain Matters.........................................36
7.9 ERISA Information and Compliance..................................37
7.10 Reinsurers' Quality Ratings.......................................37
7.11 Year 2000 Compliance..............................................38
8. Negative Covenants...........................................................38
8.1 Borrowed Money Indebtedness.......................................39
8.2 Liens.............................................................39
8.3 Contingent Liabilities............................................40
8.4 Mergers and Consolidations........................................40
8.5 Disposition of Assets.............................................41
8.6 Redemption, Dividends and Distributions...........................41
8.7 Nature of Business................................................41
8.8 Transactions with Related Parties.................................41
8.9 Loans and Investments.............................................42
8.10 Organizational Documents..........................................42
8.11 Unfunded Liabilities..............................................42
8.12 Acquisitions......................................................42
8.13 Subordinated Indebtedness.........................................42
8.14 Subsidiaries......................................................43
8.15 Property and Earnings of Material Subsidiaries....................43
9. Defaults.....................................................................43
9.1 Events of Default.................................................43
9.2 Right of Setoff...................................................46
9.3 Remedies Cumulative...............................................46
10. Agent........................................................................47
10.1 Appointment, Powers and Immunities................................47
10.2 Reliance..........................................................47
10.3 Defaults..........................................................48
</TABLE>
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<TABLE>
<S> <C> <C>
10.4 Material Written Notices..........................................48
10.5 Rights as a Lender................................................48
10.6 Indemnification...................................................49
10.7 Non-Reliance on Agent and Other Lenders...........................49
10.8 Failure to Act....................................................49
10.9 Resignation or Removal of Agent...................................49
10.10 No Partnership....................................................50
10.11 No Waiver.........................................................50
10.12 Other Agents......................................................50
11. Miscellaneous................................................................51
11.1 Waiver............................................................51
11.2 Notices...........................................................51
11.3 Expenses, Etc.....................................................51
11.4 Indemnification...................................................52
11.5 Amendments, Etc...................................................52
11.6 Successors and Assigns............................................53
11.7 Limitation of Interest............................................55
11.8 Survival..........................................................56
11.9 Captions..........................................................56
11.10 Counterparts......................................................56
11.11 Governing Law.....................................................56
11.12 Severability......................................................56
11.13 Tax Forms.........................................................57
11.14 Venue.............................................................57
11.15 Jury Waiver.......................................................57
11.16 Conflicts Between This Agreement and the Other Loan Documents.....57
11.17 Disclosure to Other Persons; Confidentiality......................57
11.18 Amendment and Restatement; Renewal Notes..........................58
</TABLE>
EXHIBITS
A -- Request for Extension of Credit
B -- Rate Designation Notice
C -- Note
D -- Assignment and Acceptance
E -- Compliance Certificate
F -- Subsidiaries as of the Effective Date
G -- Existing Borrowed Money Indebtedness
H -- Existing Liens
SCHEDULES
I -- Commitments
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LOAN AGREEMENT
THIS LOAN AGREEMENT is made and entered into as of December 17, 1999,
by and among HCC INSURANCE HOLDINGS, INC., a Delaware corporation (together with
its permitted successors, herein called the "Borrower"); each of the lenders
which is or may from time to time become a party hereto (individually, a
"Lender" and, collectively, the "Lenders"), WELLS FARGO BANK (TEXAS), NATIONAL
ASSOCIATION ("Wells Fargo"), a national banking association, as Administrative
Agent for the Lenders and Lead Arranger (in such capacity, together with its
successors in such capacity, the "Agent"), FIRST UNION NATIONAL BANK, as
Syndications Agent, BANK OF AMERICA, N.A., as Documentation Agent, THE BANK OF
NEW YORK, as Senior Managing Agent, BANK ONE, NA, as Co-Agent, and DRESDNER BANK
AG, NEW YORK AND GRAND CAYMAN BRANCHES, as Co-Agent.
The parties hereto agree as follows:
1. Definitions.
1.1 Certain Defined Terms.
Unless a particular term, word or phrase is otherwise defined or the
context otherwise requires, capitalized terms, words and phrases used herein or
in the Loan Documents (as hereinafter defined) have the following meanings (all
definitions that are defined in this Agreement in the singular have the same
meanings when used in the plural and vice versa):
Accounts, General Intangibles and Inventory shall have the respective
meanings assigned to them in the Uniform Commercial Code enacted in the State of
Texas in force on the Effective Date.
Acquisition Bridge Facility means the credit facility evidenced by that
certain promissory note in the original principal amount of $80,000,000 dated
December 17, 1999 executed by Borrower payable to the order of Wells Fargo Bank,
National Association, as the same may be renewed, extended, modified or
rearranged from time to time. The Acquisition Bridge Facility presently matures
on March 13, 2000 and must be paid in full on or before such date unless the
Majority Lenders shall otherwise agree in writing.
Additional Interest means the aggregate of all amounts accrued or paid
pursuant to the Notes or any of the other Loan Documents (other than interest on
the Notes at the Stated Rate) which, under applicable laws, are or may be deemed
to constitute interest on the indebtedness evidenced by the Notes.
Adjusted LIBOR means, with respect to each Interest Period applicable
to a LIBOR Borrowing, a rate per annum equal to the quotient, expressed as a
percentage, of (a) LIBOR with respect to such Interest Period divided by (b)
1.0000 minus the Eurodollar Reserve Requirement in effect on the first day of
such Interest Period.
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Affiliate means any Person controlling, controlled by or under common
control with any other Person. For purposes of this definition, "control"
(including "controlled by" and "under common control with") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or otherwise.
Agency Subsidiaries means HCC UK Acquisition, North American Special
Risk Associates, Inc., an Illinois corporation, LDG Reinsurance Corporation, a
Massachusetts corporation, HCC Employer Services, Inc., an Alabama corporation,
HCC Employee Benefits, Inc., a Delaware corporation, HCC Aviation Insurance
Group, Inc., a Texas corporation, HCC Benefits Corporation, a Delaware
corporation, HCC Intermediaries, Inc., a Texas corporation, U.S. Benefits
Insurance Services, Inc., a California corporation (effective upon acquisition
of Centris by Borrower) and such other Subsidiaries organized under the laws of
the United States or a subdivision thereof which are engaged primarily in the
same businesses as the foregoing entities as Borrower may from time to time
designate as an "Agency Subsidiary" by giving Agent written notice thereof and
by executing and delivering to Agent such Security Agreements, Guaranties, stock
certificates, stock powers, authorization documentation, legal opinions and
other items as Agent may reasonably request, each in Proper Form and duly
executed and delivered, in order to ensure that a Default shall not occur under
the provisions of Sections 9.1(j) or (l) hereof. Borrower may at any time cause
any of the above listed entities to no longer be characterized as an "Agency
Subsidiary" so long as no Event of Default has occurred which is continuing and
so long as such change in characterization does not result in any Default or
Event of Default (and in the event any Person ceases to be an "Agency
Subsidiary" as above provided, such Person's Guaranty shall be promptly released
by Agent and the equity interests in and to such Person shall be promptly
released by Agent from the Liens of each Security Document covering such equity
interests and the certificates evidencing such equity interests shall be
promptly delivered to Borrower by Agent).
Agreement means this Loan Agreement, as it may from time to time be
amended, modified, restated or supplemented.
Annual Financial Statements means the annual financial statements of a
Person, including all notes thereto, which statements shall include a balance
sheet as of the end of such fiscal year and an income statement and a statement
of cash flows for such fiscal year, all setting forth in comparative form the
corresponding figures from the previous fiscal year, all prepared in conformity
with GAAP in all material respects, and accompanied by the unqualified opinion
of independent certified public accountants of recognized national standing,
which shall state that such financial statements present fairly in all material
respects the financial position of such Person and, if such Person has any
Subsidiaries, its consolidated Subsidiaries as of the date thereof and the
results of its operations for the period covered thereby in conformity with GAAP
or, as applicable, statutory financial standards. Annual Financial Statements
shall also include an unaudited consolidating balance sheet and income statement
for Borrower, in Proper Form, certified by the chief financial officer or other
authorized officer of Borrower as true, correct and complete in all material
respects.
Assignment and Acceptance shall have the meaning ascribed to such term
in Section 11.6 hereof.
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Bankruptcy Code means the United States Bankruptcy Code, as amended,
and any successor statute.
Base Rate means for any day a rate per annum equal to the lesser of (a)
the greater of (1) the Prime Rate for that day or (2) the Federal Funds Rate for
that day plus 1/2 of 1% or (b) the Ceiling Rate. If for any reason Agent shall
have determined (which determination shall create a rebuttable presumption as to
the accuracy thereof) that it is unable to ascertain the Federal Funds Rate for
any reason, including, without limitation, the inability or failure of Agent to
obtain sufficient quotations in accordance with the terms hereof (and in such
event, Agent shall furnish written evidence to Borrower showing how Agent made
such determination), the Base Rate shall, until the circumstances giving rise to
such inability no longer exist, be the lesser of (a) the Prime Rate or (b) the
Ceiling Rate.
Base Rate Borrowing means that portion of the principal balance of the
Loans at any time bearing interest at the Base Rate.
Borrowed Money Indebtedness means, with respect to any Person, without
duplication, (i) all obligations of such Person for borrowed money, (ii) all
obligations of such Person evidenced by bonds, debentures, notes or similar
instruments, (iii) all obligations of such Person under conditional sale or
other title retention agreements relating to Property purchased by such Person,
(iv) all obligations of such Person issued or assumed as the deferred purchase
price of property or services (excluding obligations of such Person to creditors
for raw materials, inventory, services and supplies and deferred payments for
services to employees and former employees incurred in the ordinary course of
such Person's business), (v) all capital lease obligations of such Person, (vi)
all obligations of others secured by any lien on property or assets owned or
acquired by such Person, whether or not the obligations secured thereby have
been assumed, (vii) Interest Rate Risk Indebtedness of such Person (to the
extent treated as Indebtedness under GAAP), (viii) all obligations of such
Person in respect of outstanding letters of credit issued for the account of
such Person (whether or not drawn and in the stated amount thereof), exclusive
of letters of credit which are fully secured by cash or marketable securities,
(viii) that portion (if any) of any convertible preferred or trust preferred
securities issued by Borrower which is recognized by Standard & Poor's as
indebtedness and (ix) all guarantees of such Person of any of the foregoing.
Business Day means any day other than a day on which commercial banks
are authorized or required to close in Houston, Texas, New York City, New York
or San Francisco, California. A separate definition of "LIBOR Business Day"
applies to LIBOR Borrowings under this Agreement.
Capital Expenditures means, with respect to any Person for any period,
expenditures in respect of fixed or capital assets by such Person, including
capital lease obligations incurred during such period (to the extent not already
included), which would be reflected as additions to Property, plant or equipment
on a balance sheet of such Person and its consolidated Subsidiaries, if any,
prepared in accordance with GAAP; but excluding expenditures during such period
for the repair or replacement of any fixed or capital asset which was destroyed
or damaged, in whole or in part, to the extent financed by the proceeds of an
insurance policy maintained by such Person. Capital Expenditures shall not
include Permitted Investments or the assets owned by any Person acquired
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by way of a Permitted Investment or assets comprising substantially all of an
entire business which is acquired by the applicable Person.
Cash Flow Coverage Ratio means, as of the end of any fiscal year, the
ratio of (a) the sum of the maximum aggregate dividends that the insurance
company Subsidiaries of Borrower are permitted by applicable regulatory
authorities to pay to Borrower in the applicable fiscal year plus all cash
dividends received by Borrower from agency operations of Subsidiaries of
Borrower in the applicable fiscal year to (b) the sum of Interest Expense of
Borrower and its Subsidiaries for the applicable fiscal year plus scheduled
principal payments paid or payable by Borrower and its Subsidiaries for the
applicable fiscal year plus dividends paid by Borrower to its shareholders for
the applicable fiscal year.
Ceiling Rate means, on any day, the maximum nonusurious rate of
interest permitted for that day by whichever of applicable federal or Texas (or
any jurisdiction whose usury laws are deemed to apply to the Notes or any other
Loan Documents despite the intention and desire of the parties to apply the
usury laws of the State of Texas) laws permits the higher interest rate, stated
as a rate per annum. On each day, if any, that Chapter 1D establishes the
Ceiling Rate, the Ceiling Rate shall be the "weekly ceiling" (as defined in
Section 303 of the Texas Finance Code) for that day. Agent may from time to
time, as to current and future balances, implement any other ceiling under the
Texas Finance Code or Chapter 1D by notice to Borrower, if and to the extent
permitted by the Texas Finance Code or Chapter 1D. Without notice to Borrower or
any other person or entity, the Ceiling Rate shall automatically fluctuate
upward and downward as and in the amount by which such maximum nonusurious rate
of interest permitted by applicable law fluctuates.
Centris means The Centris Group, Inc., a Delaware corporation.
Centris Insurance Company Subsidiaries means Centris Life Insurance
Company, an Indiana corporation, Centris Insurance Company, an Indiana
corporation, and USF Insurance Company, a Pennsylvania corporation.
Change of Control means a change resulting when any Unrelated Person or
any Unrelated Persons acting together which would constitute a Group together
with any Affiliates or Related Persons thereof (in each case also constituting
Unrelated Persons) shall at any time either (i) Beneficially Own more than 50%
of the aggregate voting power of all classes of Voting Stock of Borrower or (ii)
succeed in having sufficient of its or their nominees elected to the Board of
Directors of Borrower such that such nominees, when added to any existing
directors remaining on the Board of Directors of Borrower after such election
who is an Affiliate or Related Person of such Person or Group, shall constitute
a majority of the Board of Directors of Borrower. As used herein (a)
"Beneficially Own" means "beneficially own" as defined in Rule 13d-3 of the
Securities Exchange Act of 1934, as amended, or any successor provision thereto;
provided, however, that, for purposes of this definition, a Person shall not be
deemed to Beneficially Own securities tendered pursuant to a tender or exchange
offer made by or on behalf of such Person or any of such Person's Affiliates
until such tendered securities are accepted for purchase or exchange; (b)
"Group" means a "group" for purposes of Section 13(d) of the Securities Exchange
Act of 1934, as amended; (c) "Unrelated Person" means at any time any Person
other than Borrower or any Subsidiary of
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Borrower and other than any trust for any employee benefit plan of Borrower or
any Subsidiary of Borrower; (d) "Related Person" of any Person shall mean any
other Person owning (1) 5% or more of the outstanding common stock of such
Person or (2) 5% or more of the Voting Stock of such Person; and (e) "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.
Chapter 1D means Chapter 1D of Title 79, Texas Rev. Civ. Stats. 1925,
as amended.
Code means the Internal Revenue Code of 1986, as amended, as now or
hereafter in effect, together with all regulations, rulings and interpretations
thereof or thereunder by the Internal Revenue Service.
Collateral means all Property, tangible or intangible, real, personal
or mixed, now or hereafter subject to the Security Documents.
Combined Ratio means, for any period, the sum of the Loss Ratio for
such period plus the Expense Ratio for such period; provided, however, that for
the calculation of the Combined Ratio as of December 31, 1999, the New Cap Re
Charge shall be excluded.
Commitment means, as to any Lender, the obligation, if any, of such
Lender to make Loans in an aggregate principal amount at any one time
outstanding up to (but not exceeding) the amount, if any, set forth on Schedule
I hereto, or otherwise provided for in an Assignment and Acceptance Agreement
(as the same may be reduced from time to time pursuant to Section 2.2 hereof).
Compliance Certificate shall have the meaning given to it in Section
7.2 hereof.
Controlled Group means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with Borrower, are treated as a single employer
under Section 414 of the Code.
Corporation means any corporation, limited liability company,
partnership, joint venture, joint stock association, business trust and other
business entity.
Debt to Capitalization Ratio means, as of the end of any fiscal
quarter, the ratio of (a) Indebtedness as of such date to (b) the sum of
Indebtedness as of such date plus Shareholder's Equity as of such date. For
purposes of this definition, the obligations under the Acquisition Bridge
Facility shall be excluded from the term "Indebtedness".
Default means an Event of Default or an event which with notice or
lapse of time or both would, unless cured or waived, become an Event of Default.
Dollars and $ means lawful money of the United States of America.
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Effective Date means December 17, 1999.
Environmental Claim means any third party (including Governmental
Authorities and employees) action, lawsuit, claim or proceeding (including
claims or proceedings at common law or under the Occupational Safety and Health
Act or similar laws relating to safety of employees) which seeks to impose
liability for (i) noise; (ii) pollution or contamination of the air, surface
water, ground water or land or the clean-up of such pollution or contamination;
(iii) solid, gaseous or liquid waste generation, handling, treatment, storage,
disposal or transportation; (iv) exposure to Hazardous Substances; (v) the
safety or health of employees or (vi) the manufacture, processing, distribution
in commerce or use of Hazardous Substances. An "Environmental Claim" includes,
but is not limited to, a common law action, as well as a proceeding to issue,
modify or terminate an Environmental Permit, or to adopt or amend a regulation
to the extent that such a proceeding attempts to redress violations of an
applicable permit, license, or regulation as alleged by any Governmental
Authority.
Environmental Liabilities includes all liabilities arising from any
Environmental Claim, Environmental Permit or Requirement of Environmental Law
under any theory of recovery, at law or in equity, and whether based on
negligence, strict liability or otherwise, including but not limited to:
remedial, removal, response, abatement, investigative, monitoring, personal
injury and damage to property or injuries to persons, and any other related
costs, expenses, losses, damages, penalties, fines, liabilities and obligations,
and all costs and expenses necessary to cause the issuance, reissuance or
renewal of any Environmental Permit including reasonable attorneys' fees and
court costs.
Environmental Permit means any permit, license, approval or other
authorization under any applicable Legal Requirement relating to pollution or
protection of health or the environment, including laws, regulations or other
requirements relating to emissions, discharges, releases or threatened releases
of pollutants, contaminants or hazardous substances or toxic materials or wastes
into ambient air, surface water, ground water or land, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants or Hazardous Substances.
ERISA means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and all rules, regulations, rulings and
interpretations adopted by the Internal Revenue Service or the U.S. Department
of Labor thereunder.
Eurodollar Rate means for any day during an Interest Period for a LIBOR
Borrowing a rate per annum equal to the lesser of (a) the sum of (1) the
Adjusted LIBOR in effect on the first day of such Interest Period plus (2) the
Margin Percentage from time to time in effect or (b) the Ceiling Rate. Each
Eurodollar Rate is subject to adjustments for reserves, insurance assessments
and other matters as provided for in Section 3.3 hereof.
Eurodollar Reserve Requirement means, on any day, that percentage
(expressed as a decimal fraction and rounded, if necessary, to the next highest
one ten thousandth [.0001]) which is in effect on such day for determining all
reserve requirements (including, without limitation, basic,
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supplemental, marginal and emergency reserves) applicable to "Eurocurrency
liabilities," as currently defined in Regulation D. Each determination of the
Eurodollar Reserve Requirement by Agent shall create a rebuttable presumption as
to the accuracy thereof, and may be computed using any reasonable averaging and
attribution method.
Event of Default shall have the meaning assigned to it in Section 9
hereof.
Expense Ratio means, for any period, the ratio of (a) Statutory Net
Operating Expenses for the 12 months ending on the last day of the immediately
preceding calendar quarter to (b) Statutory Net Written Premiums for the 12
months ending on the last day of the immediately preceding calendar quarter,
tested at the end of each calendar quarter.
Federal Funds Rate means, for any day, a fluctuating interest rate per
annum equal for such day to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any such day which is a
Business Day, the average of the quotations for such day on such transactions
received by Agent from three Federal funds brokers of recognized standing
selected by Agent in its sole and absolute discretion.
Financing Statements means all such Uniform Commercial Code financing
statements as Agent shall reasonably require, in Proper Form, duly executed by
Borrower (or any other applicable Obligor) to give notice of and to perfect or
continue perfection of Agent's Liens in any applicable Collateral, as any of the
foregoing may from time to time be amended, modified, supplemented or restated.
Funding Loss means, with respect to (a) Borrower's payment of principal
of a LIBOR Borrowing on a day other than the last day of the applicable Interest
Period; (b) Borrower's failure to borrow a LIBOR Borrowing on the date specified
by Borrower; (c) Borrower's failure to make any prepayment of the Loans (other
than Base Rate Borrowings) on the date specified by Borrower, or (d) any
cessation of a Eurodollar Rate to apply to the Loans or any part thereof
pursuant to Section 3.3, in each case whether voluntary or involuntary, any
loss, expense, penalty, premium or liability actually incurred by any Lender
(including but not limited to any actual loss or reasonable expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired by
any Lender to fund or maintain a Loan), but excluding loss of margin or profit
for the period after such payment or failure to borrow or prepay and excluding
losses resulting from the gross negligence or willful misconduct of the
applicable Lender.
GAAP means, as to a particular Person, such accounting practice as, in
the opinion of independent certified public accountants of recognized national
standing regularly retained by such Person, conforms at the time to generally
accepted accounting principles, consistently applied for all periods after the
Effective Date so as to present fairly the financial condition, and results of
operations and cash flows, of such Person. If any change in any accounting
principle or practice is required by the Financial Accounting Standards Board,
all reports and financial statements required hereunder may be prepared in
accordance with such change so long as Borrower provides to Agent
7
<PAGE> 12
such disclosures of the impact of such change as Agent may reasonably require.
No such change in any accounting principle or practice shall, in itself, cause a
Default or Event of Default hereunder (but Borrower, Agent and Lenders shall
negotiate in good faith to replace any financial covenants hereunder to the
extent such financial covenants are affected by such change in accounting
principle or practice).
Governmental Authority means any foreign governmental authority, the
United States of America, any State of the United States, and any political
subdivision of any of the foregoing, and any central bank, agency, department,
commission, board, bureau, court or other tribunal having jurisdiction over
Agent, any Lender, any Obligor or their respective Property.
Guaranties means, collectively, (i) the Guaranties dated on or prior to
the date of hereof executed by each of the current Agency Subsidiaries of
Borrower (other than HCC UK Acquisition) in favor of Agent, for the benefit of
Lenders, and (ii) any and all other guaranties hereafter executed in favor of
Agent, for the benefit of Lenders, relating to the Obligations, as any of them
may from time to time be amended, modified, restated or supplemented.
Hazardous Substance means petroleum products, and any hazardous or
toxic waste or substance defined or regulated as such from time to time by any
law, rule, regulation or order described in the definition of "Requirements of
Environmental Law".
HCC UK Acquisition means HCC UK Acquisition Limited, a company
organized under the laws of England and Wales.
Indebtedness means, for any Person, (i) all obligations of such Person
for Borrowed Money Indebtedness (or which has been incurred in connection with
the acquisition of property) and (ii) preferred stock having a mandatory
redemption prior to the maturity of the Revolving Loan Obligations.
Insurance Company Subsidiaries means Houston Casualty Company, a Texas
corporation, Avemco Insurance Company, a Maryland corporation, U.S. Specialty
Insurance Company, a Texas corporation, and, effective upon acquisition of
Centris by Borrower, HCC Life Insurance Company (successor to Centris Life
Insurance Company), an Indiana corporation, Centris Insurance Company, an
Indiana corporation, and USF Insurance Company, a Pennsylvania corporation.
Interest Expense means, for any Person, the sum of (i) all interest on
Indebtedness paid or due and payable (including the portion of rents payable
under capital leases allocable to interest) plus (ii) all debt discount and
expense amortized or required to be amortized during such period.
Interest Options means the Base Rate and each Eurodollar Rate, and
"Interest Option" means any of them.
Interest Payment Dates means (a) for Base Rate Borrowings, March 31,
2000 and the last Business Day of each March, June, September and December
thereafter prior to the Revolving Loan Maturity Date, and the Revolving Loan
Maturity Date and (b) for LIBOR Borrowings, the end of
8
<PAGE> 13
the applicable Interest Period (and if such Interest Period exceeds three
months' duration, quarterly, commencing on the first quarterly anniversary of
the first day of such Interest Period), and the Revolving Loan Maturity Date.
Interest Period means, for each LIBOR Borrowing, a period commencing on
the date such LIBOR Borrowing began and ending on the numerically corresponding
day which is, subject to availability as set forth in Section 3.3(c)(iii), 1, 2,
3, 6 or 12 months thereafter, as Borrower shall elect in accordance herewith;
provided, (1) unless Agent shall otherwise consent, no Interest Period with
respect to a LIBOR Borrowing shall commence on a date earlier than three (3)
Business Days after this Agreement shall have been fully executed; (2) any
Interest Period with respect to a LIBOR Borrowing which would otherwise end on a
day which is not a LIBOR Business Day shall be extended to the next succeeding
LIBOR Business Day, unless such LIBOR Business Day falls in another calendar
month, in which case such Interest Period shall end on the next preceding LIBOR
Business Day; (3) any Interest Period with respect to a LIBOR Borrowing which
begins on the last LIBOR Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the end of
such Interest Period) shall end on the last LIBOR Business Day of the
appropriate calendar month; (4) no Interest Period for a Loan shall ever extend
beyond the Revolving Loan Maturity Date, and (5) Interest Periods shall be
selected by Borrower in such a manner that the Interest Period with respect to
any portion of the Loans which shall become due shall not extend beyond such due
date.
Interest Rate Risk Agreement means an interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or similar
arrangement entered into by Borrower for the purpose of reducing Borrower's
exposure to interest rate fluctuations and not for speculative purposes,
approved in writing by Agent (such approval not to be unreasonably withheld), as
it may from time to time be amended, modified, restated or supplemented.
Interest Rate Risk Indebtedness means all obligations and Indebtedness
of Borrower with respect to the program for the hedging of interest rate risk
provided for in any Interest Rate Risk Agreement.
Investment means the purchase or other acquisition of any securities or
Indebtedness of, or the making of any loan, advance, transfer of Property (other
than transfers in the ordinary course of business) or capital contribution to,
or the incurring of any liability (other than trade accounts payable arising in
the ordinary course of business), contingently or otherwise, in respect of the
Indebtedness of, any Person; provided, however, that the purchase by Borrower or
any of its Subsidiaries of any Indebtedness of Borrower or any of its
Subsidiaries for the purpose of retiring such Indebtedness shall not be deemed
to be an Investment.
Legal Requirement means any law, statute, ordinance, decree,
requirement, order, judgment, rule, or regulation (or interpretation of any of
the foregoing) of, and the terms of any license or permit issued by, any
Governmental Authority, whether presently existing or arising in the future.
LIBOR means, for each Interest Period for any LIBOR Borrowing, the rate
per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%)
appearing on Telerate Page 3750 (or
9
<PAGE> 14
if such Telerate Page shall not be available, any successor or similar service
as may be selected by Agent and Borrower as the London interbank rate for
deposits in United States dollars) as of 11:00 London time (or as soon
thereafter as practicable) on the day two LIBOR Business Days prior to the first
day of such Interest Period for deposits in United States dollars having a term
comparable to such Interest Period and in an amount comparable to the principal
amount of the LIBOR Borrowing to which such Interest Period relates. If none of
such Telerate Page 3750 nor any successor or similar service is available, then
"LIBOR" shall mean, with respect to any Interest Period for any applicable LIBOR
Borrowing, the rate of interest per annum, rounded upwards, if necessary, to the
nearest 1/100th of 1%, quoted by Agent at or before 11:00 London time (or as
soon thereafter as practicable), on the date two LIBOR Business Days before the
first day of such Interest Period, to be the arithmetic average of the
prevailing rates per annum at the time of determination and in accordance with
the then existing practice in the applicable market, for the offering to Agent
by one or more prime banks selected by Agent in its sole discretion, in the
London interbank market, of deposits in United States dollars for delivery on
the first day of such Interest Period and having a maturity equal to the length
of such Interest Period and in an amount equal (or as nearly equal as may be) to
the LIBOR Borrowing to which such Interest Period relates. Each determination by
Agent of LIBOR shall create a rebuttable presumption as to the accuracy thereof,
and may be computed using any reasonable averaging and attribution method.
LIBOR Borrowing means each portion of the principal balance of the
Loans at any time bearing interest at a Eurodollar Rate.
LIBOR Business Day means a Business Day on which transactions in United
States dollar deposits between lenders may be carried on in the London interbank
market.
Lien means any mortgage, pledge, charge, encumbrance, security
interest, collateral assignment or other lien or restriction of any kind,
whether based on common law, constitutional provision, statute or contract, and
shall include reservations, exceptions, encroachments, easements, rights of way,
covenants, conditions, restrictions and other title exceptions.
Loans means the loans provided for by Section 2.1 hereof.
Loan Documents means, collectively, this Agreement, the Guaranties, the
Security Documents, the Notes, the Notice of Entire Agreement, all instruments,
certificates and agreements now or hereafter executed or delivered by any
Obligor to Agent or any Lender pursuant to any of the foregoing or in connection
with the Obligations or any commitment regarding the Obligations, and all
amendments, modifications, renewals, extensions, increases and rearrangements
of, and substitutions for, any of the foregoing.
Loss and Loss Adjustment Expenses means the total of all claims
incurred by an insurance or reinsurance company under a policy or policies,
whether paid or unpaid (including a provision for claims that have occurred but
have not yet been reported to the insurer or reinsurer) and the total expense of
settling claims, including legal and other fees and the portion of general
expense allocated to claim settlement costs, as determined in accordance with
statutory accounting standards.
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<PAGE> 15
Loss Ratio means, for any period, the ratio of (a) the sum of Loss and
Loss Adjustment Expenses for the 12 months ending on the last day of the
immediately preceding calendar quarter to (b) Net Earned Premiums for the 12
months ending on the last day of the immediately preceding calendar quarter,
tested at the end of each calendar quarter.
Majority Lenders means Lenders having greater than 51% of the
Commitments or, if the Commitments are terminated, Lenders having greater than
51% of the outstanding Loans.
Margin Percentage means (i) on any day prior to December 31, 1999,
1.500% and (ii) on and after December 31, 1999, the applicable per annum
percentage set forth at the appropriate intersection in the table shown below,
based on the Debt to Capitalization Ratio as of the last day of the most
recently ended fiscal quarter of Borrower calculated by Agent as soon as
practicable after receipt by Agent of all financial reports required under this
Agreement with respect to such fiscal quarter (including a Compliance
Certificate) (provided, however, that if the Margin Percentage is increased as a
result of the reported Debt to Capitalization Ratio, such increase shall be
retroactive to the date that Borrower was obligated to deliver such financial
reports to Agent pursuant to the terms of this Agreement and provided further,
however, that if the Margin Percentage is decreased as a result of the reported
Debt to Capitalization Ratio, and such financial reports are delivered to Agent
not more than ten (10) calendar days after the date required to be delivered
pursuant to the terms of this Agreement, such decrease shall be retroactive to
the date that Borrower was obligated to deliver such financial reports to Agent
pursuant to the terms of this Agreement):
<TABLE>
<CAPTION>
Debt to
Capitalization Ratio Margin Percentage
-------------------- -----------------
<S> <C>
Greater than or equal to
0.350 to 1.000 1.500
Greater than or equal to
0.300 to 1.00 but less
than 0.350 to 1.000 1.375
Greater than or equal to
0.250 to 1.00 but less
than 0.300 to 1.000 1.250
Greater than or equal to
0.200 to 1.00 but less
than 0.250 to 1.000 1.125
Greater than or equal to
0.150 to 1.00 but less
than 0.200 to 1.000 1.000
Less than 0.150 to 1.000 0.875
</TABLE>
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<PAGE> 16
Material Adverse Effect means relative to any occurrence of whatever
nature (including any adverse determination in any litigation, arbitration or
governmental investigation or proceeding), resulting in (i) a material adverse
effect on the financial condition, business, operations, or assets of Borrower
and its Subsidiaries, on a consolidated basis, from those reflected in the
financial statements furnished to Agent referred to in Section 6.2 hereof or
from the facts represented or warranted in this Agreement or any other Loan
Document, (ii) a material impairment of the ability of Borrower and its
Subsidiaries, on a consolidated basis, to perform their obligations under the
Loan Documents or (iii) a material impairment of the validity or enforceability
of the Loan Documents the result of which is a material adverse effect on the
ability of Lenders to collect the Obligations when due.
Material Subsidiaries means the Insurance Company Subsidiaries and the
Agency Subsidiaries.
Net Earned Premiums means the portion of Net Written Premiums during or
prior to a given period which is actually earned during such period.
Net Written Premiums means the total of all premiums received or to be
received for insurance underwritten and reinsurance assumed during a given
period less the total premium paid or to be paid for reinsurance ceded to others
during such period, as determined in accordance with statutory accounting
standards.
New Cap Re Charge means the establishment of a reserve and subsequent
write-off of the uncollectible reinsurance recoverables due Borrower from New
Cap Reinsurance Corporation Limited and New Cap Reinsurance Corporation
(Bermuda) Limited taken in the second fiscal quarter of the 1999 fiscal year in
the Form 10-Q filed by Borrower and its Subsidiaries.
Notes means the promissory notes of Borrower evidencing the Loans, in
the form of Exhibit C hereto, together with all renewals, extensions,
modifications, amendments, increases and/or and replacements thereof and
substitutions therefor.
Notice of Entire Agreement means a notice of entire agreement, in
Proper Form, executed by Borrower and Agent, as the same may from time to time
be amended, modified, supplemented or restated.
Obligations means, as at any date of determination thereof, the sum of
the following: (i) the aggregate principal amount of Loans outstanding hereunder
on such date, plus (ii) all other outstanding liabilities, obligations and
indebtedness of any Obligor under any Loan Document on such date.
Obligors means Borrower, the Insurance Company Subsidiaries, HCC UK
Acquisition and each other Subsidiary of Borrower which is a party to any
Guaranty or Security Agreement.
Organizational Documents means, with respect to a corporation, the
certificate of incorporation, articles of incorporation and bylaws of such
corporation; with respect to a partnership,
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<PAGE> 17
the partnership agreement establishing such partnership and with respect to a
trust, the instrument establishing such trust; in each case including any and
all modifications thereof as of the date of the Loan Document referring to such
Organizational Document and any and all future modifications thereof.
Past Due Rate means, on any day, a rate per annum equal to the lesser
of (i) the Ceiling Rate for that day or (ii) the Base Rate plus three percent
(3%).
PBGC means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
Permitted Dividends means (i) dividends or distributions by a
Subsidiary of Borrower to Borrower (or to another Subsidiary of Borrower) or
redemption by a Subsidiary of any of its stock held by Borrower (or by another
Subsidiary of Borrower), (ii) dividends paid in stock and stock splits and (iii)
so long as no Default or Event of Default shall have occurred and be continuing
(or would result therefrom), dividends or distributions by Borrower not
exceeding, in the aggregate in any applicable fiscal year, $25,000,000. The
dividends and distributions otherwise permitted under this definition shall be
subject to the provisions of Section 8.15 hereof.
Permitted Investment means Investments permitted under the terms of
Section 8.9 hereof.
Permitted Liens means Liens permitted under the provisions of Section
8.2 hereof.
Person means any individual, Corporation, trust, unincorporated
organization, Governmental Authority or any other form of entity.
Plan means an employee pension benefit plan which is covered by Title
IV of ERISA or subject to the minimum funding standards under Section 412 of the
Code and is either (a) maintained by Borrower or any member of the Controlled
Group for employees of Borrower or any member of the Controlled Group or (b)
maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
Borrower or any member of the Controlled Group is then making or accruing an
obligation to make contributions or has within the preceding five plan years
made contributions.
Prime Rate means, on any day, the prime rate for that day as determined
from time to time by Wells Fargo at its principal office in San Francisco,
California. The Prime Rate is a reference rate and does not necessarily
represent the lowest or best rate or a favored rate, and Wells Fargo, Agent and
each Lender disclaims any statement, representation or warranty to the contrary.
Wells Fargo, Agent or any Lender may make commercial loans or other loans at
rates of interest at, above or below the Prime Rate.
Principal Office means 201 Third Street, 8th Floor, San Francisco,
California 94103.
Proper Form means in form reasonably satisfactory to Agent.
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<PAGE> 18
Property means any interest in any kind of property or asset, whether
real, personal or mixed, tangible or intangible.
Quarterly Dates means the last Business Day of each March, June,
September and December.
Quarterly Financial Statements means the quarterly financial statements
of a Person, which statements shall include a balance sheet as of the end of
such fiscal quarter, an income statement for the period ended on such fiscal
quarter and for the fiscal year to date and a statement of cash flows for the
fiscal year to date, subject to normal year-end adjustments, prepared in
accordance with GAAP in all material respects except that such statements are
condensed and exclude detailed footnote disclosures and certified by the chief
financial officer or other authorized officer of such Person as fairly
presenting, in all material respects, the financial position of such person as
of such date.
Rate Designation Date means that Business Day which is (a) in the case
of Base Rate Borrowings, 9:00 a.m., San Francisco, California time, on the date
of such borrowing and (b) in the case of LIBOR Borrowings, 9:00 a.m., San
Francisco, California time, on the date three LIBOR Business Days preceding the
first day of any proposed Interest Period.
Rate Designation Notice means a written notice substantially in the
form of Exhibit B.
Regulation D means Regulation D of the Board of Governors of the
Federal Reserve System from time to time in effect and includes any successor or
other regulation relating to reserve requirements applicable to member banks of
the Federal Reserve System.
Regulatory Change means with respect to any Lender, any change on or
after the date of this Agreement in any Legal Requirement (including, without
limitation, Regulation D) or the adoption or making on or after such date of any
interpretation, directive or request applying to a class of lenders including
such Lender under any Legal Requirements (whether or not having the force of
law) by any Governmental Authority.
Request for Extension of Credit means a request for extension of credit
duly executed by the chief executive officer, president, chief financial
officer, any vice president or treasurer of Borrower or any other officer of
Borrower duly authorized in writing by Borrower, appropriately completed and
substantially in the form of Exhibit A attached hereto.
Requirements of Environmental Law means all requirements imposed by any
law (including for example and without limitation The Resource Conservation and
Recovery Act and The Comprehensive Environmental Response, Compensation, and
Liability Act), rule, regulation, or order of any federal, state or local
executive, legislative, judicial, regulatory or administrative agency, board or
authority in effect at the applicable time which relate to (i) noise; (ii)
pollution, protection or clean-up of the air, surface water, ground water or
land; (iii) solid, gaseous or liquid waste generation, treatment, storage,
disposal or transportation; (iv) exposure to Hazardous Substances; (v) the
safety or health of employees or (vi) regulation of the manufacture, processing,
distribution in commerce, use, discharge or storage of Hazardous Substances.
14
<PAGE> 19
Revolving Loan Availability Period means, for each Revolving Loan
Lender, the period from and including the Effective Date to (but not including)
the Revolving Loan Termination Date.
Revolving Loan Commitment Percentage means, as to any Revolving Loan
Lender, the percentage equivalent of a fraction the numerator of which is the
amount of such Lender's Commitment (or if the Commitments have terminated, such
Lender's outstanding Loans) and the denominator of which is the aggregate amount
of the Commitments of all Lenders (or if the Commitments have terminated, the
aggregate amount of all Loans).
Revolving Loan Lender means each Lender with (i) prior to the Revolving
Loan Termination Date, a Commitment and (ii) on and after the Revolving Loan
Termination Date, any outstanding Revolving Loan Obligations.
Revolving Loan Maturity Date means the maturity of the Notes, December
17, 2004.
Revolving Loan Obligations means, as at any date of determination
thereof, the aggregate principal amount of Loans outstanding hereunder.
Revolving Loan Termination Date means the earlier of (a) the Revolving
Loan Maturity Date or (b) the date specified by Agent in accordance with Section
9.1 hereof.
Risk Based Capital Ratio means, as of the end of any fiscal quarter,
the ratio of (a) "Total Adjusted Capital" (as set forth in the annual financial
statements for the Insurance Company Subsidiaries prepared on a statutory basis
and the quarterly financial statements for the Insurance Company Subsidiaries
prepared on a statutory basis) to (b) two (2) times the "Authorized Control
Level Risk Based Capital" (as set forth in the annual financial statements for
the Insurance Company Subsidiaries prepared on a statutory basis and the
quarterly financial statements for the Insurance Company Subsidiaries prepared
on a statutory basis).
Secretary's Certificate means a certificate, in Proper Form, of the
Secretary or an Assistant Secretary of a corporation as to (a) the resolutions
of the Board of Directors of such corporation authorizing the execution,
delivery and performance of the documents to be executed by such corporation;
(b) the incumbency and signature of the officer of such corporation executing
such documents on behalf of such corporation, and (c) the Organizational
Documents of such corporation.
Security Agreements means security agreements, each in Proper Form,
executed or to be executed in favor of Agent, securing the Obligations, covering
all of the issued and outstanding equity interests in each Material Subsidiary
of Borrower (other than HCC UK Acquisition, with respect to which only 65% of
its issued and outstanding equity interests shall be covered), as the same may
from time to time be amended, modified, restated or supplemented.
Security Documents means, collectively, the Security Agreements and any
and all security documents now or hereafter executed and delivered by any
Obligor to secure all or any part of the Obligations, as any of them may from
time to time be amended, modified, restated or supplemented.
15
<PAGE> 20
Shareholders' Equity means the consolidated shareholders' equity of
Borrower and its Subsidiaries determined in accordance with GAAP.
Stated Rate means the effective weighted per annum rate of interest
applicable to the Loans; provided, that if on any day such rate shall exceed the
Ceiling Rate for that day, the Stated Rate shall be fixed at the Ceiling Rate on
that day and on each day thereafter until the total amount of interest accrued
at the Stated Rate on the unpaid principal balances of the Notes plus the
Additional Interest equals the total amount of interest which would have accrued
if there had been no Ceiling Rate. Without notice to Borrower or any other
Person, the Stated Rate shall automatically fluctuate upward and downward in
accordance with the provisions of this definition.
Statutory Net Operating Expenses means statutory policy acquisition
costs and other underwriting expense, net of miscellaneous income or loss,
including equity in earnings (loss) of Subsidiaries for the period of time in
question, as determined in accordance with statutory accounting standards.
Statutory Net Written Premiums means the total of all premiums received
or to be received for insurance underwritten and reinsurance assumed during a
given period less the total premium paid or to be paid for reinsurance ceded to
others during such period, as determined in accordance with statutory accounting
standards.
Subordinated Indebtedness means all Indebtedness of a Person which has
been subordinated on terms and conditions satisfactory to the Majority Lenders,
in their sole discretion, to all Indebtedness of such Person to Lenders, whether
now existing or hereafter incurred. Indebtedness shall not be considered as
"Subordinated Indebtedness" unless and until Agent shall have received copies of
the documentation evidencing or relating to such Indebtedness together with a
subordination agreement, in Proper Form, duly executed by the holder or holders
of such Indebtedness and evidencing the terms and conditions of subordination
required by the Majority Lenders.
Subsidiary means, as to a particular parent Corporation, any
Corporation of which more than 50% of the indicia of equity rights (whether
outstanding capital stock or otherwise) is at the time directly or indirectly
owned by, such parent Corporation.
Taxes shall have the meaning ascribed to it in Section 4.1(d).
Unfunded Liabilities means, with respect to any Plan, at any time, the
amount (if any) by which (a) the present value of all benefits under such Plan
exceeds (b) the fair market value of all Plan assets allocable to such benefits,
all determined as of the then most recent actuarial valuation report for such
Plan, but only to the extent that such excess represents a potential liability
of any member of the Controlled Group to the PBGC or a Plan under Title IV of
ERISA. With respect to multi-employer Plans, the term "Unfunded Liabilities"
shall also include asserted withdrawal liability under Section 4201 of ERISA to
all multi-employer Plans to which Borrower or any member of a Controlled Group
for employees of Borrower contributes.
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<PAGE> 21
1.2 Miscellaneous. The words "hereof," "herein," and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not any particular provision of this Agreement. The
term "annualized" as used herein shall mean the multiplication of the applicable
amount for any given period by a fraction, the numerator of which is 365 and the
denominator of which is the number of days elapsed in such period.
2. Commitments and Loans.
2.1 Loans. Each Revolving Loan Lender severally agrees, subject to all
of the terms and conditions of this Agreement (including, without limitation,
Sections 5.1 and 5.2 hereof), to make Loans to Borrower, from time to time on or
after the Effective Date and during the Revolving Loan Availability Period, in
an aggregate principal amount at any one time outstanding up to but not
exceeding such Revolving Loan Lender's Commitment. Subject to the conditions in
this Agreement, any such Loan repaid prior to the Revolving Loan Termination
Date may be reborrowed pursuant to the terms of this Agreement; provided, that
any and all such Loans shall be due and payable in full at the end of the
Revolving Loan Availability Period. Borrower, Agent and the Revolving Loan
Lenders agree pursuant to Chapter 346 ("Chapter 346") of the Texas Finance Code,
that Chapter 346 (which relates to open-end line of credit revolving loan
accounts) shall not apply to this Agreement, the Notes or any Revolving Loan
Obligation and that neither the Notes nor any Revolving Loan Obligation shall be
governed by Chapter 346 or subject to its provisions in any manner whatsoever.
The aggregate of all Loans to be made by the Revolving Loan Lenders in
connection with a particular borrowing shall be equal to $500,000 or an integral
multiple of $100,000 in excess thereof.
2.2 Terminations or Reductions of Commitments.
(a) Mandatory. On each of June 30, 2003 and June 30, 2004, the
Commitments shall be reduced by $25,000,000. On the Revolving Loan Termination
Date, all Commitments shall be terminated in their entirety.
(b) Optional. Borrower shall have the right to terminate or reduce the
unused portion of the Commitments at any time or from time to time, provided
that (i) Borrower shall give notice of each such termination or reduction to
Agent as provided in Section 4.3 hereof and (ii) each such partial reduction as
to any Commitment shall be in an integral multiple of $5,000,000.
(c) No Reinstatement. No termination or reduction of the Commitments
may be reinstated without the written approval of Agent and the Lenders.
2.3 Commitment Fees.
(a) Borrower shall pay to Agent for the account of each Revolving Loan
Lender revolving loan commitment fees for the period from December 20, 1999 to
and including the Revolving Loan Termination Date at a rate per annum equal
0.25%. Such revolving loan commitment fees shall be computed (on the basis of
the actual number of days elapsed in a year composed of 365 or 366 days, as the
case may be) on each day and shall be based on the excess of
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<PAGE> 22
(x) the aggregate amount of each Revolving Loan Lender's Commitment for such day
over (y) the aggregate unpaid principal balance of such Lender's Note on such
day. Accrued revolving loan commitment fees under this provision shall be
payable in arrears on the Quarterly Dates prior to the Revolving Loan
Termination Date and on the Revolving Loan Termination Date.
(b) All past due fees payable under this Section shall bear interest at
the Past Due Rate.
2.4 Several Obligations. The failure of any Lender to make any Loan to
be made by it on the date specified therefor shall not relieve any other Lender
of its obligation to make its Loan on such date, but neither Agent nor any
Lender shall be responsible or liable for the failure of any other Lender to
make a Loan to be made by such other Lender. Notwithstanding anything contained
herein to the contrary, (a) no Lender shall be required to make or maintain
Loans at any time outstanding if, as a result, the total Revolving Loan
Obligations held by such Lender shall exceed the lesser of (1) such Lender's
Revolving Loan Commitment Percentage of all Revolving Loan Obligations and (2)
such Lender's Revolving Loan Commitment Percentage of the aggregate of the
Commitments and (b) if a Lender fails to make a Loan as and when required
hereunder, then upon each subsequent event which would otherwise result in funds
being paid to the defaulting Lender, the amount which would have been paid to
the defaulting Lender shall be divided among the non-defaulting Lenders ratably
according to their respective shares of the outstanding Revolving Loan
Commitment Percentages until the Revolving Loan Obligations of each Revolving
Loan Lender (including the defaulting Lender) are equal to such Lender's
Revolving Loan Commitment Percentage of the total Revolving Loan Obligations.
2.5 Notes. The Loans made by each Lender shall be evidenced by a single
Note of Borrower in substantially the form of Exhibit C hereto payable to the
order of such Lender in a principal amount equal to the Commitment of such
Lender, and otherwise duly completed. Each Lender is hereby authorized by
Borrower to endorse on the schedule (or a continuation thereof) that may be
attached to each Note of such Lender, to the extent applicable, the date,
amount, type of and the applicable period of interest for each Loan made by such
Lender to Borrower hereunder, and the amount of each payment or prepayment of
principal of such Loan received by such Lender, provided, that any failure by
such Lender to make any such endorsement shall not affect the obligations of
Borrower under such Note or hereunder in respect of such Loan.
2.6 Use of Proceeds. The proceeds of the Loans shall be used to
refinance existing Borrowed Money Indebtedness of Borrower, to finance
acquisitions and for other working capital and general corporate purposes.
Neither Agent nor any Lender shall have any responsibility as to the use of any
proceeds of the Loans.
3. Borrowings, Payments, Prepayments and Interest Options.
3.1 Borrowings. Borrower shall give Agent notice of each borrowing to
be made hereunder as provided in Section 4.3 hereof and Agent shall promptly
notify each Lender of such request. Not later than 11:00 a.m., San Francisco,
California time on the date specified for each such borrowing hereunder, each
Lender shall make available the amount of the Loan, if any, to be made by it on
such date to Agent at its Principal Office, in immediately available funds, for
the account
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<PAGE> 23
of Borrower. Such amounts received by Agent will be held in an account
maintained by Borrower with Agent. The amounts so received by Agent shall,
subject to the terms and conditions of this Agreement, be made available to
Borrower by wiring or otherwise transferring, in immediately available funds,
such amount to an account designated by Borrower.
3.2 Prepayments.
(a) Optional Prepayments. Except as provided in Section 3.3 hereof,
Borrower shall have the right to prepay, on any Business Day, in whole or in
part, without the payment of any penalty or fee, any Loans at any time or from
time to time, provided that Borrower shall give Agent notice of each such
prepayment as provided in Section 4.3 hereof. Each optional prepayment on a Loan
shall be in an amount equal to an integral multiple of $2,000,000 or an integral
multiple of $100,000 in excess thereof.
(b) Interest Payments. Accrued and unpaid interest on the unpaid
principal balance of the Loans shall be due and payable (i) on the date of any
prepayment permitted hereunder and (ii) on the Interest Payment Dates.
(c) Mandatory Prepayments. If the Commitments shall at any time be less
than the unpaid principal balance of the Loans, Borrower shall make an immediate
prepayment on the Loans equal to the difference.
3.3 Interest Options
(a) Options Available. The outstanding principal balance of the Notes
shall bear interest at the Base Rate; provided, that (1) all past due amounts,
both principal and accrued interest, shall bear interest at the Past Due Rate,
and (2) subject to the provisions hereof, Borrower shall have the option of
having all or any portion of the principal balances of the Notes from time to
time outstanding bear interest at a Eurodollar Rate. The records of Agent and
each of the Lenders with respect to Interest Options, Interest Periods and the
amounts of Loans to which they are applicable shall create a rebuttable
presumption as to the accuracy thereof, and Agent and Lenders agree to furnish
written evidence to Borrower upon request of Borrower with respect to such
matters. Interest on the Loans shall be calculated at the Base Rate except where
it is expressly provided pursuant to this Agreement that a Eurodollar Rate is to
apply. Interest on the amount of each advance against the Notes shall be
computed on the amount of that advance and from the date it is made.
Notwithstanding anything in this Agreement to the contrary, for the full term of
the Notes the interest rate produced by the aggregate of all sums paid or agreed
to be paid to the holders of the Notes for the use, forbearance or detention of
the debt evidenced thereby (including all interest on the Notes at the Stated
Rate plus the Additional Interest) shall not exceed the Ceiling Rate.
(b) Designation and Conversion. Borrower shall have the right to
designate or convert its Interest Options in accordance with the provisions
hereof. Provided no Event of Default has occurred and is continuing and subject
to the last sentence of Section 3.3(a) and the provisions of Section 3.3(c),
Borrower may elect to have a Eurodollar Rate apply or continue to apply to all
or any portion of the principal balance of the Notes. Each change in Interest
Options shall be a conversion
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<PAGE> 24
of the rate of interest applicable to the specified portion of the Loans, but
such conversion shall not change the respective outstanding principal balances
of the Notes. The Interest Options shall be designated or converted in the
manner provided below:
(i) Borrower shall give Agent telephonic notice, promptly confirmed
by a Rate Designation Notice (and Agent shall promptly inform
each Lender thereof). Each such telephonic and written notice
shall specify the amount of the Loan which is the subject of the
designation, if any; the amount of borrowings into which such
borrowings are to be converted or for which an Interest Option
is designated; the proposed date for the designation or
conversion and the Interest Period or Periods, if any, selected
by Borrower. Such telephonic notice shall be irrevocable and
shall be given to Agent no later than the applicable Rate
Designation Date.
(ii) No more than ten (10) LIBOR Borrowings shall be in effect with
respect to the Loans at any time.
(iii) Each designation or conversion of a LIBOR Borrowing shall occur
on a LIBOR Business Day.
(iv) Each request for a LIBOR Borrowing shall be in the amount equal
to an integral multiple of $2,000,000 or an integral multiple of
$100,000 in excess thereof.
(v) Each designation of an Interest Option with respect to the Notes
shall apply to all of the Notes ratably in accordance with their
respective outstanding principal balances. If any Lender assigns
an interest in any of its Notes when any LIBOR Borrowing is
outstanding with respect thereto, then such assignee shall have
its ratable interest in such LIBOR Borrowing.
(c) Special Provisions Applicable to LIBOR Borrowings.
(i) Options Unlawful. If the adoption of any applicable Legal
Requirement after the Effective Date or any change after the Effective Date in
any applicable Legal Requirement or in the interpretation or administration
thereof by any Governmental Authority or compliance by any Lender with any
request or directive (whether or not having the force of law) issued after the
Effective Date by any central bank or other Governmental Authority shall at any
time make it unlawful or impossible for any Lender to permit the establishment
of or to maintain any LIBOR Borrowing, the commitment of such Lender to
establish or maintain such LIBOR Borrowing shall forthwith be canceled and
Borrower shall forthwith, upon demand by Agent to Borrower, (1) convert the
LIBOR Borrowing of such Lender with respect to which such demand was made to a
Base Rate Borrowing; (2) pay all accrued and unpaid interest to date on the
amount so converted; and (3) pay any amounts required to compensate each Lender
for any additional cost or expense which any Lender may incur as a result of
such adoption of or change in such Legal Requirement or in the interpretation or
administration thereof and any Funding Loss which any Lender may incur as a
result of such conversion. If, when Agent so notifies Borrower, Borrower has
given a Rate Designation Notice specifying a LIBOR Borrowing but the selected
Interest Period has not yet
20
<PAGE> 25
begun, as to the applicable Lender such Rate Designation Notice shall be deemed
to be of no force and effect, as if never made,and the balance of the Loans made
by such Lender specified in such Rate Designation Notice shall bear interest at
the Base Rate until a different available Interest Option shall be designated in
accordance herewith.
(ii) Increased Cost of Borrowings. If the adoption after the Effective
Date of any applicable Legal Requirement or any change after the Effective Date
in any applicable Legal Requirement or in the interpretation or administration
thereof by any Governmental Authority or compliance by any Lender with any
request or directive (whether or not having the force of law) issued after the
Effective Date by any central bank or Governmental Authority shall at any time
as a result of any portion of the principal balances of the Notes being
maintained on the basis of a Eurodollar Rate:
(1) subject any Lender to any Taxes, or any deduction or
withholding for any Taxes, on or from any payment due
under any LIBOR Borrowing or other amount due
hereunder, other than income and franchise taxes of
the United States or its political subdivisions or
such other jurisdiction in which the applicable
Lender has its principal office or applicable lending
office; or
(2) change the basis of taxation of payments due from
Borrower to any Lender under any LIBOR Borrowing
(other than by a change in the rate of taxation of
the overall net income of such Lender); or
(3) impose, modify, increase or deem applicable any
reserve requirement (excluding that portion of any
reserve requirement included in the calculation of
the applicable Eurodollar Rate), special deposit
requirement or similar requirement (including, but
not limited to, state law requirements and Regulation
D) against assets of any Lender, or against deposits
with any Lender, or against loans made by any Lender,
or against any other funds, obligations or other
property owned or held by any Lender; or
(4) impose on any Lender any other condition regarding
any LIBOR Borrowing;
and the result of any of the foregoing is to materially increase the cost to any
Lender of agreeing to make or of making, renewing or maintaining such LIBOR
Borrowing, or reduce the amount of principal or interest received by any Lender,
then, within 15 Business Days after demand by the applicable Lender (accompanied
by a statement setting forth in reasonable detail the applicable Lender's basis
therefor), Borrower shall pay to Agent additional amounts which shall compensate
each Lender for such increased cost or reduced amount. The determination by any
Lender of the amount of any such increased cost, increased reserve requirement
or reduced amount shall create a rebuttable presumption as to the accuracy
thereof. Borrower shall have the right, if it receives from Agent any notice
referred to in this paragraph, upon three Business Days' notice to Agent (which
shall notify each affected Lender), either (i) to repay in full (but not in
part) any borrowing with respect to which such notice was given, together with
any accrued interest thereon, or (ii) to convert the LIBOR Borrowing which is
the subject of the notice to a Base Rate Borrowing;
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<PAGE> 26
provided, that any such repayment or conversion shall be accompanied by payment
of (x) the amount required to compensate each Lender for the increased cost or
reduced amount referred to in the preceding paragraph; (y) all accrued and
unpaid interest to date on the amount so repaid or converted, and (z) any
Funding Loss which any Lender may incur as a result of such repayment or
conversion. Each Lender will notify Borrower through Agent of any event
occurring after the date of this Agreement which will entitle such Lender to
compensation pursuant to this Section as promptly as practicable after it
obtains knowledge thereof and determines to request such compensation, and (if
so requested by Borrower through Agent) will designate a different lending
office of such Lender for the applicable LIBOR Borrowing or will take such other
action as Borrower may reasonably request if such designation or action is
consistent with the internal policy of such Lender and legal and regulatory
restrictions, will avoid the need for, or reduce the amount of, such
compensation and will not, in the sole opinion of such Lender, be materially
disadvantageous to such Lender (provided that such Lender shall have no
obligation so to designate a different lending office which is located in the
United States of America).
(iii) Inadequacy of Pricing and Rate Determination. If, for any reason
with respect to any Interest Period, Agent shall have determined (which
determination shall create a rebuttable presumption as to the accuracy thereof)
that:
(1) Agent is unable through its customary general
practices to determine any applicable Eurodollar
Rate, or
(2) by reason of circumstances affecting the applicable
market, generally, Agent is not being offered
deposits in United States dollars in such market, for
the applicable Interest Period and in an amount equal
to the amount of any applicable LIBOR Borrowing
requested by Borrower,
then Agent shall give Borrower written notice thereof (accompanied by a
statement setting forth in reasonable detail the applicable Lender's basis
therefor) and thereupon, (A) any Rate Designation Notice previously given by
Borrower designating the applicable LIBOR Borrowing which has not commenced as
of the date of such notice from Agent shall be deemed for all purposes hereof to
be of no force and effect, as if never given, and (B) until Agent shall notify
Borrower that the circumstances giving rise to such notice from Agent no longer
exist, each Rate Designation Notice requesting the applicable Eurodollar Rate
shall be deemed a request for a Base Rate Borrowing, and any applicable LIBOR
Borrowing then outstanding shall be converted, without any notice to or from
Borrower, upon the termination of the Interest Period then in effect with
respect to it, to a Base Rate Borrowing.
(iv) Funding Losses. Borrower shall indemnify each Lender against and
hold each Lender harmless from any Funding Loss. This indemnity shall, subject
to the provisions of Section 3.5 hereof, survive the payment of the Notes. A
certificate of such Lender (explaining in reasonable detail the amount and
calculation of the amount claimed) as to any additional amounts payable pursuant
to this paragraph submitted to Borrower shall create a rebuttable presumption as
to the accuracy thereof.
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<PAGE> 27
(d) Funding Offices; Adjustments Automatic; Calculation Year. Any
Lender may, if it so elects, fulfill its obligation as to any LIBOR Borrowing by
causing a branch or affiliate of such Lender to make such Loan and may transfer
and carry such Loan at, to or for the account of any branch office or affiliate
of such Lender; provided, that in such event for the purposes of this Agreement
such Loan shall be deemed to have been made by such Lender and the obligation of
Borrower to repay such Loan shall nevertheless be to such Lender and shall be
deemed held by it for the account of such branch or affiliate. Without notice to
Borrower or any other Person, each rate required to be calculated or determined
under this Agreement shall automatically fluctuate upward and downward in
accordance with the provisions of this Agreement. Interest at the Prime Rate
shall be computed on the basis of the actual number of days elapsed in a year
consisting of 365 or 366 days, as the case may be. All other interest required
to be calculated or determined under this Agreement shall be computed on the
basis of the actual number of days elapsed in a year consisting of 360 days,
unless the Ceiling Rate would thereby be exceeded, in which event, to the extent
necessary to avoid exceeding the Ceiling Rate, the applicable interest shall be
computed on the basis of the actual number of days elapsed in the applicable
calendar year in which accrued.
(e) Funding Sources. Notwithstanding any provision of this Agreement to
the contrary, each Lender shall be entitled to fund and maintain its funding of
all or any part of the Loans in any manner it sees fit, it being understood,
however, that for the purposes of this Agreement all determinations hereunder
shall be made as if each Lender had actually funded and maintained each LIBOR
Borrowing during each Interest Period through the purchase of deposits having a
maturity corresponding to such Interest Period and bearing an interest rate
equal to the Eurodollar Rate for such Interest Period.
3.4 Capital Adequacy. If any Lender shall have determined that the
adoption after the Effective Date of any applicable law, rule, regulation or
treaty regarding capital adequacy, or any change therein after the Effective
Date, or any change in the interpretation or administration thereof after the
Effective Date by any Governmental Authority, central bank or comparable agency
charged with the interpretation or administration thereof, or compliance by any
Lender with any request or directive after the Effective Date 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, under the Notes or other Obligations held by it 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, upon satisfaction of the conditions precedent set forth in
this Section, after demand by such Lender (with a copy to Agent) as provided
below, Borrower shall pay (subject to Section 11.7 hereof) to such Lender such
additional amount or amounts as will compensate such Lender for such reduction.
The certificate of any Lender setting forth such amount or amounts as shall be
necessary to compensate it and the basis thereof and reasons therefor shall be
delivered as soon as practicable to Borrower and shall create a rebuttable
presumption as to the accuracy thereof. Borrower shall pay the amount shown as
due on any such certificate within five (5) Business Days after the delivery of
such certificate. In preparing such certificate, a Lender may employ such
assumptions and allocations of costs and expenses as it shall in good faith deem
reasonable and may use any reasonable averaging and attribution method.
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<PAGE> 28
3.5 Limitation on Charges; Substitute Lenders; Non-Discrimination.
Anything in Sections 3.3 or 3.4 notwithstanding:
(1) Borrower shall not be required to pay to any Lender
reimbursement with regard to any costs or expenses described in such
Sections, unless such Lender notifies Borrower of such costs or
expenses within 90 days after the date paid or incurred but in no event
more than 90 days after the repayment of the Loans and the termination
of the Commitments;
(2) none of the Lenders shall be permitted to pass through to
Borrower charges and costs under such Sections (other than Funding
Losses) on a discriminatory basis (i.e., which are not also passed
through by such Lender to all other customers of such Lender similarly
situated where such customer is subject to documents providing for such
pass through); and
(3) if any Lender (including, without limitation, the Agent)
elects to pass through to Borrower any material charge or cost under
such Sections (other than Funding Losses) or elects to terminate the
availability of LIBOR Borrowings for any material period of time,
Borrower may, within 60 days after the date of such event and so long
as no Default shall have occurred and be continuing, elect to terminate
such Lender as a party to this Agreement; provided that, concurrently
with such termination Borrower shall (i) if Agent and each of the other
Lenders shall consent, pay that Lender all principal, interest and fees
and other amounts owed to such Lender through such date of termination
or (ii) have arranged for another financial institution approved by
Agent (such approval not to be unreasonably withheld) as of such date,
to become a substitute Lender for all purposes under this Agreement in
the manner provided in Section 11.6; provided further that, prior to
substitution for any Lender, Borrower shall have given written notice
to Agent of such intention and the Lenders shall have the option, but
no obligation, for a period of 60 days after receipt of such notice, to
increase their Commitments in order to replace the affected Lender in
lieu of such substitution.
4. Payments; Pro Rata Treatment; Computations, Etc.
4.1 Payments.
(a) Except to the extent otherwise provided herein, all payments of
principal, interest Obligations and other amounts to be made by Borrower
hereunder, under the Notes and under the other Loan Documents shall be made in
Dollars, in immediately available funds, to Agent at the Principal Office (or in
the case of a successor Agent, at the principal office of such successor Agent
in the United States), not later than 11:00 a.m., San Francisco, California time
on the date on which such payment shall become due (each such payment made after
such time on such due date to be deemed to have been made on the next succeeding
Business Day).
(b) Borrower shall, at the time of making each payment hereunder, under
any Note or under any other Loan Document, specify to Agent the Loans or other
amounts payable by Borrower
24
<PAGE> 29
hereunder or thereunder to which such payment is to be applied. Each payment
received by Agent hereunder, under any Note or under any other Loan Document for
the account of a Lender shall be paid promptly to such Lender, in immediately
available funds. If Agent fails to send to any Lender the applicable amount by
the close of business on the date any such payment is received by Agent if such
payment is received prior to 11:00 a.m., San Francisco, California time (or on
the next succeeding Business Day with respect to payments which are received
after 11:00 a.m., San Francisco, California time), Agent shall pay to the
applicable Lender interest on such amount from such date at the Federal Funds
Rate.
(c) If the due date of any payment hereunder or under any Note falls on
a day which is not a Business Day, the due date for such payments (except as
otherwise provided in Section 3.3 hereof) shall be extended to the next
succeeding Business Day and interest shall be payable for any principal so
extended for the period of such extension.
(d) All payments by the Borrower hereunder or under any other Loan
Document shall be made free and clear of and without deduction for or on account
of any present or future income, stamp, or other taxes, fees, duties,
withholding or other charges of any nature whatsoever imposed by any taxing
authority excluding in the case of each Lender taxes imposed on or measured by
its net income or franchise taxes imposed by the jurisdiction in which it is
organized or through which it acts for purposes of this Agreement (such
non-excluded items being hereinafter referred to as "Taxes"). If as a result of
any change in law (or the interpretation thereof) after the date that the
applicable Lender became a "Lender" under this Agreement any withholding or
deduction from any payment to be made to, or for the account of, a Lender by the
Borrower hereunder or under any other Loan Document is required in respect of
any Taxes pursuant to any applicable law, rule, or regulation, then the Borrower
will (i) pay to the relevant authority the full amount required to be so
withheld or deducted; (ii) to the extent available, promptly forward to the
Agent an official receipt or other documentation reasonably satisfactory to the
Agent evidencing such payment to such authority; and (iii) pay to the Agent, for
the account of each affected Lender, such additional amount or amounts as are
necessary to ensure that the net amount actually received by such Lender will
equal the full amount such Lender would have received had no such withholding or
deduction been required. Each Lender shall determine such additional amount or
amounts payable to it (which determination shall create a rebuttable presumption
as to the accuracy thereof), and in such event, Agent shall furnish written
evidence to Borrower showing how Agent made such determination. If a Lender
becomes aware that any such withholding or deduction from any payment to be made
by the Borrower hereunder or under any other Loan Document is required, then
such Lender shall promptly notify the Agent and the Borrower thereof stating the
reasons therefor and the additional amount required to be paid under this
Section. Each Lender shall execute and deliver to the Agent and Borrower such
forms as it may be required to execute and deliver pursuant to Section 11.13
hereof. To the extent that any such withholding or deduction results from the
failure of a Lender to provide a form required by Section 11.13 hereof (unless
such failure is due to some prohibition under applicable Legal Requirements),
the Borrower shall have no obligation to pay the additional amount required by
clause (iii) above. Anything in this Section notwithstanding, if any Lender
elects to require payment by the Borrower of any material amount under this
Section, the Borrower may, within 60 days after the date of receiving notice
thereof and so long as no Default shall have occurred and be continuing, elect
to terminate such Lender as a party to this Agreement; provided
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<PAGE> 30
that, concurrently with such termination the Borrower shall (i) if the Agent and
each of the other Lenders shall consent, pay that Lender all principal, interest
and fees and other amounts owed to such Lender through such date of termination
or (ii) have arranged for another financial institution approved by the Agent
(such approval not to be unreasonably withheld) as of such date, to become a
substitute Lender for all purposes under this Agreement in the manner provided
in Section 11.6; provided further that, prior to substitution for any Lender,
the Borrower shall have given written notice to the Agent of such intention and
the Lenders shall have the option, but no obligation, for a period of 60 days
after receipt of such notice, to increase their Commitments in order to replace
the affected Lender in lieu of such substitution.
4.2 Pro Rata Treatment. Except to the extent otherwise provided herein:
(a) each Loan borrowing shall be made ratably from the Revolving Loan Lenders in
accordance with their respective Commitments; (b) each payment of commitment
fees with respect to the Commitments shall be made for the account of the
Revolving Loan Lenders and each termination or reduction of the Commitments
under Section 2.2 hereof shall be applied, pro rata, according to the applicable
Lenders' respective Commitments, and (c) each payment by Borrower of principal
of or interest on the Loans shall be made to Agent for the account of the
Lenders pro rata in accordance with the respective unpaid principal amounts of
such Loans held by the Lenders.
4.3 Certain Actions, Notices, Etc. Notices to Agent of any termination
or reduction of Commitments and of borrowings and optional prepayments of Loans
shall be irrevocable and shall be effective only if received by Agent not later
than 9:00 a.m., San Francisco, California time on the number of Business Days
prior to the date of the relevant termination, reduction, borrowing and/or
prepayment specified below:
<TABLE>
<CAPTION>
Number of Business Days
Prior Notice
-----------------------
<S> <C>
Borrowing at the Base Rate 1 Business Day
Repayment of Base Rate Borrowing 1 Business Day
Borrowing at Eurodollar Rate 3 LIBOR Business Days
Repayment of LIBOR Borrowing
prior to last day of the applicable 3 LIBOR Business Days
Interest Period
Termination or Reduction of
Commitments 2 Business Days (subject to any
Funding Losses with respect to
LIBOR Borrowings)
</TABLE>
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<PAGE> 31
Each such notice of termination or reduction shall specify the amount of the
applicable Commitment to be terminated or reduced. Each such notice of borrowing
or prepayment shall specify the amount of the Loans to be borrowed or prepaid
and the date of borrowing or prepayment (which shall be a Business Day). Agent
shall promptly notify the affected Lenders of the contents of each such notice.
Any selection of a Eurodollar Rate with respect to a Loan shall be subject to
the advance notice requirements set forth in Section 3.3 hereof.
4.4 Non-Receipt of Funds by Agent. Unless Agent shall have been
notified by a Lender or Borrower (the "Payor") prior to the day on which such
Lender is to make payment to Agent of the proceeds of a Loan to be made by it
hereunder or Borrower is to make a payment to Agent for the account of one or
more of the Lenders, as the case may be (such payment being herein called the
"Required Payment"), which notice shall be effective upon receipt, that the
Payor does not intend to make the Required Payment to Agent, Agent may assume
that the Required Payment has been made and may, in reliance upon such
assumption (but shall not be required to), make the amount thereof available to
the intended recipient on such date and, if the Payor has not in fact made the
Required Payment to Agent, the recipient of such payment shall, on demand, pay
to Agent the amount made available by Agent, together with interest thereon in
respect of the period commencing on the date such amount was so made available
by Agent until the date Agent recovers such amount at a rate per annum equal to
the Federal Funds Rate for such period.
4.5 Sharing of Payments, Etc. If a Lender shall obtain payment of any
principal of or interest on any Loan made by it under this Agreement or on any
other Obligation then due to such Lender hereunder, through the exercise of any
right of set-off (including, without limitation, any right of setoff or lien
granted under Section 9.2 hereof), banker's lien, counterclaim or similar right,
or otherwise, it shall promptly purchase from the other Lenders participations
in the Loans made or other Obligations held, by the other Lenders in such
amounts, and make such other adjustments from time to time as shall be equitable
to the end that all the Lenders shall share the benefit of such payment (net of
any expenses which may be incurred by such Lender in obtaining or preserving
such benefit) pro rata in accordance with the unpaid Obligations then due to
each of them (after giving due consideration to any similar payments obtained by
the other Lenders). To such end all the Lenders shall make appropriate
adjustments among themselves (by the resale of participations sold or otherwise)
if such payment is rescinded or must otherwise be restored. Borrower agrees, to
the fullest extent it may effectively do so under applicable law, that any
Lender so purchasing a participation in the Loans made or other Obligations
held, by other Lenders may exercise all rights of set-off, bankers' lien,
counterclaim or similar rights with respect to such participation as fully as if
such Lender were a direct holder of Loans or other Obligations in the amount of
such participation. Nothing contained herein shall require any Lender to
exercise any such right or shall affect the right of any Lender to exercise, and
retain the benefits of exercising, any such right with respect to any other
indebtedness or obligation of Borrower.
5. Conditions Precedent.
5.1 Initial Loans. The obligation of each Lender to make its initial
Loans hereunder is subject to the following conditions precedent, each of which
shall have been fulfilled or waived to the satisfaction of Agent:
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(a) Authorization and Status. Agent shall have received from the
appropriate Governmental Authorities certified copies of the Organizational
Documents (other than by-laws) of each Obligor, and evidence satisfactory to
Agent of all action taken by each Obligor authorizing the execution, delivery
and performance of the Loan Documents and all other documents related to this
Agreement to which it is a party (including, without limitation, a certificate
of the secretary of each such party which is a corporation setting forth the
resolutions of its Board of Directors authorizing the transactions contemplated
thereby and attaching a copy of its bylaws), together with such certificates as
may be appropriate to demonstrate the qualification and good standing of and
payment of taxes by each Obligor in the jurisdiction of its organization and in
each other jurisdiction where the failure in which to qualify would have a
Material Adverse Effect.
(b) Incumbency. Each Obligor shall have delivered to Agent a
certificate in respect of the name and signature of each of the officers (i) who
is authorized to sign on its behalf the applicable Loan Documents related to any
Loan and (ii) who will, until replaced by another officer or officers duly
authorized for that purpose, act as its representative for the purposes of
signing documents and giving notices and other communications in connection with
any Loan. Agent and each Lender may conclusively rely on such certificates until
they receive notice in writing from the applicable Obligor to the contrary.
(c) Notes. Agent shall have received the appropriate Notes of Borrower
for each Lender, duly completed and executed.
(d) Loan Documents. Each Obligor shall have duly executed and delivered
the Loan Documents to which it is a party (in such number of copies as Agent
shall have requested). Each such Loan Document shall be in substantially the
form furnished to the Lenders prior to their execution of this Agreement,
together with such changes therein as Lenders may approve.
(e) Security Matters. All such action as Agent shall have requested to
perfect the Liens created pursuant to the Security Documents shall have been
taken, including, without limitation, where applicable, the filing and recording
of the Security Documents with the appropriate Governmental Authorities. Agent
shall also have received evidence satisfactory to it that the Liens created by
the Security Documents constitute first priority Liens, except for the
exceptions expressly provided for herein, including, without limitation,
delivery of all applicable stock certificates (with stock powers executed in
blank), Uniform Commercial Code search reports and executed releases of any
prior Liens (except as permitted by Section 8.2).
(f) Fees and Expenses. Borrower shall have paid to Agent all unpaid
fees in the amounts previously agreed upon in writing among Borrower and Agent;
and shall have in addition paid to Agent all amounts payable under Section 11.3
hereof, on or before the date of this Agreement, except for amounts which Agent,
in its sole discretion, agrees may be paid at a later date.
(g) Insurance. Borrower shall have delivered to Agent certificates of
insurance satisfactory to Agent evidencing the existence of all insurance
required to be maintained by each Obligor by this Agreement and the Security
Documents.
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(h) Opinions of Counsel. Agent shall have received such opinions of
counsel to Obligors as Agent shall reasonably request with respect to Obligors
and the Loan Documents.
(i) Consents. Agent shall have received evidence satisfactory to Agent
that all material consents of each Governmental Authority and of each other
Person, if any, reasonably required in connection with (a) the Loans and (b) the
execution, delivery and performance of this Agreement and the other Loan
Documents have been satisfactorily obtained.
(j) Payment of Certain Outstanding Indebtedness. Agent shall have
received evidence satisfactory to Agent that all existing Borrowed Money
Indebtedness owing by any Obligors (other than Indebtedness permitted under
Section 8.1 hereof) shall have been paid in full (or will be paid in full out of
the initial advance hereunder) and that any credit availability under any
facility for Borrowed Money Indebtedness to which any Obligor is a party as the
borrower (other than Indebtedness permitted under Section 8.1 hereof) shall have
been terminated.
(k) Centris Acquisition. Agent shall have received evidence
satisfactory to Agent that all applicable regulatory authorities shall have
approved the acquisition by Borrower of all of the issued and outstanding equity
interests in and to Centris and that the cash tender offer (and the aggregate
consideration actually paid) for such equity interests does not exceed
$150,000,000.
(l) Ratings Confirmation. Agent shall have received reaffirmation of
current ratings with respect to Borrower issued by Standard & Poor's.
(m) Other Documents. Agent shall have received such other documents
consistent with the terms of this Agreement and relating to the transactions
contemplated hereby as Agent may reasonably request.
5.2 All Loans. The obligation of each Lender to make any Loan
(including the initial Loan) to be made by it hereunder is subject to (a) the
accuracy, in all material respects, on the date of such Loan of all
representations and warranties of each Obligor contained in this Agreement and
the other Loan Documents (except for such representations and warranties which
expressly refer to a prior date in which case they shall be true and correct as
of such earlier date); provided, however, that for purposes of this Section, in
each representation and warranty in Article 6 hereof that makes reference to a
Schedule, the representation under this Section that such representation and
warranty in Article 6 hereof is true on and as of the date of making of such
Loan shall take into account subsequent amendments to any Schedule referred to
therein and matters arising after the date hereof which do not otherwise give
rise to or constitute a Default hereunder; (b) Agent shall have received the
following, all of which shall be duly executed and in Proper Form: (1) a Request
for Extension of Credit as to the Loan no later than 9:00 a.m., San Francisco,
California time on the Business Day on which such Request for Extension of
Credit must be given under Section 4.3 hereof, and (2) such other documents as
Agent may reasonably require; (c) prior to the making of such Loan and after
giving effect thereto, there shall have occurred no event having a Material
Adverse Effect; (d) no Default or Event of Default shall have occurred and be
continuing; (e) the making of such Loan shall not be illegal or prohibited by
any Legal Requirement, and (f) Borrower shall have paid all fees and expenses of
the type described in Section 11.3 hereof and all other fees owed to Agent or
any
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Lender under the Loan Documents which are due and payable, in each case, prior
to or on the date of such Loan or such issuance (except for amounts which Agent
or the applicable Lender, as the case may be, in their sole discretion, agree
may be paid at a later date). The submission by the Borrower of a Request for
Extension of Credit shall be deemed to be a representation and warranty that the
conditions precedent to the applicable Loan have been satisfied. Selection of a
new interest rate at the expiration of an Interest Period shall not constitute a
new Loan hereunder.
6. Representations and Warranties.
To induce the Lenders to enter into this Agreement and to make the
Loans, Borrower represents and warrants (such representations and warranties to
survive any investigation and the making of the Loans) to the Lenders and Agent
as follows:
6.1 Organization. Each Obligor (a) is duly incorporated, validly
existing and in good standing under the laws of the jurisdiction of its
organization; (b) has all necessary power and authority to conduct its business
as presently conducted, and (c) is duly qualified to do business and in good
standing in the jurisdiction of its organization and in all jurisdictions in
which the failure to so qualify would reasonably be expected to have a Material
Adverse Effect.
6.2 Financial Statements. Borrower has furnished to Agent (i) audited
financial statements (including a balance sheet) as to Borrower which fairly
present in all material respects, in accordance with GAAP, the consolidated
financial condition and the results of operations of Borrower as at the end of
Borrower's fiscal year ending in 1998 and (ii) unaudited financial statements
(including a balance sheet) as to Borrower which fairly present in all material
respects, in accordance with GAAP (subject to year-end adjustments and the
absence of notes), the consolidated financial condition and the results of
operations of Borrower as at the end of the fiscal quarter ended September 30,
1999. No events, conditions or circumstances have occurred from the date that
the financial statements were delivered to Agent through the Effective Date
which would cause said financial statements to be misleading in any material
respect. There are no material instruments or liabilities which should, in
accordance with GAAP, be reflected in such financial statements provided to
Agent which are not so reflected.
6.3 Enforceable Obligations; Authorization. The Loan Documents have
been duly executed and delivered by each applicable Obligor and are legal, valid
and binding obligations of each applicable Obligor, enforceable in accordance
with their respective terms, except as may be limited by bankruptcy, insolvency
and other similar laws and judicial decisions affecting creditors' rights
generally and by general equitable principles. The execution, delivery and
performance of the Loan Documents (a) have all been duly authorized by all
necessary action; (b) are within the power and authority of each applicable
Obligor; (c) to the best of Borrower's knowledge, do not and will not contravene
or violate any Legal Requirement applicable to any applicable Obligor or the
Organizational Documents of any applicable Obligor, the contravention or
violation of which would reasonably be expected to have a Material Adverse
Effect; (d) do not and will not result in the breach of, or constitute a default
under, any material agreement or instrument by which any Obligor or any of its
Property may be bound the contravention or violation of which would reasonably
be expected to have a Material Adverse Effect, and (e) do not and will not
result in the creation of any
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Lien upon any material Property of any Obligor except for Permitted Liens. All
necessary permits, registrations and consents for such making and performance
have been obtained, except where the failure to obtain the same would not have a
Material Adverse Effect. Except as otherwise expressly stated in the Security
Documents, the Liens of the Security Documents will constitute valid and
perfected first and prior Liens on the Property described therein, subject to no
other Liens whatsoever except Permitted Liens covering Collateral other than
equity interests in the Subsidiaries of Borrower.
6.4 Other Debt. After giving effect to the initial advance hereunder
(and the payment of certain existing Indebtedness of Obligors thereby), no
Obligor is in default in the payment of any other Indebtedness or under any
agreement, mortgage, deed of trust, security agreement or lease to which it is a
party and which would constitute an Event of Default under Section 9.1(b).
6.5 Litigation. There is no litigation or administrative proceeding, to
the knowledge of any executive officer of Borrower, pending or threatened
against, nor any outstanding judgment, order or decree against, Borrower or any
of its Subsidiaries before or by any Governmental Authority which does or would
reasonably be expected to have a Material Adverse Effect. No Obligor is in
default with respect to any judgment, order or decree of any Governmental
Authority where such default would have a Material Adverse Effect.
6.6 Title. Each Obligor has indefeasible title to all of its material
Property necessary in the ordinary course of its business, free and clear of all
Liens except Permitted Liens.
6.7 Taxes. Each Obligor has filed all federal and other material tax
returns required to have been filed and paid all federal taxes and all other
material taxes due and payable, except (i) those for which extensions have been
obtained and those which are being contested in good faith and adequate reserves
computed in accordance with GAAP have been set aside therefor and (ii) taxes,
assessments, levies or other charges imposed by any Governmental Authority
(other than federal income taxes) with respect to which the failure to make
payments could not, by reason of the amount thereof or of remedies available to
such Governmental Authorities, reasonably be expected to have a Material Adverse
Effect.
6.8 Regulations U and X. None of the proceeds of any Loan will be used
for the purpose of purchasing or carrying directly or indirectly any margin
stock or for any other purpose which would constitute this transaction a
"purpose credit" within the meaning of Regulations U and X of the Board of
Governors of the Federal Reserve System, as any of them may be amended from time
to time.
6.9 Subsidiaries. As of the Effective Date, Borrower has no
Subsidiaries other than those set forth on Exhibit F hereto.
6.10 No Untrue or Misleading Statements. No representation or warranty
made by Borrower in any Loan Document or in any document, instrument or other
writing furnished to the Lenders by or on behalf of any Obligor in connection
with the transactions contemplated in any Loan Document contains any untrue
material statement of material fact or omits to state any such
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material fact (of which any executive officer of Borrower has knowledge)
necessary to make the representations, warranties and other statements contained
herein or in such other document, instrument or writing not misleading in any
material respect on the date when made or deemed made.
6.11 ERISA. With respect to each Plan, Borrower and each member of the
Controlled Group have fulfilled their obligations, including obligations under
the minimum funding standards of ERISA and the Code and are in compliance in all
material respects with the provisions of ERISA and the Code. No event has
occurred which could result in a liability of Borrower or any member of the
Controlled Group to the PBGC or a Plan (other than to make contributions in the
ordinary course) that would reasonably be expected to have a Material Adverse
Effect. There have not been any nor are there now existing any events or
conditions that would cause the Lien provided under Section 4068 of ERISA to
attach to any Property of Borrower or any member of the Controlled Group.
Unfunded Liabilities as of the date hereof do not exceed $500,000. No
"prohibited transaction" (for which there is not an exemption) has occurred with
respect to any Plan.
6.12 Investment Company Act. No Obligor is an investment company within
the meaning of the Investment Company Act of 1940, as amended, or, directly or
indirectly, controlled by or acting on behalf of any Person which is an
investment company, within the meaning of said Act.
6.13 Public Utility Holding Company Act. No Obligor is an "affiliate"
or a "subsidiary company" of a "public utility company," or a "holding company,"
or an "affiliate" or a "subsidiary company" of a "holding company," as such
terms are defined in the Public Utility Holding Company Act of 1935, as amended.
6.14 Solvency. None of Borrower, any other Obligor, or Borrower and its
Subsidiaries on a consolidated basis, is "insolvent," as such term is used and
defined in (i) the Bankruptcy Code and (ii) the fraudulent conveyance statutes
of the State of Texas or of any other applicable jurisdiction.
6.15 Fiscal Year. The fiscal year of each Obligor ends on December 31.
6.16 Compliance. To the best knowledge of any executive officer of
Borrower, Borrower and each of its Subsidiaries is in compliance with all Legal
Requirements applicable to it, except to the extent that the failure to comply
therewith would not reasonably be expected to have a Material Adverse Effect.
6.17 Environmental Matters. Each Obligor has, to the best knowledge of
Borrower's executive officers, obtained and maintained in effect all
Environmental Permits (or the applicable Person has initiated the necessary
steps to transfer the Environmental Permits into its name or obtain such
permits), the failure to obtain which would reasonably be expected to have a
Material Adverse Effect. Each Obligor and its Properties, business and
operations have been and are, to the best knowledge of Borrower's executive
officers, in compliance with all applicable Requirements of Environmental Law
and Environmental Permits, the failure to comply with which would reasonably be
expected to have a Material Adverse Effect. Each Obligor and its Properties,
business and
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operations are not, to the best knowledge of Borrower's executive officers
(after making reasonable inquiry of the personnel and records of their
respective Corporations), subject to any (a) Environmental Claims or (b)
Environmental Liabilities, in either case direct or contingent, arising from or
based upon any act, omission, event, condition or circumstance occurring or
existing on or prior to the date hereof which would reasonably be expected to
have a Material Adverse Effect. None of the officers of Borrower have received
nor is aware of any Obligor receiving any notice of any violation or alleged
violation of any Requirements of Environmental Law or Environmental Permit or
any Environmental Claim in connection with its Properties, liabilities,
condition (financial or otherwise), business or operations which would
reasonably be expected to have a Material Adverse Effect. Borrower does not know
of any event or condition with respect to currently enacted Requirements of
Environmental Laws presently scheduled to become effective in the future with
respect to any of the Properties of any Obligor which would reasonably be
expected to have a Material Adverse Effect, for which the applicable Person has
not made good faith provisions in its business plan and projections of financial
performance.
6.18 Property and Earnings of Material Subsidiaries. The aggregate book
value of the Property owned by the Material Subsidiaries is equal to or greater
than ninety percent (90%) of the aggregate consolidated book value of the
Property owned by Borrower and its Subsidiaries on the Effective Date and the
aggregate earnings of the Material Subsidiaries for the twelve month period
ending on the Effective Date is equal to or greater than ninety percent (90%) of
the aggregate consolidated earnings of Borrower and its Subsidiaries for such
period.
6.19 Year 2000 Compliance. Borrower and each of its Subsidiaries have
performed all acts reasonably necessary to ensure that Borrower and each of its
Subsidiaries and any business in which Borrower or any of its Subsidiaries holds
a substantial interest are currently Year 2000 Compliant (as defined in Section
7.11 hereof).
7. Affirmative Covenants.
Borrower covenants and agrees with Agent and the Lenders that prior to
the termination of this Agreement it will do or cause to be done, and cause each
of its Subsidiaries to do or cause to be done, each and all of the following:
7.1 Taxes, Existence, Regulations, Property, Etc. At all times (a) pay
when due all taxes and governmental charges of every kind upon it or against its
income, profits or Property, unless and only to the extent that the same shall
be contested diligently in good faith and adequate reserves in accordance with
GAAP have been established therefor and, in the case of Subsidiaries which are
not Obligors, the failure to pay would reasonably be expected to have a Material
Adverse Effect; (b) do all things necessary to preserve its existence,
qualifications, rights and franchises in all jurisdictions where such failure to
qualify would reasonably be expected to have a Material Adverse Effect; (c)
comply with all applicable Legal Requirements (including without limitation
Requirements of Environmental Law) in respect of the conduct of its business and
the ownership of its Property, the noncompliance with which would reasonably be
expected to have a Material Adverse Effect; and (d) cause its Property to be
protected, maintained and kept in good repair (ordinary wear and tear excepted)
and make all replacements and additions to such Property as may be reasonably
necessary
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to conduct its business properly and efficiently except where the failure to do
so would not reasonably be expected to have a Material Adverse Effect.
7.2 Financial Statements and Information. Furnish to Agent fifteen (15)
copies of each of the following: (a) as soon as available and in any event
within 100 days after the end of each applicable fiscal year, beginning with the
fiscal year ending on December 31, 1999, Annual Financial Statements of
Borrower; (b) as soon as available and in any event within 60 days after the end
of each fiscal quarter, Quarterly Financial Statements of Borrower; (c)
concurrently with the financial statements provided for in Subsections 7.2(a)
and (b) hereof, such schedules, computations and other information, in
reasonable detail, as may be reasonably required by Agent to demonstrate
compliance with the covenants set forth herein or reflecting any non-compliance
therewith as of the applicable date, all certified and signed by the president,
chief financial officer or treasurer of Borrower (or other authorized officer
approved by Agent) as true and correct in all material respects to the best
knowledge of such officer and, concurrently with the financial statements
provided for in Subsections 7.2(a) and (b) hereof commencing with the Annual
Financial Statement prepared as of December 31, 1998, a compliance certificate
("Compliance Certificate") in the form of Exhibit E hereto, duly executed by
such authorized officer; (d) as soon as available and in any event within 90
days after the end of each applicable fiscal year, beginning with the fiscal
year ending on December 31, 1999, annual financial statements prepared on a
statutory basis for the Insurance Company Subsidiaries (as filed with the
appropriate regulatory authorities); (e) as soon as available and in any event
within 60 days after the end of each applicable fiscal quarter (other than the
last fiscal quarter of a fiscal year), beginning with the fiscal quarter ending
on December 31, 1999, quarterly financial statements prepared on a statutory
basis for the Insurance Company Subsidiaries (as filed with the appropriate
regulatory authorities); (f) as soon as available and in any event within 100
days after the end of each applicable fiscal year, beginning with the fiscal
year ending on December 31, 1999, annual financial statements prepared on a
statutory basis for HCC Reinsurance Company Limited (as filed with the Bermuda
Department of Insurance); (g) within fifteen (15) days of their becoming
publicly available, each financial statement, report, notice or definitive proxy
statements sent by Borrower or any of its Subsidiaries to shareholders generally
and each regular or periodic report and each registration statement or
prospectus filed by Borrower or any of its Subsidiaries with any securities
exchange or the Securities and Exchange Commission or any successor agency; (h)
within thirty (30) days after the end of each fiscal year, projections of the
consolidated financial statements of Borrower and its Subsidiaries for the
following fiscal year; (i) at the request of Agent or the Majority Lenders,
independent actuarial reserve adequacy summary reports for the Insurance Company
Subsidiaries in Proper Form and issued by the actuarial consultant utilized by
the Insurance Company Subsidiaries, such consultant to be satisfactory to Agent
and the Majority Lenders; (j) within fifteen (15) days after the provision
thereof, all significant reports by the National Association of Insurance
Commissioners or any insurance regulatory authority or other Governmental
Authority with respect to any Insurance Company Subsidiary's insurance business,
and (k) such other financial projections and other information (including
without limitation significant filings under state insurance holding company
acts) relating to the condition (financial or otherwise), operations or business
of any Obligor as from time to time may be reasonably requested by Agent (or any
Lender through Agent). Each delivery of a financial statement pursuant to this
Section 7.2 shall constitute a restatement of the representations contained
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in the last two sentences of Section 6.2 with respect to the period of time from
the date of such most recently delivered financial statements.
7.3 Financial Tests.
(a) Borrower will have and maintain (in each case, on a consolidated
basis for Borrower and its Subsidiaries):
(i) Shareholders Equity - Shareholders' Equity of not less
than (1) at all times during the period commencing on the Effective
Date through and including December 31, 1999, an amount equal to
$420,000,000 and (2) at all times during each fiscal quarter
thereafter, $420,000,000 plus 50% of the net income of Borrower and its
Subsidiaries, on a consolidated basis for each fiscal quarter ending
after September 30, 1999 (if positive) plus 75% of the net proceeds
realized from the issuance of any equity securities by Borrower or any
of its Subsidiaries after the date hereof.
(ii) Debt to Capitalization Ratio - a Debt to Capitalization
Ratio of not greater than (1) at all times during the period commencing
on the Effective Date through and including June 29, 2000, 40%, (2) at
all times during the period commencing on June 30, 2000 through and
including December 30, 2000, 38%, (3) at all times during the period
commencing on December 31, 2000 through and including June 29, 2001,
36% and (4) at all times thereafter, 35%.
(iii) Cash Flow Coverage Ratio - a Cash Flow Coverage Ratio at
the end of each fiscal year of not less than 2.00 to 1.00.
(iv) Combined Ratio - a Combined Ratio of not greater than (1)
at all times during the period commencing on the Effective Date through
and including September 30, 2001, 110% and (2) at all times thereafter,
105%.
(b) Borrower will cause each of its Insurance Company Subsidiaries to
maintain a Risk Based Capital Ratio at all times of not less than 200%. In
addition, Borrower will cause the Insurance Company Subsidiaries to maintain, on
a consolidated basis, a statutory surplus of not less than (1) at all times
during the period commencing on the Effective Date through and including
December 31, 1999, an amount equal to $300,000,000 and (2) at all times during
each fiscal quarter thereafter, $300,000,000 plus 50% of the net income of the
Insurance Company Subsidiaries, on a consolidated basis for each fiscal quarter
ending after September 30, 1999 (if positive).
7.4 Inspection. Permit Agent and each Lender upon five (5) Business
Days' prior notice (unless a Default or an Event of Default has occurred which
is continuing, in which case no prior notice is required) to inspect its
Property, to examine its files, books and records, except privileged
communication with legal counsel (both inside and outside) and classified
governmental material, and make and take away copies thereof, and to discuss its
affairs with its officers and accountants, all during normal business hours and
at such intervals and to such extent as Agent or such Lender may reasonably
desire. Unless an Event of Default has occurred which is continuing, Agent and
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Lenders shall not exercise their rights hereunder more than once each calendar
year and Agent or the applicable Lender, as the case may be, shall pay its own
costs and expenses relating to the exercise of the rights under this Section.
7.5 Further Assurances. Promptly execute and deliver, at Borrower's
expense, any and all other and further instruments which may be reasonably
requested by Agent to cure any defect in the execution and delivery of any Loan
Document in order to effectuate the transactions expressly contemplated by the
Loan Documents, and in order to grant, preserve, protect and perfect the
validity and priority of the security interests created by the Security
Documents.
7.6 Books and Records. Maintain accounting records which permit
financial statements to be prepared in accordance with GAAP and statutory
accounting principles, as applicable.
7.7 Insurance. Borrower will (and will cause each of its Subsidiaries
to) maintain insurance with such insurers, on such of its Property, with
responsible companies in such amounts, with such deductibles and against such
risks as are usually carried by owners of similar businesses and properties in
the same general areas in which the applicable Person operates, and furnish
Agent satisfactory evidence thereof promptly upon request.
7.8 Notice of Certain Matters. Give Agent written notice of the
following within five Business Days after any executive officer of Borrower
shall become aware of the same:
(a) the issuance by any court or governmental agency or authority of
any injunction, order or other restraint prohibiting, or having the effect of
prohibiting, the performance of this Agreement, any other Loan Document, or the
making of the Loans or the initiation of any litigation, or any claim or
controversy which would reasonably be expected to result in the initiation of
any litigation, seeking any such injunction, order or other restraint;
(b) the filing or commencement of any action, suit or proceeding,
whether at law or in equity or by or before any court or any Governmental
Authority involving claims in excess of $15,000,000 (exclusive of claims covered
by insurance and exclusive of claims made in the ordinary course of the
insurance business of such Person) or which would reasonably be expected to
result in a Default hereunder;
(c) any Event of Default or Default, specifying the nature and extent
thereof and the action (if any) which is proposed to be taken with respect
thereto;
(d) the incurrence of material burdensome restrictions under contracts
or applicable law which would reasonably be expected to have a Material Adverse
Effect and any other event (including strikes, labor disputes or loss of use of
material patents or trademarks) which could reasonably be expected to have a
Material Adverse Effect.
Borrower will also notify Agent in writing at least 30 days prior to the date
that any Obligor changes its name or the location of its chief executive office
or principal place of business or the place where it keeps its books and
records.
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7.9 ERISA Information and Compliance. Furnish to Agent (i) within five
(5) days after receipt, a copy of any notice of complete or partial withdrawal
liability under Title IV of ERISA which would reasonably be expected to have a
Material Adverse Effect and any notice from the PBGC under Title IV of ERISA of
an intent to terminate or appoint a trustee to administer any Plan which would
reasonably be expected to have a Material Adverse Effect, (ii) if requested by
Agent, promptly after the filing thereof with the United States Secretary of
Labor or the PBGC or the Internal Revenue Service, copies of each annual and
other report with respect to each Plan or any trust created thereunder, (iii)
within five (5) days after becoming aware of the occurrence of any "reportable
event," as such term is defined in Section 4043 of ERISA which would reasonably
be expected to have a Material Adverse Effect, for which the disclosure
requirements of Regulation Section 4043 promulgated by the PBGC have not been
waived, or of any "prohibited transaction," as such term is defined in Section
4975 of the Code, in connection with any Plan or any trust created thereunder
which would reasonably be expected to have a Material Adverse Effect, a written
notice signed by the President or the principal financial officer of Borrower or
the applicable member of the Controlled Group specifying the nature thereof,
what action Borrower or the applicable member of the Controlled Group is taking
or proposes to take with respect thereto, and, when known, any action taken by
the PBGC, the Internal Revenue Service or the Department of Labor with respect
thereto, (iv) within five (5) days after the filing or receiving thereof by
Borrower or any member of the Controlled Group of any notice of the institution
of any proceedings or other actions which may result in the termination of any
Plan which would reasonably be expected to have a Material Adverse Effect, and
(v) each request for waiver of the funding standards or extension of the
amortization periods required by Sections 303 and 304 of ERISA or Section 412 of
the Code within five (5) days after the request is submitted by Borrower or any
member of the Controlled Group to the Secretary of the Treasury, the Department
of Labor or the Internal Revenue Service, as the case may be. To the extent
required under applicable statutory funding requirements, Borrower will fund, or
will cause the applicable member of the Controlled Group to fund, all current
service pension liabilities as they are incurred under the provisions of all
Plans from time to time in effect, and comply with all applicable provisions of
ERISA, in each case, except to the extent that failure to do the same would not
reasonably be expected to have a Material Adverse Effect. Except to the extent
that failure to do the same would not reasonably be expected to have a Material
Adverse Effect, Borrower covenants that it shall and shall cause each member of
the Controlled Group to (1) make contributions to each Plan in accordance with
the time limits imposed by ERISA and in an amount sufficient to comply with the
contribution obligations under such Plan and the minimum funding standards
requirements of ERISA; (2) prepare and file in accordance with the time limits
imposed by ERISA all notices and reports required under the terms of ERISA
including but not limited to annual reports; and (3) pay in accordance with the
time limits imposed by ERISA all required PBGC premiums.
7.10 Reinsurers' Quality Ratings. Borrower will cause at least ninety
percent (90%) of all reinsurance obligations to the Insurance Company
Subsidiaries (excluding any reinsurance obligations which are cash secured or
are supported by letters of credit in a form and issued by a surety reasonably
acceptable to Agent and the Majority Lenders) to be held at all times by
reinsurers with an A.M. Best rating of A- or better or a Standard and Poor's
rating of A- or better.
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7.11 Year 2000 Compliance. Perform all acts reasonably necessary to
ensure that Borrower and each of its Subsidiaries and any business in which
Borrower or any of its Subsidiaries holds a substantial interest become Year
2000 Compliant in a timely manner. Such acts shall include, without limitation,
performing a comprehensive review and assessment of all of Borrower's and each
of its Subsidiaries' systems and adopting a detailed plan, with itemized budget,
for the remediation, monitoring and testing of such systems. As used herein,
"Year 2000 Compliant" shall mean, in regard to any entity, that all software,
hardware, firmware, equipment, goods or systems utilized by or material to the
business operations or financial condition of such entity and the failure of
which would reasonably be expected to have a Material Adverse Effect, will
properly perform date sensitive functions before, during and after the year
2000. Borrower shall (and shall cause each of its Subsidiaries to), immediately
upon request, provide to Agent such certifications or other evidence of
Borrower's and its Subsidiaries' compliance with the terms hereof as Agent or
the Majority Lenders may from time to time reasonably require.
8. Negative Covenants.
Borrower covenants and agrees with Agent and the Lenders that prior to
the termination of this Agreement it will not, and will not suffer or permit any
of its Subsidiaries to, do any of the following without the prior written
consent of the Majority Lenders:
8.1 Borrowed Money Indebtedness. Create, incur, suffer or permit to
exist, or assume or guarantee, directly or indirectly, or become or remain
liable with respect to any Borrowed Money Indebtedness, whether direct,
indirect, absolute, contingent or otherwise, except the following:
(i) Indebtedness under this Agreement and the other Loan Documents
and Indebtedness secured by Liens permitted by Section 8.2
hereof;
(ii) the liabilities and other credit facilities (whether or not
funded) existing on the date of this Agreement (other than the
Acquisition Bridge Facility) and disclosed in the financial
statements delivered on or prior to the Effective Date
pursuant to Section 6.2 hereof and set forth on Exhibit G
hereto, and all renewals, extensions and replacements (but not
increases) of any of the foregoing;
(iii) the Interest Rate Risk Indebtedness;
(iv) current liabilities incurred in the ordinary course of
business;
(v) purchase money Indebtedness (whether for the purchase of real
or personal Property) and/or real estate construction
Indebtedness not to exceed $35,000,000 in the aggregate at any
one time outstanding;
(vi) prior to March 13, 2000, the Acquisition Bridge Facility
(without amendment in any manner without the prior written
consent of the Majority Lenders); and
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(vii) other unsecured Indebtedness of Borrower not to exceed, in the
aggregate at any one time outstanding, $75,000,000 (to be
increased on a dollar-for-dollar basis by any decrease of the
Commitments from time to time).
8.2 Liens. Create or suffer to exist any Lien upon any of its Property
now owned or hereafter acquired, or acquire any Property upon any conditional
sale or other title retention device or arrangement or any purchase money
security agreement; or in any manner directly or indirectly sell, assign, pledge
or otherwise transfer any of its Accounts or General Intangibles; provided,
however, that Borrower or any of its Subsidiaries may create or suffer to exist
the following:
(i) artisans', mechanics' or other Liens imposed by law arising in
the ordinary course of business, but only to the extent that
payment thereof shall not at the time be overdue by more than
30 days or, if overdue by more than 30 days, the payment
thereof is being diligently contested in good faith and
adequate reserves computed in accordance with GAAP have been
set aside therefor;
(ii) normal encumbrances and restrictions on, and defects in, title
including, without limitation, zoning restrictions, easements,
rights-of-way, restrictions and similar encumbrances, which do
not secure Borrowed Money Indebtedness and which would not be
reasonably expected to have, in the aggregate, a Material
Adverse Effect;
(iii) Liens in favor of Agent or any Lender under the Loan
Documents, including, without limitation, Liens securing
Interest Rate Risk Indebtedness owed to one or more of the
Lenders or Affiliate thereof (but not to any Person which is
not, at the time the Interest Rate Risk Indebtedness is
incurred, a Lender or an Affiliate thereof);
(iv) Liens incurred or deposits made in the ordinary course of
business (1) in connection with workmen's compensation,
unemployment insurance, social security and other like laws,
or (2) to secure insurance in the ordinary course of business,
the performance of bids, tenders, contracts, leases, licenses,
statutory obligations, surety, appeal and performance bonds
and other similar obligations incurred in the ordinary course
of business, not, in any of the cases specified in this clause
(2), incurred in connection with the borrowing of money, the
obtaining of advances or the payment of the deferred purchase
price of Property;
(v) attachments, judgments and other similar Liens arising in
connection with court proceedings, provided that the execution
and enforcement of such Liens are effectively stayed and the
claims secured thereby are being actively contested in good
faith with adequate reserves made therefor in accordance with
GAAP;
(vi) Liens securing obligations in respect of capital leases
covering the property subject to the applicable capital lease
provided that such capital leases are permitted under the
other provisions of this Agreement;
(vii) existing Liens as of Effective Date as set forth on Exhibit H
hereto;
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(viii) Liens for taxes, fees, assessments or other governmental
charges, but only to the extent that payment thereof shall not
at the time be due or if due, the payment thereof is being
diligently contested in good faith and adequate reserves
computed in accordance with GAAP have been set aside therefor;
(ix) Liens securing purchase money Indebtedness permitted under
Section 8.1 hereof and covering the Property so purchased;
(x) Liens arising from precautionary Uniform Commercial Code
financing statement filings with respect to operating leases
or consignment arrangements otherwise permitted hereunder
entered into by Borrower or any of its Subsidiaries in the
ordinary course of business;
(xi) licenses, leases and subleases permitted under this Agreement
and granted to others that do not interfere in any material
respect with the business or operations of Borrower and its
Subsidiaries taken as a whole; and
(xii) extensions, renewals and replacements of Liens referred to in
clauses (i) through (xi) above; provided that any such
extension, renewal or replacement Lien shall be limited to the
Property or assets covered by the Lien extended, renewed or
replaced and that the Borrowed Money Indebtedness secured by
any such extension, renewal or replacement Lien shall be in an
amount not greater than the amount of the Indebtedness secured
by the Lien extended, renewed or replaced.
8.3 Contingent Liabilities. Directly or indirectly guarantee the
performance or payment of, or purchase or agree to purchase, or assume or
contingently agree to become or be secondarily liable in respect of, any
obligation or liability of any other Person (other than Subsidiaries) except for
(a) the endorsement of checks or other negotiable instruments in the ordinary
course of business; (b) obligations disclosed to Agent in the financial
statements delivered on or prior to the Effective Date pursuant to Section 6.2
hereof (but not increases of such obligations after the Effective Date); (c)
those liabilities permitted under Section 8.1 hereof (including without
limitation liabilities under letter of credit facilities permitted under Section
8.1 hereof) and (d) other contingent liabilities not relating to Borrowed Money
Indebtedness arising in the ordinary course of the insurance company business.
8.4 Mergers and Consolidations. In any single transaction or series of
transactions, directly or indirectly: (a) liquidate or dissolve; (b) be a party
to any merger or consolidation unless and so long as (i) no Default or Event of
Default has occurred that is then continuing, (ii) immediately thereafter and
giving effect thereto, no event will occur and be continuing which constitutes a
Default and (iii) the applicable Obligor (or one of such Obligors if such merger
is between Obligors) subject to such merger is the surviving Person. The
provisions of this Section are subject to the restrictions set forth in Section
8.12 hereof. Notwithstanding the foregoing, so long as no Event of Default has
occurred which is continuing (or will arise by reason thereof) (a) any
Subsidiary of Borrower may merge with Borrower or any Obligor provided that
Borrower or such Obligor is the surviving entity, or with one or more
Subsidiaries of Borrower (including
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without limitation mergers between newly acquired Subsidiaries in connection
with any acquisition permitted hereunder) provided that if any merger is between
a wholly-owned Subsidiary of Borrower and a Subsidiary of Borrower which is not
a wholly-owned Subsidiary, such wholly-owned Subsidiary of Borrower shall be the
surviving entity, (b) any Subsidiary of Borrower may sell all or substantially
all of its assets (upon voluntary liquidation or otherwise) to Borrower or any
other Obligor or, so long as such Subsidiary is not an Obligor, to another
wholly-owned Subsidiary of Borrower, (c) any Subsidiary which is not a Material
Subsidiary may be liquidated or dissolved, and (d) mergers, consolidations or
dissolutions by any Subsidiary of Borrower to change its state of incorporation
or to change the form of entity are not prohibited.
8.5 Disposition of Assets. Sell, convey or lease all or any part of its
assets, except as permitted by Section 8.4 hereof and except for (a) sales of
Inventory in the ordinary course of business, (b) transfers resulting from
casualty or condemnation of property, (c) intercompany sales or transfers of
goods, (d) any sale or other transfer of any property or assets not otherwise
permitted hereunder provided that the net proceeds of all such sales and
transfers shall not exceed $50,000,000 in the aggregate during any fiscal year
of Borrower, (e) licenses or sublicenses of intellectual property and general
intangibles and licenses, leases or subleases of other Property in the ordinary
course of business and which do not materially interfere with the business or
operation of any Obligor and which does not otherwise have a Material Adverse
Effect, (f) sales/leaseback transactions (provided that Borrower and its
Subsidiaries shall not, in the aggregate, consummate more than three (3)
sales/leasebacks with respect to Property owned by Borrower or its Subsidiaries
as of the Effective Date), and (g) sales of any investment assets (including,
without limitation, stocks, bonds, cash equivalents, etc.) in the ordinary
course of business. Prior to consummation of any single disposition providing
for aggregate consideration in excess of $5,000,000, Borrower shall certify to
Agent that no Default can reasonably be expected to arise by reason of such
transaction. This Section shall be subject to the limitations set forth in
Section 8.15 hereof.
8.6 Redemption, Dividends and Distributions. At any time: (a) redeem,
retire or otherwise acquire, directly or indirectly, any equity interest in
Borrower other than stock repurchases not exceeding, in the aggregate and on a
cumulative basis from and after the Effective Date, (1) $50,000,000 at all such
times as the Debt to Capitalization Ratio shall be greater than 35% and (2)
$75,000,000 at all such times as the Debt to Capitalization Ratio shall be less
than or equal to 35%, or (b) make any distributions of any Property or cash to
the owner of any of the equity interests in Borrower or any of its Subsidiaries
other than Permitted Dividends.
8.7 Nature of Business. Change the general nature of its business from
insurance, insurance services and related operations.
8.8 Transactions with Related Parties. Enter into any material
transaction or material agreement with any officer, director or holder of any
equity interest in Borrower or any of its Subsidiaries (or any Affiliate of any
such Person) unless the same is upon terms substantially similar to those
obtainable from wholly unrelated sources (to the best knowledge of the executive
officers of Borrower); provided that the foregoing shall not prohibit Borrower
or any Subsidiary from entering into transactions by and among Borrower and its
Subsidiaries, subject to the provisions of Section 8.15 hereof. Notwithstanding
the foregoing, Borrower and its Subsidiaries shall be entitled
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to make the following payments and/or enter into the following transactions: (i)
the payment of reasonable and customary fees and reimbursement arrangements with
respect to the procurement of services from any Subsidiary in the ordinary
course of business; (ii) the payment of reasonable and customary fees and
reimbursement of expenses payable to officers and directors of Borrower and its
Subsidiaries; and (iii) the payment of reasonable lease payments for the use of
vehicles, office space, equipment and other Property in which any officer or
director of Borrower or any Subsidiary has a direct or indirect ownership
interest.
8.9 Loans and Investments. Make any loan, advance, extension of credit
or capital contribution to, or make or have any Investment in, any Person, or
make any commitment to make any such extension of credit or Investment, except
to the extent such loans, advances, extensions of credit, capital contributions
or Investments are not prohibited by applicable Legal Requirements.
8.10 Organizational Documents. Amend, modify, restate or supplement any
of its Organizational Documents if such action would reasonably be expected to
have a Material Adverse Effect, unless such action shall be consented to in
writing by the Majority Lenders, which consent shall not be unreasonably
withheld.
8.11 Unfunded Liabilities. Incur any Unfunded Liabilities after the
Effective Date or allow any Unfunded Liabilities in excess of $2,000,000, in the
aggregate, to arise or exist.
8.12 Acquisitions. Without the prior written consent of the Majority
Lenders, acquire any real Property or any material personal Property (including
any acquisition of equity interests in another Person other than an Obligor or,
subject to the provisions of Section 8.15 hereof, any other Subsidiary of
Borrower as of the Effective Date) after the Effective Date from any Person
other than an Obligor if the aggregate consideration for a single transaction
would exceed $100,000,000 or if the aggregate consideration for the applicable
transaction plus the aggregate consideration for all acquisitions of real
Property or material personal Property (including any acquisition of equity
interests in another Person other than an Obligor) previously consummated during
the applicable fiscal year (other than those from an Obligor or, subject to the
provisions of Section 8.15 hereof, any other Subsidiary of Borrower as of the
Effective Date) would exceed $150,000,000; provided, however, that
notwithstanding the foregoing, the aggregate consideration paid during any
fiscal year for the acquisition of all of the issued and outstanding equity
interests in and to other Persons shall not exceed 40% of Shareholders' Equity
as of the last day of the preceding fiscal year. Each such acquisition shall be
subject to the provisions of Section 8.7 hereof. Lenders acknowledge that they
have approved the acquisition of Centris substantially concurrently herewith
pursuant to terms and conditions heretofore disclosed to Lenders in writing.
8.13 Subordinated Indebtedness. Except as expressly permitted in
writing by the Majority Lenders, Borrower will not amend, modify or obtain or
grant a waiver of any provision of any document or instrument evidencing any
Subordinated Indebtedness or purchase, redeem, retire or otherwise acquire for
value, deposit any monies with any Person with respect to or make any payment or
prepayment of the principal of or any other amount owing in respect of, any
Subordinated Indebtedness (other than scheduled payments under payment terms
approved by Agent and the Majority Lenders in writing).
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8.14 Subsidiaries. Form, create or acquire any Subsidiary except that
Borrower or any of its Subsidiaries may form, create or acquire a wholly-owned
Subsidiary so long as (a) immediately thereafter and giving effect thereto, no
event will occur and be continuing which constitutes a Default (and Agent or the
Majority Lenders may request evidence that, after such formation, creation or
acquisition, Borrower shall continue to be in compliance with the provisions of
Section 8.15 hereof); (b) to the extent such Subsidiary constitutes an Agency
Subsidiary, such Subsidiary shall execute and deliver to the Agent a Guaranty,
in Proper Form and (c) to the extent such Subsidiary constitutes a Material
Subsidiary, the owner(s) of the equity interests in and to such Subsidiary shall
execute and deliver to the Agent such Security Documents, in Proper Form, as the
Agent may reasonably require to create a first and prior Lien upon such equity
interests securing the Obligations.
8.15 Property and Earnings of Material Subsidiaries. Borrower will not
permit the aggregate book value of the Property owned by the Material
Subsidiaries to at any time be less than ninety percent (90%) of the aggregate
consolidated book value of the Property owned by Borrower and its Subsidiaries
and Borrower will not permit the aggregate earnings of the Material Subsidiaries
for the twelve month period ending on the last day of any fiscal quarter to be
less than ninety percent (90%) of the aggregate consolidated earnings of
Borrower and its Subsidiaries for such period. Aggregate transfers of Property
from Material Subsidiaries which are organized under the laws of the United
States or a subdivision thereof to Material Subsidiaries which are not organized
under the laws of the United States or a subdivision thereof shall not exceed
$1,000,000 in any fiscal year.
9. Defaults.
9.1 Events of Default. If any one or more of the following events
(herein called "Events of Default") shall occur, then Agent may (with the
consent of the Majority Lenders) and shall (upon direction by the Majority
Lenders), do any or all of the following: (1) without notice to Borrower or any
other Person, declare the Commitments terminated (whereupon the Commitments
shall be terminated) and/or accelerate the Revolving Loan Termination Date to a
date as early as the date of termination of the Commitments; (2) declare the
principal amount then outstanding of and the unpaid accrued interest on the
Loans and all fees and all other amounts payable hereunder, under the Notes and
under the other Loan Documents to be forthwith due and payable, whereupon such
amounts shall be and become immediately due and payable, without notice
(including, without limitation, notice of acceleration and notice of intent to
accelerate), presentment, demand, protest or other formalities of any kind, all
of which are hereby expressly waived by Borrower; provided that in the case of
the occurrence of an Event of Default with respect to Borrower or any of its
Subsidiaries referred to in clause (f), (g) or (h) of this Section 9.1, the
Commitments shall be automatically terminated and the principal amount then
outstanding of and unpaid accrued interest on the Loans and all fees and all
other amounts payable hereunder, under the Notes and under the other Loan
Documents shall be and become automatically and immediately due and payable,
without notice (including, without limitation, notice of acceleration and notice
of intent to accelerate), presentment, demand, protest or other formalities of
any kind, all of which are hereby expressly waived by Borrower, and (3) exercise
any or all other rights and remedies available to Agent or any of the Lenders
under the Loan Documents, at law or in equity:
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(a) Payments - (i) any Obligor shall fail to make any payment
or required prepayment of any installment of principal on the Loans
payable under the Notes, this Agreement or the other Loan Documents
when due or (ii) any Obligor fails to make any payment or required
prepayment of interest with respect to the Loans or any other fee or
amount under the Notes, this Agreement or the other Loan Documents when
due and such failure to pay continues unremedied for a period of three
Business Days; or
(b) Other Obligations - Borrower or any of its Subsidiaries
shall default in the payment when due of any principal of or interest
on any Indebtedness having an outstanding principal amount of at least
$2,500,000 (other than the Loans) and such default shall continue
beyond any applicable period of grace; or any event or condition shall
occur which results in the acceleration of the maturity of any
Indebtedness having an outstanding principal amount of at least
$2,500,000 (other than the Loans) or enables (or, with the giving of
notice or lapse of time or both, would enable) the holder of any such
Indebtedness or any Person acting on such holder's behalf to accelerate
the maturity thereof and such event or condition shall not be cured
within any applicable period of grace; or
(c) Representations and Warranties - any representation or
warranty made or deemed made by or on behalf of any Obligor in this
Agreement or any other Loan Document or in any certificate furnished or
made by any Obligor to Agent or the Lenders in connection herewith or
therewith shall prove to have been incorrect, false or misleading in
any material respect as of the date thereof or as of the date as of
which the facts therein set forth were stated or certified or deemed
stated or certified; or
(d) Affirmative Covenants - (i) default shall be made in the
due observance or performance of any of the covenants or agreements
contained in Sections 7.3 or 7.8(c) hereof or (ii) default is made in
the due observance or performance of any of the other covenants and
agreements contained in Section 7 hereof or any other affirmative
covenant of any Obligor contained in this Agreement or any other Loan
Document and such default continues unremedied for a period of 30 days
after (x) notice thereof is given by Agent to Borrower or (y) such
default otherwise becomes known to any executive officer of Borrower,
whichever is earlier; or
(e) Negative Covenants - default is made in the due observance
or performance by Borrower of any of the covenants or agreements
contained in Section 8 of this Agreement or of any other negative
covenant of any Obligor contained in this Agreement or any other Loan
Document; or
(f) Involuntary Bankruptcy or Receivership Proceedings - a
receiver, conservator, liquidator or trustee of Borrower or any of its
Subsidiaries or of any of its Property is appointed by the order or
decree of any court or agency or supervisory authority having
jurisdiction, and such decree or order remains in effect for more than
90 days; or Borrower or any of its Subsidiaries is adjudicated bankrupt
or insolvent; or any of such Person's Property is sequestered by court
order and such order remains in effect for more than 90 days; or a
petition is filed against Borrower or any of its Subsidiaries under any
state
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or federal bankruptcy, reorganization, arrangement, insolvency,
readjustment or debt, dissolution, liquidation or receivership law or
any jurisdiction, whether now or hereafter in effect, and is not
dismissed within 90 days after such filing; or
(g) Voluntary Petitions or Consents - Borrower or any of its
Subsidiaries commences a voluntary case or other proceeding or order
seeking liquidation, reorganization, arrangement, insolvency,
readjustment of debt, dissolution, liquidation or other relief with
respect to itself or its debts or other liabilities under any
bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of
its Property, or consents to any such relief or to the appointment of
or taking possession by any such official in an involuntary case or
other proceeding commenced against it, or fails generally to, or
cannot, pay its debts generally as they become due (taking into account
applicable grace periods) or takes any corporate action to authorize or
effect any of the foregoing; or
(h) Assignments for Benefit of Creditors or Admissions of
Insolvency - Borrower or any of its Subsidiaries makes an assignment
for the benefit of its creditors, or admits in writing its inability to
pay its debts generally as they become due, or consents to the
appointment of a receiver, trustee, or liquidator of such Person or of
all or any substantial part of its Property; or
(i) Undischarged Judgments - a final non-appealable judgment
or judgments for the payment of money exceeding, in the aggregate,
$2,500,000 (exclusive of amounts covered by insurance and exclusive of
judgments in the ordinary course of the insurance business of such
Person) is rendered by any court or other governmental body against
Borrower or any of its Subsidiaries and such Person does not discharge
the same or provide for its discharge in accordance with its terms, or
procure a stay of execution thereof within 90 days from the date of
entry thereof; or
(j) Security Documents; Guaranties - any Security Document for
any reason ceases to create a valid and perfected Lien of the first
priority (subject to the Permitted Liens), required thereby on any of
the Collateral purported to be covered thereby and securing that
portion of the Obligations which is therein designated as being
secured, or any Agency Subsidiary shall cease to be subject to a duly
executed Guaranty or any Guaranty for any reason ceases to be the valid
and binding obligation of the applicable Obligor, or any Obligor (or
any other Person who may have granted or purported to grant such Lien
or execute such Guaranty) will so state in writing (provided, however,
that this clause (j) shall be subject to the release rights set forth
in the definition of "Agency Subsidiaries" in Section 1.1 hereof); or
(k) Concealment - Borrower or any of its Subsidiaries 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 shall have made any transfer of its
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Property to or for the benefit of a creditor at a time when other
creditors similarly situated have not been paid; or
(l) Ownership of Certain Subsidiaries - Borrower shall cease
to own, directly or through one or more wholly-owned Subsidiaries of
Borrower, all of the issued and outstanding equity interests in and to
each of the Material Subsidiaries of Borrower or Agent shall cease to
have a valid, perfected, first priority Lien upon all such equity
interests (other than HCC UK Acquisition, with respect to which Agent
shall have a valid, perfected, first priority Lien upon only 65% of
their issued and outstanding equity interests); or
(m) Best Ratings - any of the Insurance Company Subsidiaries
(other than the Centris Insurance Company Subsidiaries) shall fail to
maintain an A.M. Best rating of at least "A" or any of the Centris
Insurance Company Subsidiaries shall fail to maintain an A.M. Best
rating of at least "A-" (provided, however, that if the rating of any
Centris Insurance Company Subsidiary is raised, then such Centris
Insurance Company Subsidiary shall thereafter be required to maintain
an A.M. Best rating of at least "A"); or
(n) Change of Control - there should occur any Change of
Control.
9.2 Right of Setoff. 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, without notice to any Obligor (any such notice being expressly waived
by Borrower and the other Obligors), to setoff and apply any and all deposits
(general or special, time or demand, provisional or final (but excluding the
funds held in accounts clearly designated as escrow or trust accounts held by
Borrower or any other Obligor for the benefit of Persons which are not
Affiliates of any Obligor, whether or not such setoff results in any loss of
interest or other penalty, and including without limitation all certificates of
deposit) at any time held, and any other funds or Property at any time held, and
other Indebtedness at any time owing by such Lender to or for the credit or the
account of Borrower or any other Obligor against any and all of the Obligations
irrespective of whether or not such Lender or Agent will have made any demand
under this Agreement, the Notes or any other Loan Document. Should the right of
any Lender to realize funds in any manner set forth hereinabove be challenged
and any application of such funds be reversed, whether by court order or
otherwise, the Lenders shall make restitution or refund to Borrower pro rata in
accordance with their Commitments. Each Lender agrees to promptly notify
Borrower and Agent after any such setoff and application, provided that the
failure to give such notice will not affect the validity of such setoff and
application. The rights of Agent and the Lenders under this Section are in
addition to other rights and remedies (including without limitation other rights
of setoff) which Agent or the Lenders may have. This Section is subject to the
terms and provisions of Sections 4.5 and 11.7 hereof.
9.3 Remedies Cumulative. No remedy, right or power conferred upon Agent
or any Lender is intended to be exclusive of any other remedy, right or power
given hereunder or now or hereafter existing at law, in equity, or otherwise,
and all such remedies, rights and powers shall be cumulative.
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10. Agent.
10.1 Appointment, Powers and Immunities. Each Lender hereby irrevocably
appoints and authorizes Agent to act as its agent hereunder and under the other
Loan Documents with such powers as are specifically delegated to Agent by the
terms hereof and thereof, together with such other powers as are reasonably
incidental thereto. Any Loan Documents executed in favor of Agent shall be held
by Agent for the ratable benefit of the Lenders. Agent ("Agent" as used in this
Section 10 shall include reference to its Affiliates and its own and its
Affiliates' respective officers, shareholders, directors, employees and agents)
(a) shall not have any duties or responsibilities except those expressly set
forth in this Agreement and the other Loan Documents, and shall not by reason of
this Agreement or any other Loan Document be a trustee or fiduciary for any
Lender; (b) shall not be responsible to any Lender for any recitals, statements,
representations or warranties contained in this Agreement or any other Loan
Document, or in any certificate or other document referred to or provided for
in, or received by any of them under, this Agreement or any other Loan Document,
or for the value, validity, effectiveness, genuineness, enforceability,
execution, filing, registration, collectibility, recording, perfection,
existence or sufficiency of this Agreement or any other Loan Document or any
other document referred to or provided for herein or therein or any Property
covered thereby or for any failure by any Obligor or any other Person to perform
any of its obligations hereunder or thereunder, and shall not have any duty to
inquire into or pass upon any of the foregoing matters; (c) shall not be
required to initiate or conduct any litigation or collection proceedings
hereunder or under any other Loan Document except to the extent requested by the
Majority Lenders; (d) shall not be responsible for any mistake of law or fact or
any action taken or omitted to be taken by it hereunder or under any other Loan
Document or any other document or instrument referred to or provided for herein
or therein or in connection herewith or therewith, including, without
limitation, pursuant to its own negligence, except for its own gross negligence
or willful misconduct; (e) shall not be bound by or obliged to recognize any
agreement among or between Borrower and any Lender to which Agent is not a
party, regardless of whether Agent has knowledge of the existence of any such
agreement or the terms and provisions thereof; (f) shall not be charged with
notice or knowledge of any fact or information not herein set out or provided to
Agent in accordance with the terms of this Agreement or any other Loan Document;
(g) shall not be responsible for any delay, error, omission or default of any
mail, telegraph, cable or wireless agency or operator, and (h) shall not be
responsible for the acts or edicts of any Governmental Authority. Agent may
employ agents and attorneys-in-fact and shall not be responsible for the
negligence or misconduct of any such agents or attorneys-in-fact selected by it
with reasonable care. In any foreclosure proceeding concerning any Collateral,
each holder of an Obligation if bidding for its own account or for its own
account and the accounts of other Lenders is prohibited from including in the
amount of its bid an amount to be applied as a credit against the Obligations
held by it or the Obligations held by the other Lenders; instead, such holder
must bid in cash only. However, in any such foreclosure proceeding, Agent may
(but shall not be obligated to) submit a bid for all Lenders (including itself)
in the form of a credit against the Obligations, and Agent or its designee may
(but shall not be obligated to) accept title to such collateral for and on
behalf of all Lenders.
10.2 Reliance. Agent shall be entitled to rely upon any certification,
notice or other communication (including any thereof by telephone, telex,
telegram or cable) believed by it to be
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genuine and correct and to have been signed or sent by or on behalf of the
proper Person or Persons, and upon advice and statements of legal counsel (which
may be counsel for Borrower), independent accountants and other experts selected
by Agent. Agent shall not be required in any way to determine the identity or
authority of any Person delivering or executing the same. As to any matters not
expressly provided for by this Agreement or any other Loan Document, Agent shall
in all cases be fully protected in acting, or in refraining from acting,
hereunder and thereunder in accordance with instructions of the Majority
Lenders, and any action taken or failure to act pursuant thereto shall be
binding on all of the Lenders. Pursuant to instructions of the requisite
Lenders, Agent shall have the authority to execute releases of the Security
Documents on behalf of the Lenders without the joinder of any Lender. If any
order, writ, judgment or decree shall be made or entered by any court affecting
the rights, duties and obligations of Agent under this Agreement or any other
Loan Document, then and in any of such events Agent is authorized, in its sole
discretion, to rely upon and comply with such order, writ, judgment or decree
which it is advised by legal counsel of its own choosing is binding upon it
under the terms of this Agreement, the relevant Loan Document or otherwise; and
if Agent complies with any such order, writ, judgment or decree, then it shall
not be liable to any Lender or to any other Person by reason of such compliance
even though such order, writ, judgment or decree may be subsequently reversed,
modified, annulled, set aside or vacated.
10.3 Defaults. Agent shall not be deemed to have knowledge of the
occurrence of a Default (other than the non-payment of principal of or interest
on Loans) unless Agent has received notice from a Lender or Borrower specifying
such Default and stating that such notice is a "Notice of Default." In the event
that Agent receives such a Notice of Default, Agent shall give prompt notice
thereof to the Lenders (and shall give each Lender prompt notice of each such
non-payment). Agent shall (subject to Section 10.7 hereof) take such action with
respect to such Notice of Default as shall be directed by the Majority Lenders
and within its rights under the Loan Documents and at law or in equity, 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,
permitted hereby with respect to such Notice of Default as it shall deem
advisable in the best interests of the Lenders and within its rights under the
Loan Documents, at law or in equity.
10.4 Material Written Notices. In the event that Agent receives any
written notice of a material nature from the Borrower or any Obligor under the
Loan Documents, Agent shall promptly inform each of the Lenders thereof. Agent
shall promptly distribute the financial statements delivered to Agent pursuant
to Section 7.2 hereof and any notices delivered to Agent pursuant to Section 7.8
hereof.
10.5 Rights as a Lender. With respect to its Commitments and the Loans
made, Wells Fargo in its capacity as a Lender hereunder shall have the same
rights and powers hereunder as any other Lender and may exercise the same as
though it were not acting in its agency capacity, and the term "Lender" or
"Lenders" shall, unless the context otherwise indicates, include Agent in its
individual capacity. Agent may (without having to account therefor to any
Lender) accept deposits from, lend money to and generally engage in any kind of
banking, trust, letter of credit, agency or other business with Borrower (and
any of its Affiliates) as if it were not acting as Agent, and Agent may accept
fees and other consideration from Borrower (in addition to the fees heretofore
agreed
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to between Borrower and Agent) for services in connection with this Agreement or
otherwise without having to account for the same to the Lenders.
10.6 Indemnification. The Lenders agree to indemnify Agent (to the
extent not reimbursed under Section 11.3 or Section 11.4 hereof, but without
limiting the obligations of Borrower under said Sections 11.3 and 11.4), ratably
in accordance with the Lenders' respective Commitments, for any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind and nature whatsoever, REGARDLESS
OF WHETHER CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE OF ANY INDEMNIFIED
PARTIES, which may be imposed on, incurred by or asserted against Agent in any
way relating to or arising out of this Agreement or any other Loan Document or
any other documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby (including, without limitation, the
costs and expenses which Borrower is obligated to pay under Sections 11.3 and
11.4 hereof, interest, penalties, attorneys' fees and amounts paid in
settlement, but excluding, unless a Default has occurred and is continuing,
normal administrative costs and expenses incident to the performance of its
agency duties hereunder) or the enforcement of any of the terms hereof or
thereof or of any such other documents; provided that no Lender shall be liable
for any of the foregoing to the extent they arise from the gross negligence or
willful misconduct of the party to be indemnified. The obligations of the
Lenders under this Section 10.6 shall survive the termination of this Agreement
and the repayment of the Obligations.
10.7 Non-Reliance on Agent and Other Lenders. Each Lender agrees that
it has received current financial information with respect to Borrower and each
other Obligor that it has, independently and without reliance on Agent or any
other Lender and based on such documents and information as it has deemed
appropriate, made its own credit analysis of Borrower and each other Obligor and
decision to enter into this Agreement and that it will, independently and
without reliance upon Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
analysis and decisions in taking or not taking action under this Agreement or
any of the other Loan Documents. Agent shall not be required to keep itself
informed as to the performance or observance by any Obligor of this Agreement or
any of the other Loan Documents or any other document referred to or provided
for herein or therein or to inspect the properties or books of any Obligor.
Except for notices, reports and other documents and information expressly
required to be furnished to the Lenders by Agent hereunder or under the other
Loan Documents, Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the affairs, financial
condition or business of any Obligor (or any of their affiliates) which may come
into the possession of Agent.
10.8 Failure to Act. Except for action expressly required of Agent
hereunder or under the other Loan Documents, Agent shall in all cases be fully
justified in failing or refusing to act hereunder and thereunder unless it shall
receive further assurances to its satisfaction by the Lenders of their
indemnification obligations under Section 10.6 hereof against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action.
10.9 Resignation or Removal of Agent. Subject to the appointment and
acceptance of a successor Agent as provided below, Agent may resign at any time
by giving notice thereof to the
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Lenders and Borrower, and Agent may be removed at any time with or without cause
by the Majority Lenders; provided, that Agent shall continue as Agent until such
time as any successor shall have accepted appointment as Agent hereunder. Upon
any such resignation or removal, (i) the Majority Lenders without the consent of
Borrower shall have the right to appoint a successor Agent so long as such
successor Agent is also a Lender at the time of such appointment and (ii) the
Majority Lenders shall have the right to appoint a successor Agent that is not a
Lender at the time of such appointment so long as Borrower consents to such
appointment (which consent shall not be unreasonably withheld). If no successor
Agent shall have been so appointed by the Majority Lenders and accepted such
appointment within 30 days after the retiring Agent's giving of notice of
resignation or the Majority Lenders' removal of the retiring Agent, then the
retiring Agent may, on behalf of the Lenders, appoint a successor Agent. Any
successor Agent shall be a bank which has an office in the United States and a
combined capital and surplus of at least $250,000,000. 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 hereunder and under any other Loan
Documents. Such successor Agent shall promptly specify by notice to Borrower its
Principal Office referred to in Section 3.1 and Section 4 hereof. After any
retiring Agent's resignation or removal hereunder as Agent, the provisions of
this Section 10 shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as Agent.
10.10 No Partnership. Neither the execution and delivery of this
Agreement nor any of the other Loan Documents nor any interest the Lenders,
Agent or any of them may now or hereafter have in all or any part of the
Obligations shall create or be construed as creating a partnership, joint
venture or other joint enterprise between the Lenders or among the Lenders and
Agent. The relationship between the Lenders, on the one hand, and Agent, on the
other, is and shall be that of principals and agent only, and nothing in this
Agreement or any of the other Loan Documents shall be construed to constitute
Agent as trustee or other fiduciary for any Lender or to impose on Agent any
duty, responsibility or obligation other than those expressly provided for
herein and therein.
10.11 No Waiver. None of the provisions of this Section 10 shall be
construed as limiting or otherwise waiving any rights or remedies which Borrower
or any other Obligor may have against Agent or any Lender.
10.12 Other Agents. First Union National Bank, Bank of America, N.A.,
The Bank of New York, Bank One, NA and Dresdner Bank AG, New York and Grand
Cayman Branches, in their capacities as Syndications Agent, Documentation Agent,
Senior Managing Agent or Co-Agent, as the case may be, shall have no rights,
powers, duties, obligations or liabilities under this Agreement or any of the
other Loan Documents, but to the extent that for any reason any Person makes a
claim against First Union National Bank, Bank of America, N.A., The Bank of New
York, Bank One, NA or Dresdner Bank AG, New York and Grand Cayman Branches, in
their capacities as Syndications Agent, Documentation Agent, Senior Managing
Agent or Co-Agent, as the case may be, and not as a Lender, the indemnification
provisions in Section 10.6 shall apply.
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11. Miscellaneous.
11.1 Waiver. No waiver of any Default or Event of Default shall be a
waiver of any other Default or Event of Default. No failure on the part of
Agent, any Lender or Borrower or any other Obligor to exercise and no delay in
exercising, and no course of dealing with respect to, any right, power or
privilege under any Loan Document shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, power or privilege thereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The remedies provided in the Loan Documents are
cumulative and not exclusive of any remedies provided by law or in equity.
11.2 Notices. All notices and other communications provided for herein
(including, without limitation, any modifications of, or waivers or consents
under, this Agreement) shall be given or made by telex, telegraph, telecopy
(confirmed by mail), cable or other writing and telexed, telecopied,
telegraphed, cabled, mailed or delivered to the intended recipient at the
"Address for Notices" specified below its name on the signature pages hereof (or
provided for in an Assignment and Acceptance); or, as to any party hereto, at
such other address as shall be designated by such party in a notice (given in
accordance with this Section) (i) as to Borrower, to Agent, (ii) as to Agent, to
Borrower and to each Lender, and (iii) as to any Lender, to Borrower and Agent.
Except as otherwise provided in this Agreement, all such notices or
communications shall be deemed to have been duly given when (i) transmitted by
telex or telecopier or delivered to the telegraph or cable office, (ii)
personally delivered (iii) one Business Day after deposit with an overnight mail
or delivery service, postage prepaid or (iv) three Business Days' after deposit
in a receptacle maintained by the United States Postal Service, postage prepaid,
registered or certified mail, return receipt requested, in each case given or
addressed as aforesaid.
11.3 Expenses, Etc. Whether or not any Loan is ever made, Borrower
shall pay or reimburse within 10 days after written demand (a) Agent for paying
the reasonable fees and expenses of outside legal counsel to Agent in connection
with the preparation, negotiation, execution and delivery of this Agreement
(including the exhibits and schedules hereto), the other Loan Documents and the
making of the Loans hereunder, and any modification, supplement or waiver of any
of the terms of this Agreement or any other Loan Document; (b) Agent for any
lien search fees; (c) Agent for reasonable out-of-pocket expenses incurred by
Agent in connection with the preparation, documentation, administration and
syndication of the Loans or any of the Loan Documents (including, without
limitation, the marketing, printing, duplicating, mailing and similar expenses)
of the Loans; (d) Agent for paying all transfer, stamp, documentary or other
similar taxes, assessments or charges levied by any governmental or revenue
authority in respect of this Agreement or any other Loan Document or any other
document referred to herein or therein; (e) Agent for paying all costs,
expenses, taxes, assessments and other charges incurred in connection with any
filing, registration, recording or perfection of any security interest
contemplated by this Agreement or any document referred to herein and (f)
following the occurrence and during the continuation of an Event of Default, any
Lender or Agent for paying all amounts (including reasonable attorneys' fees)
reasonably expended, advanced or incurred by such Lender or Agent to satisfy any
obligation of any Obligor under this Agreement or any other Loan Document, to
protect Collateral, to collect the Obligations or to enforce, protect, preserve
or defend the rights of the Lenders or Agent under this Agreement or any other
Loan Document, including, without limitation,
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reasonable fees and expenses incurred in connection with such Lender's or
Agent's participation as a member of a creditor's committee in a case commenced
under the Bankruptcy Code or other similar law, fees and expenses incurred in
connection with lifting the automatic stay prescribed in ss. 362 of the
Bankruptcy Code and reasonable fees and expenses incurred in connection with any
action pursuant to ss. 1129 of the Bankruptcy Code and all other customary and
reasonable out-of-pocket expenses incurred by such Lender or Agent in connection
with such matters, together with interest thereon at the Base Rate on each such
amount until the earlier of payment or ten (10) days after written demand
therefor, and if such amount has not been paid within ten (10) days after
written demand therefor, at the Past Due Rate until the date of reimbursement to
such Lender or Agent.
11.4 Indemnification. Borrower shall indemnify each of Agent, the
Lenders, and each Affiliate thereof and their respective directors, officers,
employees and agents from, and hold each of them harmless against, any and all
losses, liabilities, claims or damages to which any of them may become subject,
REGARDLESS OF WHETHER CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE OF ANY
INDEMNIFIED PARTIES, insofar as such losses, liabilities, claims or damages
arise out of or result from any (i) actual or proposed use by Borrower of the
proceeds of any extension of credit by any Lender hereunder; (ii) breach by any
Obligor of this Agreement or any other Loan Document; (iii) violation by any
Obligor of any Legal Requirement; (iv) investigation, litigation or other
proceeding relating to any of the foregoing, and Borrower shall reimburse Agent,
each Lender, and each Affiliate thereof and their respective directors,
officers, employees and agents, within five (5) days after demand for any
reasonable expenses (including reasonable legal fees) incurred in connection
with any such investigation or proceeding, or (v) taxes (excluding income taxes,
franchise taxes or any similar taxes) payable or ruled payable by any
Governmental Authority in respect of the Obligations or any Loan Document,
together with interest and penalties, if any; provided that Borrower shall not
be required to indemnify any party seeking indemnification for any claims,
damages, losses, liabilities, costs or expenses to the extent, but only to the
extent, caused by (i) the willful misconduct or gross negligence of the party
seeking indemnification or (ii) disputes between or among any and all of Agent
and Lenders. Nothing in this Section is intended to limit the obligations of
Borrower under any other provision of this Agreement.
11.5 Amendments, Etc. No amendment or modification of this Agreement,
the Notes or any other Loan Document shall in any event be effective against
Borrower unless the same shall be agreed or consented to in writing by Borrower.
No amendment, modification or waiver of any provision of this Agreement, the
Notes or any other Loan Document, nor any consent to any departure by Borrower
therefrom, shall in any event be effective against the Lenders unless the same
shall be agreed or consented to in writing by the Majority Lenders, and each
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given; provided, that no amendment, modification,
waiver or consent shall, unless in writing and signed by each Lender affected
thereby, do any of the following: (a) increase any Commitment of any of the
Lenders (or reinstate any termination or reduction of the Commitments) or
subject any of the Lenders to any additional obligations; (b) reduce the
principal of, or interest on, any Loan or fee hereunder; (c) postpone or extend
the Revolving Loan Maturity Date, the Revolving Loan Termination Date, the
Revolving Loan Availability Period or any scheduled date fixed for any payment
of principal of, or interest on, any Loan, fee or other sum to be paid hereunder
or waive any
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Event of Default described in Section 9.1(a) hereof; (d) change the percentage
of any of the Commitments or of the aggregate unpaid principal amount of any of
the Loans, or the percentage of Lenders, which shall be required for the Lenders
or any of them to take any action under this Agreement (including, without
limitation, the definition of "Majority Lenders"); (e) change any provision
contained in Sections 3.4, 11.3 or 11.4 hereof or this Section 11.5; (f) release
any Person from liability under a Guaranty or release substantially all of the
security for the Obligations or release Collateral in any one (1) calendar year
ascribed an aggregate value on the most recent financial statements of Borrower
delivered to Agent in excess of $1,000,000 (provided, however, that the
foregoing shall not apply to releases which Agent is obligated to provide
pursuant to this Agreement (including releases required under the definition of
"Agency Subsidiaries" set forth in Section 1.1 hereof) or any of the other Loan
Documents or by law), or (g) modify the provisions of Sections 4.1(b) or 4.2
hereof regarding pro rata application of amounts after an Event of Default shall
have occurred and be continuing. Notwithstanding anything in this Section 11.5
to the contrary, no amendment, modification, waiver or consent shall be made
with respect to Section 10 without the consent of Agent to the extent it affects
Agent, as Agent.
11.6 Successors and Assigns.
(a) This Agreement shall be binding upon and inure to the benefit of
Borrower, Agent and the Lenders and their respective successors and assigns;
provided, however, that Borrower may not assign or transfer any of its rights or
obligations hereunder without the prior written consent of all of the Lenders,
and any such assignment or transfer without such consent shall be null and void.
Each Lender may sell participations to any Person in all or part of any Loan, or
all or part of its Notes or Commitments, in which event, without limiting the
foregoing, the provisions of the Loan Documents shall inure to the benefit of
each purchaser of a participation; provided, however, the pro rata treatment of
payments, as described in Section 4.2 hereof, shall be determined as if such
Lender had not sold such participation. Any Lender that sells one or more
participations to any Person shall not be relieved by virtue of such
participation from any of its obligations to Borrower under this Agreement
relating to the Loans. In the event any Lender shall sell any participation,
such Lender shall retain the sole right and responsibility to enforce the
obligations of Borrower relating to the Loans, including, without limitation,
the right to approve any amendment, modification or waiver of any provision of
this Agreement other than amendments, modifications or waivers with respect to
(i) any fees payable hereunder to the Lenders, (ii) the amount of principal or
the rate of interest payable on, or the dates fixed for the scheduled repayment
of principal of, the Loans and (iii) the release of the Liens on all or
substantially all of the Collateral.
(b) Each Lender may assign to one or more Lenders or any other Person
all or a portion of its interests, rights and obligations under this Agreement;
provided, however, that (i) the aggregate amount of the Commitments of the
assigning Lender subject to each such assignment shall in no event be less than
$5,000,000; (ii) other than in the case of an assignment to another Lender (that
is, at the time of the assignment, a party hereto) or to an Affiliate of such
Lender or to a Federal Reserve Bank, Agent and, so long as no Event of Default
shall have occurred and be continuing, Borrower must each give its prior written
consent, which consents shall not be unreasonably withheld, and (iii) the
parties to each such assignment shall execute and deliver to Agent, for its
acceptance an Assignment and Acceptance in the form of Exhibit D hereto (each an
"Assignment
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and Acceptance") with blanks appropriately completed, together with any Note or
Notes subject to such assignment and a processing and recording fee of $3,000
paid by the assignee (for which Borrower will have no liability). Upon such
execution, delivery and acceptance, from and after the effective date specified
in each Assignment and Acceptance, (A) the assignee thereunder shall be a party
hereto and, to the extent provided in such Assignment and Acceptance, have the
rights and obligations of a Lender hereunder and (B) the Lender thereunder
shall, to the extent provided in such Assignment and Acceptance, be released
from its obligations under this 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 except in respect of provisions of this Agreement which survive payment
of the Obligations and termination of the Commitments). Notwithstanding anything
contained in this Agreement to the contrary, any Lender may at any time assign
all or any portion of its rights under this Agreement and the Notes issued to it
as collateral to a Federal Reserve Bank; provided that no such assignment shall
release such Lender from any of its obligations hereunder.
(c) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than the
representation and warranty that it is the legal and beneficial owner of the
interest being assigned thereby free and clear of any adverse claim, such Lender
assignor makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with this Agreement or any of the other Loan Documents or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of this Agreement or any of the other Loan Documents or any other instrument or
document furnished pursuant thereto; (ii) such Lender assignor makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of Borrower or the performance or observance by Borrower of
any of its obligations under this Agreement or any of the other Loan Documents
or any other instrument or document furnished pursuant hereto; (iii) such
assignee confirms that it has received a copy of this Agreement, together with
copies of the financial statements referred to in Section 6.2 hereof and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and Acceptance; (iv)
such assignee will, independently and without reliance upon Agent, such Lender
assignor 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 and the other Loan Documents;
(v) such assignee appoints and authorizes Agent to take such action as agent 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, together with such
powers as are reasonably incidental thereto; and (vi) such assignee agrees that
it will perform in accordance with their terms all obligations that by the terms
of this Agreement and the other Loan Documents are required to be performed by
it as a Lender.
(d) The entries in the records of Agent as to each Assignment and
Acceptance delivered to it and the names and addresses of the Lenders and the
Commitments of, and principal amount of the Loans owing to, each Lender from
time to time shall create a rebuttable presumption as to the accuracy thereof
and Borrower, Agent and the Lenders may treat each Person the name of which is
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recorded in the books and records of Agent as a Lender hereunder for all
purposes of this Agreement and the other Loan Documents.
(e) Upon Agent's receipt of an Assignment and Acceptance executed by an
assigning Lender and the assignee thereunder, together with any Note or Notes
subject to such assignment and the written consent to such assignment (to the
extent consent is required), Agent shall, if such Assignment and Acceptance has
been completed with blanks appropriately filled, (i) accept such Assignment and
Acceptance, (ii) record the information contained therein in its records and
(iii) give prompt notice thereof to Borrower. Within fifteen (15) Business Days
after receipt of notice (and provided that Borrower has consented to the
applicable assignment to the extent Borrower's consent is required with respect
thereto), Borrower, at its own expense (but without incurring any expense or
cost incurred by Agent or any Lender), shall execute and deliver to Agent in
exchange for the surrendered Notes new Notes to the order of such assignee in an
amount equal to the respective Commitments assumed by it pursuant to such
Assignment and Acceptance and, if the assigning Lender has retained Commitments
hereunder, new Notes to the order of the assigning Lender in an amount equal to
the respective Commitments retained by it hereunder. Such new Notes shall be in
an aggregate principal amount equal to the aggregate principal amount of such
surrendered Notes, shall be dated the effective date of such Assignment and
Acceptance and shall otherwise be in substantially the form of the respective
Note. Thereafter, such surrendered Notes shall be marked renewed and substituted
and the originals thereof delivered to Borrower (with copies, certified by
Borrower as true, correct and complete, to be retained by Agent).
(f) Any Lender may, in connection with any assignment or participation
or proposed assignment or participation pursuant to this Section 11.6, disclose
to the assignee or participant or proposed assignee or participant, any
information relating to Borrower furnished to such Lender by or on behalf of
Borrower.
11.7 Limitation of Interest. Borrower and the Lenders intend to
strictly comply with all applicable federal and Texas laws, including applicable
usury laws (or the usury laws of any jurisdiction whose usury laws are deemed to
apply to the Notes or any other Loan Documents despite the intention and desire
of the parties to apply the usury laws of the State of Texas). Accordingly, the
provisions of this Section 11.7 shall govern and control over every other
provision of this Agreement or any other Loan Document which conflicts or is
inconsistent with this Section, even if such provision declares that it
controls. As used in this Section, the term "interest" includes the aggregate of
all charges, fees, benefits or other compensation which constitute interest
under applicable law, provided that, to the maximum extent permitted by
applicable law, (a) any non-principal payment shall be characterized as an
expense or as compensation for something other than the use, forbearance or
detention of money and not as interest, and (b) all interest at any time
contracted for, reserved, charged or received shall be amortized, prorated,
allocated and spread throughout the full term of the Obligations so that such
interest does not exceed the Ceiling Rate. In no event shall Borrower or any
other Person be obligated to pay, or any Lender have any right or privilege to
reserve, receive or retain, (a) any interest in excess of the maximum amount of
nonusurious interest permitted under the laws of the State of Texas or the
applicable laws (if any) of the United States or of any other jurisdiction, or
(b) total interest in excess of the amount which such Lender could lawfully have
contracted for, reserved, received, retained or charged had the
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interest been calculated for the full term of the Obligations at the Ceiling
Rate. The daily interest rates to be used in calculating interest at the Ceiling
Rate shall be determined by dividing the applicable Ceiling Rate per annum by
the number of days in the calendar year for which such calculation is being
made. None of the terms and provisions contained in this Agreement or in any
other Loan Document (including, without limitation, Section 9.1 hereof) which
directly or indirectly relate to interest shall ever be construed without
reference to this Section 11.7, or be construed to create a contract to pay for
the use, forbearance or detention of money at an interest rate in excess of the
Ceiling Rate. If the term of any Obligation is shortened by reason of
acceleration of maturity as a result of any Default or by any other cause, or by
reason of any required or permitted prepayment, and if for that (or any other)
reason any Lender at any time, including but not limited to, the stated
maturity, is owed or receives (and/or has received) interest in excess of
interest calculated at the Ceiling Rate, then and in any such event all of any
such excess interest shall be canceled automatically as of the date of such
acceleration, prepayment or other event which produces the excess, and, if such
excess interest has been paid to such Lender, it shall be credited pro tanto
against the then-outstanding principal balance of Borrower's obligations to such
Lender, effective as of the date or dates when the event occurs which causes it
to be excess interest, until such excess is exhausted or all of such principal
has been fully paid and satisfied, whichever occurs first, and any remaining
balance of such excess shall be promptly refunded to its payor.
11.8 Survival. The obligations of Borrower under Sections 3.3, 3.4,
11.3 and 11.4 hereof and all other obligations of Borrower in any other Loan
Document (to the extent stated therein as surviving) and the obligations of the
Lenders under Section 10.5 and 11.7 hereof, shall, notwithstanding anything
herein to the contrary, survive the repayment of the Loans and the termination
of the Commitments.
11.9 Captions. Captions and section headings appearing herein are
included solely for convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.
11.10 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
agreement and any of the parties hereto may execute this Agreement by signing
any such counterpart.
11.11 Governing Law. THIS AGREEMENT AND (EXCEPT AS THEREIN PROVIDED)
THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE APPLICABLE LAWS OF THE STATE OF TEXAS (WITHOUT GIVING EFFECT TO THE TEXAS
CONFLICT OF LAWS RULES) AND THE UNITED STATES OF AMERICA FROM TIME TO TIME IN
EFFECT.
11.12 Severability. Whenever possible, each provision of the Loan
Documents shall be interpreted in such manner as to be effective and valid under
applicable law. If any provision of any Loan Document shall be invalid, illegal
or unenforceable in any respect under any applicable law, the validity, legality
and enforceability of the remaining provisions of such Loan Document shall not
be affected or impaired thereby.
56
<PAGE> 61
11.13 Tax Forms. Each Lender which is organized under the laws of a
jurisdiction outside the United States shall, on the day of the initial
borrowing from each such Lender hereunder and from time to time thereafter if
requested by Borrower or Agent, provide Agent and Borrower with the forms
prescribed by the Internal Revenue Service of the United States certifying as to
such Lender's status for purposes of determining exemption from United States
withholding taxes with respect to all payments to be made to such Lender
hereunder or other documents satisfactory to such Lender, Borrower and Agent
indicating that all payments to be made to such Lender hereunder are not subject
to United States withholding tax or are subject to such tax at a rate reduced by
an applicable tax treaty. Unless Borrower and Agent shall have received such
forms or such documents indicating that payments hereunder are not subject to
United States withholding tax or are subject to such tax at a rate reduced by an
applicable tax treaty, Borrower or Agent shall withhold taxes from such payments
at the applicable statutory rate.
11.14 Venue. The Borrower hereby irrevocably (a) agrees that any legal
proceeding against the Agent or any Lender arising out of or in connection with
the Loan Documents shall be brought in the district courts of Harris County,
Texas, or in the United States District Court for the Southern District of
Texas, Houston Division (collectively, the "Houston Courts"); (b) submits to the
non-exclusive jurisdiction of the Houston Courts; (c) agrees and consents that
service of process may be made upon it in any proceeding arising out of the Loan
Documents or any transaction contemplated thereby by service of process as
provided by Texas law; (d) WAIVES, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of any Loan Document or the transactions
contemplated thereby in the Houston Courts; and (e) WAIVES any claim that any
such suit, action or proceeding in any Houston Court has been brought in an
inconvenient forum. All of the obligations of the Borrower under the Loan
Documents are performable in Harris County, Texas. Nothing herein shall affect
the right of the Agent or any Lender to commence legal proceedings or otherwise
proceed against the Borrower in any jurisdiction or to serve process in any
manner permitted by applicable law. The Borrower agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions in any manner provided by law.
11.15 Jury Waiver. BORROWER, AGENT AND LENDERS EACH WAIVE ANY RIGHT TO
HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT,
TORT OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO
THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS. INSTEAD, ANY DISPUTES RESOLVED IN COURT WILL BE
RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
11.16 Conflicts Between This Agreement and the Other Loan Documents. In
the event of any conflict between the terms of this Agreement and the terms of
any of the other Loan Documents, the terms of this Agreement shall control.
11.17 Disclosure to Other Persons; Confidentiality. Agent and each
Lender agree that it may deliver copies of any financial statements and other
documents or information delivered to it
57
<PAGE> 62
and disclose any other information disclosed to it by or on behalf of Borrower
or any Subsidiary of Borrower in connection with or pursuant to this Agreement
and the other Loan Documents only to:
(i) its and its affiliates' directors, officers, employees,
auditors, attorneys and professional consultants;
(ii) any other Lender;
(iii) any Person to which such Lender offers to sell its Note
or any part thereof, provided that each such Person agrees in writing
to observe the confidentiality standards described in this Section;
(iv) any Person to which such Lender sells or offers to sell a
participation in all or any part of its Note, provided that each such
Person agrees in writing to observe the confidentiality standards
described in this Section;
(v) any federal or state regulatory authority having
jurisdiction over it;
(vi) any other Person to which such delivery or disclosure may
be legally required in response to any subpoena or other legal process
or investigative demand (in which event the Agent or the applicable
Lender, as the case may be, shall, unless prohibited by applicable law,
notify Borrower as soon as practicable), and
(vii) any other Person in connection with any litigation
involving any obligation, right or remedy of Agent or any Lender under
the Loan Documents.
Subject to the foregoing, Agent and each Lender hereby agrees to use its best
efforts to hold in confidence and not to disclose any Confidential Information;
provided, that such Person will be free, after notice to Borrower, to correct
any false or misleading information which may become public concerning its
relationship to Borrower. For the purpose of this Section, the term
"Confidential Information" shall mean information about Borrower or any
Subsidiary of Borrower furnished by Borrower or any such Subsidiary, but does
not include any information which (i) is publicly known, or otherwise known to
such holder, at the time of disclosure; (ii) subsequently becomes publicly
known, but not through any act or omission by such holder, or (iii) otherwise
becomes known to such holder other than through disclosure by Borrower or any
Subsidiary of Borrower from any Person which is not known to be subject to a
confidentiality agreement with Borrower or the applicable Subsidiary of
Borrower.
11.18 Amendment and Restatement; Renewal Notes. This Agreement amends
and restates in its entirety, effective as of the initial funding hereunder,
that certain Loan Agreement (the "Prior Loan Agreement") dated as of March 8,
1999 executed by and among Borrower, Wells Fargo Bank (Texas), National
Association, as Agent, and certain financial institutions therein set forth. The
Notes have been given in renewal, extension and modification of the revolving
credit facility previously provided to Borrower pursuant to such Loan Agreement.
Each Lender which is also a
58
<PAGE> 63
party to the Prior Loan Agreement hereby waives any default arising thereunder
by reason of the execution and delivery of this Agreement and the Acquisition
Bridge Facility.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the Effective Date.
HCC INSURANCE HOLDINGS, INC.,
a Delaware corporation
By:
----------------------------------
Frank J. Bramanti,
Executive Vice President
Address for Notices:
13403 Northwest Freeway
Houston, Texas 77040
Attention: President
Telecopy No.: (713) 462-2401
59
<PAGE> 64
WELLS FARGO BANK (TEXAS), NATIONAL
ASSOCIATION, as Administrative Agent and Lead
Arranger and as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Address for Notices:
Wells Fargo Bank, N.A.
Commercial Bank Loan Center
Agency Dept., 2840
201 3rd Street, 8th Floor
San Francisco, California 94103
Attention: Manager
Telecopy No.: (415) 512-9408
with a copy to:
1000 Louisiana, 3rd Floor
Houston, Texas 77002
Attention: Jonathan C. Homeyer
Telecopy No.: (713) 739-1082
60
<PAGE> 65
FIRST UNION NATIONAL BANK,
as Syndications Agent and as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Address for Notices:
301 South College Street
Charlotte, NC 28288-0735
Attention: Tommy Hunter
Telecopy No.: (704) 383-7611
61
<PAGE> 66
BANK OF AMERICA, N.A.,
as Documentation Agent and as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Address for Notices:
901 Main Street - 66th Floor
M.C. TX1-492-66-01
Dallas, TX 75202
Attention: Doug Scotti
Telecopy No.: (214) 209-3742
62
<PAGE> 67
THE BANK OF NEW YORK,
as Senior Managing Agent and as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Address for Notices:
1 Wall Street, 17th Floor
New York, NY 10286
Attention: Benjamin Balkind
Telecopy No.: (212) 809-9520
63
<PAGE> 68
BANK ONE, NA,
as Co-Agent and as a Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Address for Notices:
Bank One Plaza
IL1-0085
Chicago, Ill 60670
Attention: Thomas W. Doddridge
Telecopy No.: (312) 732-4033
64
<PAGE> 69
DRESDNER BANK AG, NEW YORK AND GRAND
CAYMAN BRANCHES, as Co-Agent and as a
Lender
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Address for Notices:
75 Wall Street
New York, New York 10005
Attention: George Ferguson
Telecopy No.: (212) 429-2524
65
<PAGE> 70
CREDIT LYONNAIS NEW YORK BRANCH
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Address for Notices:
1301 Avenue of the Americas
12th Floor
New York, NY 10019
Attention: James Tse
Telecopy No.: (212) 261-3438
66
<PAGE> 71
GUARANTY FEDERAL
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Address for Notices:
333 Clay St., Suite 4430
Houston, TX 77002
Attention: Richard Menchaca
Telecopy No.: (713) 759-0765
67
<PAGE> 72
The undersigned hereby join in this Agreement to evidence consent to
execution by Borrower of this Agreement, to confirm that each Loan Document
(including without limitation Guaranties and Security Agreements) now or
previously executed by the undersigned applies and shall continue to apply to
this Agreement, and to acknowledge that without such consent and confirmation,
neither Agent nor any Lender would execute this Agreement.
AVEMCO CORPORATION, a Delaware corporation,
NORTH AMERICAN SPECIAL RISK ASSOCIATES, INC.,
an Illinois corporation, LDG REINSURANCE
CORPORATION (successor in interest to LDG
Management Company Incorporated), a
Massachusetts corporation, HCC EMPLOYER
SERVICES, INC., an Alabama corporation, HCC
EMPLOYEE BENEFITS, INC., a Delaware
corporation, HCC AVIATION INSURANCE GROUP,
INC., a Texas corporation, HCC BENEFITS
CORPORATION, a Delaware corporation, HCC
INTERMEDIARIES, INC., a Texas corporation,
HCC INTERMEDIATE HOLDINGS, INC., a Delaware
corporation, HOUSTON CASUALTY COMPANY, a
Texas corporation
By:
-----------------------------------------
Frank J. Bramanti,
Executive Vice President
68
<PAGE> 73
SCHEDULE I
COMMITMENTS
<TABLE>
<S> <C>
Wells Fargo Bank (Texas), National Association................................$55,000,000
First Union National Bank.....................................................$45,000,000
Bank of America, N.A..........................................................$45,000,000
The Bank of New York..........................................................$45,000,000
Bank One, NA..................................................................$30,000,000
Dresdner Bank AG, New York and Grand Cayman Branches..........................$30,000,000
Guaranty Federal..............................................................$25,000,000
Credit Lyonnais New York Branch...............................................$25,000,000
</TABLE>
<PAGE> 1
EXHIBIT 10.2
NOTE
$80,000,000 December 17, 1999
FOR VALUE RECEIVED, HCC INSURANCE HOLDINGS, INC. ("Maker"), a Delaware
corporation, promises to pay to the order of WELLS FARGO BANK, NATIONAL
ASSOCIATION ("Payee"), a national banking association, at its principal office
at 201 Third Street, MAC 0187-081 San Francisco, CA 94103, or at such other
address as Payee may specify in written notice give to Maker in accordance with
the applicable provisions hereof, in immediately available funds and in lawful
money of the United States of America, the principal sum of Eighty Million
Dollars ($80,000,000) (or the unpaid balance of all principal advanced against
this note, if that amount is less), together with interest as follows: (a)
interest on the unpaid principal balance of this note from time to time
outstanding at the Stated Rate and interest on all past due amounts, both
principal and accrued interest, from the respective due dates thereof until paid
at the Past Due Rate and (b) the Additional Interest; provided, that for the
full term of this note the interest rate produced by the aggregate of all sums
paid or agreed to be paid to the holder of this note for the use, forbearance or
detention of the debt evidenced hereby (including, but not limited to, all
interest on this note at the Stated Rate plus the Additional Interest) shall not
exceed the Ceiling Rate.
1. Definitions. As used in this note, the following terms shall have
the respective meanings indicated:
(a) "Additional Interest" means the aggregate of all amounts accrued or
paid pursuant to this note or any of the other Loan Documents (other than
interest on this note at the Stated Rate) which, under applicable laws, are or
may be deemed to constitute interest on the indebtedness evidenced by this note.
(b) "Base Rate" means for any day a rate per annum equal to the lesser
of (a) the greater of (1) the Prime Rate for that day or (2) the Federal Funds
Rate for that day plus 1/2 of 1% or (b) the Ceiling Rate. If for any reason
Payee shall have determined (which determination shall create a rebuttable
presumption as to the accuracy thereof) that it is unable to ascertain the
Federal Funds Rate for any reason, including, without limitation, the inability
or failure of Payee to obtain sufficient quotations in accordance with the terms
hereof (and in such event, Payee shall furnish written evidence to Maker showing
how Payee made such determination), the Base Rate shall, until the circumstances
giving rise to such inability no longer exist, be the lesser of (a) the Prime
Rate or (b) the Ceiling Rate.
(c) "Business Day" means any day other than a day on which commercial
banks are authorized or required to close in New York City, New York, Houston,
Texas or San Francisco, California.
(d) "Ceiling Rate" means, on any day, the maximum nonusurious rate of
interest permitted for that day by whichever of applicable federal or Texas (or
any jurisdiction whose usury laws are deemed to apply to this note or any other
Loan Documents despite the intention and desire of the parties to apply the
usury laws of the State of Texas) laws permits the higher interest rate,
<PAGE> 2
stated as a rate per annum. On each day, if any, that Chapter 1D establishes the
Ceiling Rate, the Ceiling Rate shall be the "weekly ceiling" (as defined in
ss.303 of the Texas Finance Code) for that day. Payee may from time to time, as
to current and future balances, implement any other ceiling under the Texas
Finance Code or Chapter 1D by notice to Maker, if and to the extent permitted by
the Texas Finance Code or Chapter 1D. Without notice to Maker or any other
person or entity, the Ceiling Rate shall automatically fluctuate upward and
downward as and in the amount by which such maximum nonusurious rate of interest
permitted by applicable law fluctuates.
(e) "Chapter 1D" means Chapter 1D of Title 79, Texas Rev. Civ. Stats.
1925, as amended.
(f) "Event of Default" means the occurrence of any of the following
events:
(i) an Event of Default (as defined in the Loan Agreement); or
(ii) failure of Maker to make any payment of any installment of
principal on this note when due; or
(iii) failure of Maker to make (x) any payment of interest with
respect to this note when due or (y) any payment of or with
respect to any fee, expense or any other amount under this
note or the other Loan Documents when due and such failure
to pay under this clause (iii) continues unremedied for a
period of three (3) Business Days; or
(iv) any representation or warranty made or deemed made by or on
behalf of Maker in this note or in any certificate furnished
or made by Maker to Payee in connection herewith shall prove
to have been incorrect, false or misleading in any material
respect as of the date thereof or as of the date as of which
the facts therein set forth were stated or certified or
deemed stated or certified.
(g) "Federal Funds Rate" means, for any day, a fluctuating interest
rate per annum equal for such day to the weighted average of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published for such day (or, if such day is
not a Business Day, for the next preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any such day which is
a Business Day, the average of the quotations for such day on such transactions
received by Payee from three Federal funds brokers of recognized standing
selected by Payee in its sole and absolute discretion.
(h) "Loan Agreement" means that certain Loan Agreement dated
concurrently herewith among Maker, certain signatory financial institutions
named therein, WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION, as Administrative
Agent and Lead Arranger, FIRST UNION NATIONAL BANK, as Syndications Agent, BANK
OF AMERICA, N.A., as Documentation Agent, THE BANK OF NEW YORK, as Senior
Managing Agent, BANK ONE, NA, as Co-Agent, and DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES, as Co-Agent. The terms and provisions of the Loan
Agreement shall continue in full force and effect for purposes of the
incorporation by reference of certain terms thereof in this note notwithstanding
payment in full of the Obligations (as defined in the Loan Agreement),
termination of the Revolving
2
<PAGE> 3
Loan Commitments (as defined in the Loan Agreement) and termination of the Loan
Agreement by its own express terms until such time as, in addition to the
foregoing event, this note shall have been paid in full.
(i) "Loan Documents" means, collectively, this note, that certain
Notice of Entire Agreement dated concurrently herewith executed by and between
Maker and Payee, all instruments, certificates and agreements now or hereafter
executed or delivered by Maker to Payee pursuant to any of the foregoing or in
connection with the obligations under this note or any commitment regarding the
obligations under this note, and all amendments, modifications, renewals,
extensions, increases and rearrangements of, and substitutions for, any of the
foregoing.
(j) "Maturity Date" means the maturity of this note, March 13, 2000.
(k) "Past Due Rate" means, on any day, a rate per annum equal to the
lesser of (i) the Ceiling Rate for that day or (ii) the Stated Rate plus three
percent (3%).
(l) "Prime Rate" means, on any day, the prime rate for that day as
determined from time to time by Payee at its principal office in San Francisco,
California. The Prime Rate is a reference rate and does not necessarily
represent the lowest or best rate or a favored rate, and Payee disclaims any
statement, representation or warranty to the contrary. Payee may make commercial
loans or other loans at rates of interest at, above or below the Prime Rate.
(m) "Stated Rate" means, on any day, a rate per annum equal to the Base
Rate for that day minus 1/4 of 1%, provided, that if on any day the Base Rate
for that day minus 1/4 of 1% shall exceed the Ceiling Rate for that day, the
Stated Rate shall be fixed at the Ceiling Rate on that day and on each day
thereafter until the total amount of interest accrued at the Stated Rate on the
unpaid principal balance of this note plus the Additional Interest equals the
total amount of interest which would have accrued if there had been no Ceiling
Rate. Without notice to Maker or any other person or entity, the Stated Rate
shall automatically fluctuate upward and downward in accordance with the
provisions of this Subparagraph.
2. Advances. The unpaid principal balance of this note at any time
shall be the total of all amounts lent or advanced against this note less the
amount of all payments or prepayments made on the unpaid principal of this note
and by or for the account of Maker. All loans and advances and all payments and
prepayments made hereon may be endorsed by the holder of this note on a schedule
which may be attached hereto (and thereby made a part hereof for all purposes)
or otherwise recorded in the holder's records; provided, that any failure to
make notation of any loan or advance hereunder shall not cancel, limit or
otherwise affect Maker's obligations or any holder's rights with respect to that
loan or advance and, provided further, that any failure to make a notation of
any payment or prepayment of principal shall not cancel, limit or otherwise
affect Maker's entitlement to credit for that payment as of the date received by
the holder. Amounts repaid hereunder may not be reborrowed. Advances hereunder
shall be used solely to effectuate the acquisition by Maker of all outstanding
equity interests in and to Centris Group, Inc. Payee shall not be required to
make more than one (1) advance hereunder. As a condition precedent to any
advance hereunder, Maker must deliver to Payee evidence reasonably satisfactory
to Payee that (i) the aggregate purchase price of all outstanding equity
interests in and to Centris Group, Inc. will not exceed $150,000,000, (ii) Maker
shall have obtained the necessary number of shares of Centris
3
<PAGE> 4
Group, Inc. through tender offer to definitively effectuate a merger and (iii)
all applicable regulatory agencies shall have approved the transactions herein
contemplated and the acquisition of Centris Group, Inc.
3. Mandatory Payments of Principal and Interest.
(a) On the Maturity Date, the entire unpaid principal balance of this
note and all accrued and unpaid interest on the unpaid principal balance of this
note shall be due and payable.
(b) All payments hereon made pursuant to this Paragraph shall be
applied first to accrued interest, the balance to principal.
(c) If any payment provided for in this note shall become due on a day
other than a Business Day, such payment may be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of interest on this note.
4. Prepayments. Maker shall have the right to prepay, on any Business
Day, without the payment of any penalty or fee, the entire unpaid principal
balance of this note and all accrued and unpaid interest on the unpaid principal
balance of this note. Partial prepayments are not permitted. Any prepayment
hereon shall be applied first to accrued interest and the balance to the
principal.
5. Indemnification. Maker shall indemnify Payee and each affiliate of
Payee and Payee's directors, officers, employees and agents from, and hold each
of them harmless against, any and all losses, liabilities, claims or damages to
which any of them may become subject, REGARDLESS OF WHETHER CAUSED IN WHOLE OR
IN PART BY THE NEGLIGENCE OF ANY INDEMNIFIED PARTIES, insofar as such losses,
liabilities, claims or damages arise out of or result from any (i) actual or
proposed use by Maker of the proceeds of any extension of credit by Payee
hereunder; (ii) breach by Maker of this note or any other Loan Document; (iii)
violation by Maker of any legal requirement, or (iv) investigation, litigation
or other proceeding relating to any of the foregoing, and Maker shall reimburse
Payee and each affiliate of Payee and Payee's directors, officers, employees and
agents, upon demand for any reasonable expenses (including reasonable legal
fees) incurred in connection with any such investigation or proceeding;
provided, however, that Maker shall not have any obligations pursuant to this
Paragraph with respect to any losses, liabilities, claims, damages or expenses
incurred by the person or entity seeking indemnification by reason of the gross
negligence or willful misconduct of that person or entity. Nothing in this
Paragraph is intended to limit the obligations of Maker under any other
provision of this note.
6. No Usury Intended; Spreading. Notwithstanding any provision to the
contrary contained in this note or any of the other Loan Documents, it is
expressly provided that in no case or event shall the aggregate of (i) all
interest on the unpaid balance of this note, accrued or paid from the date
hereof and (ii) the aggregate of any other amounts accrued or paid pursuant to
this note or any of the other Loan Documents, which under applicable laws are or
may be deemed to constitute interest upon the indebtedness evidenced by this
note from the date hereof, ever exceed the Ceiling Rate. In this connection,
Maker and Payee stipulate and agree that it is their common and overriding
intent to contract in strict compliance with applicable federal and Texas usury
laws (and the usury
4
<PAGE> 5
laws of any other jurisdiction whose usury laws are deemed to apply to this note
or any of the other Loan Documents despite the intention and desire of the
parties to apply the usury laws of the State of Texas). In furtherance thereof,
none of the terms of this note or any of the other Loan Documents shall ever be
construed to create a contract to pay, as consideration for the use, forbearance
or detention of money, interest at a rate in excess of the Ceiling Rate. Maker
or other parties now or hereafter becoming liable for payment of the
indebtedness evidenced by this note shall never be liable for interest in excess
of the Ceiling Rate. If, for any reason whatever, the interest paid or received
on this note during its full term produces a rate which exceeds the Ceiling
Rate, the holder of this note shall credit against the principal of this note
(or, if such indebtedness shall have been paid in full, shall refund to the
payor of such interest) such portion of said interest as shall be necessary to
cause the interest paid on this note to produce a rate equal to the Ceiling
Rate. All sums paid or agreed to be paid to the holder of this note for the use,
forbearance or detention of the indebtedness evidenced hereby shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term of this note, so that the interest rate does not exceed
the Ceiling Rate. The provisions of this Paragraph shall control all agreements,
whether now or hereafter existing and whether written or oral, between Maker and
Payee.
7. No Waiver by Payee. No delay or omission of Payee or any other
holder hereof to exercise any power, right or remedy accruing to Payee or any
other holder hereof shall impair any such power, right or remedy or shall be
construed to be a waiver of the right to exercise any such power, right or
remedy. Payee's right to accelerate this note for any late payment or Maker's
failure to timely fulfill its other obligations hereunder or under the other
Loan Documents shall not be waived or deemed waived by Payee by Payee's having
accepted a late payment or late payments in the past or Payee otherwise not
accelerating this note or exercising other remedies for Maker's failure to
timely perform its obligations hereunder or under the other Loan Documents.
Payee shall not be obligated or be deemed obligated to notify Maker that it is
requiring Maker to strictly comply with the terms and provisions of this note
and the other Loan Documents before accelerating this note and exercising its
other remedies hereunder or under the other Loan Documents because of Maker's
failure to timely perform its obligations under this note and the other Loan
Documents.
8. Default. If any Event of Default occurs which has not been cured or
waived, Payee may, at its option, exercise any or all rights, powers and
remedies afforded under any Loan Document and by law, including the right to
declare the unpaid balance of principal and accrued interest on this note at
once mature and payable.
9. Waivers by Maker and Others. Except to the extent, if any, that
notice of default is expressly required herein or in any of the other Loan
Documents, Maker and any and all co-makers, endorsers, guarantors and sureties
severally waive notice (including, but not limited to, notice of intent to
accelerate and notice of acceleration, notice of protest and notice of
dishonor), demand, presentment for payment, protest, diligence in collecting and
the filing of suit for the purpose of fixing liability and consent that the time
of payment hereof may be extended and re-extended from time to time without
notice to any of them. Each such person agrees that its liability on or with
respect to this note shall not be affected by any release of or change in any
guaranty or security at any time existing or by any failure to perfect or to
maintain perfection of any lien against or security interest in any such
security or the partial or complete unenforceability of any guaranty or other
surety obligation, in each case in whole or in part, with or without notice and
before or after maturity.
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10. Paragraph Headings. Paragraph headings appearing in this note are
for convenient reference only and shall not be used to interpret or limit the
meaning of any provision of this note.
11. Calculation of Interest. All interest required to be calculated or
determined under this note shall be computed on the basis of the actual number
of days elapsed in a year consisting of 360 days, unless the Ceiling Rate would
thereby be exceeded, in which event, to the extent necessary to avoid exceeding
the Ceiling Rate, the applicable interest shall be computed on the basis of the
actual number of days elapsed in the applicable calendar year in which accrued.
12. Choice of Law. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE APPLICABLE LAWS OF THE STATE OF TEXAS FROM TIME TO TIME IN
EFFECT.
13. Successors and Assigns. This note and all the covenants and
agreements contained herein shall be binding upon, and shall inure to the
benefit of, the respective successors and assigns of Maker and Payee.
14. Records of Payments. The records of Payee shall be prima facie
evidence of the amounts owing on this note.
15. Severability. If any provision of this note is held to be illegal,
invalid or unenforceable under present or future laws, the legality, validity
and enforceability of the remaining provisions of this note shall not be
affected thereby, and this note shall be liberally construed so as to carry out
the intent of the parties to it.
16. Notices. Any notice, request or other communication required or
permitted to be given hereunder shall be given in writing by delivering it
against receipt for it, by depositing it with an overnight delivery service or
by depositing it in a receptacle maintained by the United States Postal Service,
postage prepaid, registered or certified mail, return receipt requested,
addressed to the respective parties as follows (and if so given, shall be deemed
given on the second business day after mailing):
If to Maker:
HCC Insurance Holdings, Inc.
13403 Northwest Freeway
Houston, Texas 77040
Attention: General Counsel
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If to Payee:
Wells Fargo Bank, National Association
201 Third Street, MAC 0187-081
San Francisco, CA 94103
with a copy to:
Wells Fargo Bank (Texas), National Association
1000 Louisiana, 3rd Floor
Houston, 77002
Attention: Jonathan C. Homeyer
Maker's address for notice may be changed at any time and from time to time, by
providing written notice to Payee and shall be the most recent such address
furnished in writing by Maker to Payee. Payee's address for notice may be
changed at any time and from time to time, by providing written notice to Maker
and shall be the most recent such address furnished in writing by Payee to
Maker. Actual notice, however and from whomever given or received, shall always
be effective when received.
17. Certain Representations. This note is the legal, valid and binding
obligation of Maker, enforceable in accordance with its terms, except as may be
limited by bankruptcy, insolvency and other similar laws and judicial decisions
affecting creditors' rights generally and by general equitable principles. The
execution, delivery and performance of this note (a) have all been duly
authorized by all necessary action; (b) are within the power and authority of
Maker; (c) do not and will not contravene or violate any legal requirement
applicable to Maker or the organizational documents of Maker, the contravention
or violation of which could have a material adverse effect on the business,
condition (financial or otherwise), operations or properties of Maker; (d) do
not and will not result in the breach of, or constitute a default under, any
material agreement or instrument by which Maker or any of its property may be
bound or affected, and (e) do not and will not result in the creation of any
lien or security interest upon any property of Maker, except in favor of Payee.
All necessary permits, registrations and consents for such making and
performance have been obtained.
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18. Business Loans. Maker warrants and represents to Payee and all
other holders of this note that all advances under this note are and will be for
business, commercial, investment or other similar purpose and not primarily for
personal, family, household or agricultural use, as such terms are used in
Chapter 1D.
HCC INSURANCE HOLDINGS, INC.,
a Delaware corporation
By:
-----------------------------------
Frank J. Bramanti,
Executive Vice President
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