<PAGE>
_____________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition period from _________ to _________.
Commission file number 0-26652
TRANSPORT HOLDINGS INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3595073
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
714 MAIN STREET 76102
FORT WORTH, TEXAS (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code (817) 390-8000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
As of July 31, 1996, there were 1,592,048 shares of the registrant's Class A
Common Stock, $.01 par value, outstanding.
_____________________________________________________________________________
<PAGE>
TRANSPORT HOLDINGS INC.
FORM 10-Q
TABLE OF CONTENTS
PAGE
PART I FINANCIAL INFORMATION
Item 1. Financial Statements........................................ 1
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations............ 8
PART II OTHER INFORMATION
Item 1. Legal Proceedings........................................... 14
Item 2. Changes in Securities....................................... 14
Item 3. Defaults Upon Senior Securities............................. 14
Item 4. Submission of Matters to a Vote of Security Holders......... 14
Item 5. Other Information........................................... 14
Item 6. Exhibits and Reports on Form 8-K............................ 14
<PAGE>
TRANSPORT HOLDINGS INC.
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
(in thousands)
June 30, December 31,
1996 1995
ASSETS (unaudited) (a) <F1>
------------ ------------
<S> <C> <C>
Fixed maturities available for sale, at market
(cost: 1996 - $475,081; 1995 - $482,626) $ 480,515 $ 518,303
Equity securities, at market
(cost: 1996 - $76; 1995 - $1,850) 886 3,473
Mortgage loans on real estate 8,579 9,348
Investment in real estate 279 195
Policy loans 17,833 18,487
Short-term investments 24,075 22,952
Other investments 4,821 4,872
---------- ----------
Total investments 536,988 577,630
Cash and cash equivalents (3,085) 2,198
Accrued investment income 6,426 6,258
Premiums due and unpaid 6,828 4,918
Due from reinsurers 319,750 298,867
Due from agents 3,840 5,332
Value of insurance in force 11,295 12,177
Deferred policy acquisition costs 28,781 29,531
Debt issue costs 3,596 3,738
Other assets 10,119 9,839
---------- ----------
Total assets $ 924,538 $ 950,488
========== ==========
(Continued)
</TABLE>
1
<PAGE>
TRANSPORT HOLDINGS INC.
Condensed Consolidated Balance Sheets, Continued
<TABLE>
<CAPTION>
(in thousands)
June 30, December 31,
1996 1995
LIABILITIES AND STOCKHOLDERS' EQUITY (unaudited) (a) <F1>
------------ ------------
<S> <C> <C>
Notes payable to banks $ 58,250 $ 60,250
Subordinated convertible notes payable 50,000 50,000
Future policy benefits 337,956 315,253
Unearned premiums 36,619 39,961
Policy and contract claims 235,322 229,179
Other policyholder funds 2,848 3,130
Income taxes payable 18,412 28,074
Accrued expenses and other liabilities 17,002 20,546
---------- ----------
Total liabilities 756,409 746,393
Stockholders' equity
Preferred stock, $0.01 par value per share, 2,000,000
shares authorized; shares issued and outstanding:
91,030 at June 30, 1996, 182,060 at December 31,
1995; redemption value: $24,884 at June 30, 1996,
$46,911 at December 31, 1995 22,758 45,515
Class A common stock, $0.01 par value per share,
8,000,000 shares authorized; shares issued and
outstanding: 1,592,048 at June 30, 1996, 1,590,461
at December 31, 1995 16 16
Class B common stock, $0.01 par value per share,
2,000,000 shares authorized, none issued - - - -
Paid in capital 169,732 169,665
Unrealized appreciation of securities, net 4,058 24,245
Retained (deficit) (28,435) (35,346)
---------- ----------
Total equity 168,129 204,095
---------- ----------
Total liabilities and stockholders' equity $ 924,538 $ 950,488
========== ==========
<FN>
<F1>
(a) Condensed from audited financial statements.
</FN>
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
2
<PAGE>
TRANSPORT HOLDINGS INC.
Condensed Consolidated Statements of Income
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Net premium income $ 27,690 $ 52,803 $ 55,622 $ 108,618
Investment income, net of related expenses 10,020 13,403 19,879 26,040
Realized investment gains (25) (110) 314 369
Other income 300 - - 600 - -
---------- ---------- ---------- ----------
Total revenues 37,985 66,096 76,415 135,027
Benefits and expenses:
Incurred claims and other policy benefits, net 18,653 35,422 37,061 73,717
Commissions 5,564 10,961 11,333 23,155
Capitalization of deferred policy acquisition costs (1,241) (3,451) (2,588) (7,657)
Amortization of deferred policy acquisition costs
and value of insurance in force 2,060 6,142 4,220 11,337
Interest expense and amortization
of debt issue costs 2,231 - - 4,557 - -
Other operating expenses 3,786 6,733 7,954 13,350
---------- ---------- ---------- ----------
Total benefits and expenses 31,053 55,807 62,537 113,902
---------- ---------- ---------- ----------
Income before tax 6,932 10,289 13,878 21,125
Provision for federal income tax 2,426 3,447 4,857 7,085
---------- ---------- ---------- ----------
Net income $ 4,506 $ 6,842 $ 9,021 $ 14,040
========== ========== ========== ==========
Earnings per share:
Primary $ 1.91 $ (a) <F2> $ 3.85 $ (a) <F2>
========== ========== ========== ==========
Fully diluted $ 1.20 $ (a) $ 2.42 $ (a)
========== ========== ========== ==========
<FN>
<F2>
(a) No per share amounts were applicable to the 1995 periods, which were prior to
distribution of the Company's shares to the public.
</FN>
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
3
<PAGE>
TRANSPORT HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
(in thousands)
Six Months Ended
June 30,
1996 1995
---------- ----------
<S> <C> <C>
Operating activities:
Net income $ 9,021 $ 14,040
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of securities (314) (369)
Accretion of bond discount or premium (1,036) (631)
Amortization debt issue costs 328 - -
Directors fees paid in capital stock 67 - -
Change in assets and liabilities:
Accrued investment income (168) (168)
Premiums due and unpaid (1,910) 1,408
Due from reinsurers (20,883) 10,811
Due from agents 1,492 966
Value of insurance in force 882 1,192
Deferred policy acquisition costs 750 2,487
Other assets (280) 453
Reserves for future policy benefits and claims 25,222 4,991
Income taxes payable 1,208 (1,174)
Accrued expenses and other liabilities (409) 1,056
---------- ----------
Net cash provided by operating activities 13,970 35,062
Investing activities:
Sale of fixed maturities 61,937 29,223
Maturity of fixed maturities 3,330 - -
Sale of common stock 2,487 5,345
Purchase of fixed maturities (57,116) (107,937)
Purchase of common stock - - (218)
Principal payments on mortgages 769 1,087
Principal payments on policy loans 654 1,489
Security transactions in course of settlement (3,135) 203
Change in short-term and other invested assets (1,156) 36,217
---------- ----------
Net cash used in investing activities 7,770 (34,591)
Financing activities:
Dividends paid - - (9,000)
Redemption of preferred stock (24,868) - -
Principal payments on bank debt (2,000) - -
Cost of borrowings capitalized (155) - -
---------- ----------
Net cash used in financing activities (27,023) (9,000)
Decrease in cash and cash equivalents (5,283) (8,529)
Cash and cash equivalents at beginning of period 2,198 3,096
---------- ----------
Cash and cash equivalents at end of period $ (3,085) $ (5,433)
========== ==========
Supplemental disclosure of cash flow information:
Cash paid for taxes $ 3,650 $ 8,186
Interest paid $ 3,552 $ - -
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
4
<PAGE>
TRANSPORT HOLDINGS INC.
Condensed Consolidated Statement of Stockholders' Equity
(unaudited)
(in thousands except share amounts)
<TABLE>
<CAPTION>
Unrealized
Preferred Stock Class A Common Stock appreciation
-------------------- ---------------------- (depreciation)
Shares Shares Paid in of securities, Retained
Issued Amount Issued Amount Capital net Deficit Total
--------- --------- ----------- --------- --------- ----------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1995 182,060 $ 45,515 1,590,461 $ 16 $ 169,665 $ 24,245 $(35,346) $ 204,095
Net income 9,021 9,021
Issuance of shares to directors 1,587 0 67 67
Redemption of preferred stock (91,030) (22,757) (2,110) (24,867)
Unrealized investment losses,
net of taxes (20,187) (20,187)
--------- --------- ----------- --------- --------- ----------------- --------- ---------
Balance, June 30, 1996 91,030 $ 22,758 1,592,048 $ 16 $ 169,732 $ 4,058 $(28,435) $ 168,129
========= ========= =========== ========= ========= ================= ========= =========
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
5
<PAGE>
TRANSPORT HOLDINGS INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Organization
Transport Holdings Inc. (the "Company") was incorporated under the laws of
the State of Delaware. The Company is the sole stockholder of Intermediate
Holdings Inc., a Delaware corporation. Intermediate Holdings Inc. is the
sole stockholder of THD Inc., a Delaware corporation organized in 1996 and
TLSD Inc., a Delaware corporation organized in 1995. THD Inc. is the sole
stockholder of TLIC Life Insurance Company, a Texas life insurance company
organized in 1995. TLIC Life Insurance Company is the sole stockholder of
Transport Life Insurance Company, a Texas life insurance company organized
in 1958 and in continuous operation since that time. Transport Life Insurance
Company in turn owns all of the common stock of Continental Life Insurance
Company, a Texas insurance company formed and in continuous operation since
1969, and a wholly owned subsidiary of Transport Life Insurance Company
since 1971. TLIC Life Insurance Company, Transport Life Insurance Company,
and Continental Life Insurance Company are principally engaged in the
supplemental life and health insurance business.
These condensed consolidated financial statements include the accounts of
the Company, Intermediate Holdings Inc., THD Inc., TLSD Inc., TLIC Life
Insurance Company, Transport Life Insurance Company, and Continental Life
Insurance Company, which have been combined for all periods presented. All
material intercompany accounts and transactions have been eliminated. Prior
to September 1995, there were no material assets, liabilities, or results of
operations for any of the consolidated companies except Transport Life
Insurance Company and Continental Life Insurance Company.
2. Basis of Presentation
The condensed consolidated financial statements as of and for the three
months and six months ended June 30, 1996 are unaudited and have been
prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information
presented not misleading. The interim financial statements reflect all
adjustments, consisting only of normal recurring adjustments, that are, in
the opinion of management, necessary for a fair statement of the results for
the interim periods.
These financial statements should be read in conjunction with the audited
consolidated financial statements and the notes thereto included in the
Annual Report dated March 22, 1996 and furnished to stockholders of the
Company. The results of operations for
6
<PAGE>
the three month and six month periods ended June 30, 1996 should not be
considered indicative of the results to be expected for the entire year.
3. Earnings Per Share
Substantially all of the Company's Class A Common Stock was issued on
September 29, 1995. On April 30, 1996, 1,587 shares of Class A Common
Stock were issued to certain of the Company's directors in payment of
directors' fees. Primary earnings per share was based on the weighted
average number of Class A shares outstanding plus the weighted average
number of common stock equivalents outstanding for stock options granted,
using the treasury stock method. Fully diluted earnings per share was based
on the number of shares that would be outstanding if the $50 million of
subordinated convertible notes payable were converted into Class A shares
(if such notes were presently convertible into Class A shares) and assuming
the exercise of outstanding stock options using the treasury stock method.
None of the stock options outstanding are currently exercisable.
On June 28, 1996, the Company redeemed 91,030 shares of preferred stock
then outstanding at a cost of approximately $25 million. Approximately
$2 million was charged to retained deficit for the excess of the redemption
price, as determined pursuant to the preferred stock indenture, over the
carrying value of the shares redeemed. This excess represented cumulative
unpaid dividends on the preferred stock redeemed for the period from
issuance (September 29, 1995) to redemption.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The following discussion should be read in conjunction with the
condensed consolidated financial statements and notes thereto found under
Part I, Item 1, along with management's discussion and analysis of financial
condition and results of operations found in the Company's Annual Report
dated March 22, 1996.
The Company is principally engaged in the supplemental life and health
insurance business through its operating subsidiaries, TLIC Life Insurance
Company, Transport Life Insurance Company and Continental Life Insurance
Company.
CHANGE IN CAPITALIZATION
On June 28, 1996, the Company redeemed one half of its preferred stock
then outstanding for cash of $25 million. Pursuant to the terms of the
preferred stock, the redemption price included an amount for accrued but
undeclared dividends on the shares redeemed at a rate of 12% per annum
compounded quarterly since issue. The preferred stock was issued on
September 29, 1995. The $2 million excess of the redemption price over the
carrying value of the shares redeemed was charged to retained deficit.
In connection with the redemption, the Company's loan agreements for its
bank debt were amended at a cost of $0.2 million. These costs were
capitalized and will be amortized over the remaining life of the bank debt.
RESULTS OF OPERATIONS
OVERVIEW
The Company sold its long term care business effective October 1, 1995.
Results for the second quarter of 1996 as compared to the second quarter of
1995, and the first six months of 1996 as compared to the first six months
of 1995, reflect a reduction in premiums, benefits, and investment income
because of the sale of this business. In addition, the Company incurred
interest expense on bank debt and the subordinated convertible notes in the
first and second quarters of 1996. These notes were issued on
September 29, 1995.
THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE MONTHS ENDED JUNE 30, 1995
PREMIUM INCOME
Premium income, net of reinsurance, decreased by 48% or $25.1 million
to $27.7 million for the three months ended June 30, 1996 as compared to
the three months ended June 30, 1995, principally as a result of the sale
of the long term care
8
<PAGE>
business. Long term care insurance premiums were $24.6 million in the
second quarter of 1995 as compared to none in the second quarter of 1996.
Cancer insurance premiums declined $0.4 million or 2% to $17.3 million.
The decrease for cancer insurance premiums is attributable to reduced sales
in the past several years. The Company expects the decline in premium
income to continue for at least six months as a result of the declines in
new sales in prior periods.
New annualized premium for cancer and heart/stoke insurance decreased
17% or $0.5 million to $2.7 million for the three months ended June 30, 1996
as compared to the three months ended June 30, 1995. The Company believes
that the factors which resulted in sales declines in 1995, 1994 and 1993
have continued to impact new annualized premium. These factors include the
Company's cancer insurance marketing agencies process of adjusting to a rate
increase environment and to selling policies with more limited radiation and
chemotherapy benefits.
NET INVESTMENT INCOME
Net investment income decreased by 25% or $3.4 million to $10 million
for the three months ended June 30, 1996 as compared to the three months
ended June 30, 1995. The decrease resulted primarily from lower levels of
invested assets because of the sale of the long term care business.
Invested assets were $537 million at June 30, 1996 as compared to $772
million at June 30, 1995, a decrease of $235 million or 30%. In
December 1995, the Company transferred $250 million to the buyer of the
long term care business in connection with the sale. During the first
quarter of 1996, the Company sold most of its equity securities and
reinvested the proceeds in fixed maturity securities. Equity securities
(at market) were $0.9 million at June 30, 1996 as compared to $3.5 million
at December 31, 1995. On June 28, 1996, the Company paid $25 million to
the holder of its preferred stock for the redemption of one half of the
preferred stock outstanding.
The use of $25 million of invested assets for the redemption of
preferred stock on June 28, 1996 will result in a decrease in investment
income in future quarters. In addition, investment income is impacted by,
among other things, changes in prevailing market interest rates and the
creditworthiness and period to maturity of the Company's investments.
Investment income in future periods may differ from past experience as a
result of changes in any or all of these factors. Significant increases or
decreases in investment income could correspondingly affect future results
of operations.
OTHER INCOME
Other income was $0.3 million in the three months ended June 30, 1996,
relating to incentive management fees on business the Company administers
for a third party. There was no other income in 1995.
9
<PAGE>
NET CLAIMS AND OTHER POLICY BENEFITS
Benefits decreased by 47% or $16.8 million to $18.7 million for the
three months ended June 30, 1996 as compared to the three months ended
June 30, 1995, primarily as a result of the sale of the long term care
business. Benefits for long term care business were $18.2 million in the
second quarter of 1995, and none in the second quarter of 1996. Benefits
for cancer insurance increased by $0.3 million to $11.3 million and benefits
for major/catastrophic hospital insurance decreased by $0.7 million. The
provision for benefits is impacted by the number of policyholders who
qualify for benefits, along with the severity and duration of their claims,
as well as the Company's estimates of future obligations on policies
currently in force. Any or all of these factors may change in the future,
causing the provision for benefits to increase or decrease with a
corresponding impact on results of operations.
COMMISSIONS AND DEFERRED POLICY ACQUISITION COSTS
Commissions paid decreased by 49% or $5.4 million to $5.6 million for
the three months ended June 30, 1996 as compared to the three months ended
June 30, 1995, primarily as a result of the sale of the long term care
business. Commissions for long term care business declined by $4.9 million
as compared to the second quarter of 1995. Commissions paid on cancer,
heart/stroke, and other accident and health insurance declined by $0.4
million or 7% as a result of lower new sales. First year commissions
capitalized declined $1.2 million and other capitalized expenses related to
the production of new business declined $1 million as a result of the sale
of the long term care business and lower new sales of cancer, heart/stroke,
and other accident and health insurance.
Amortization of deferred policy acquisition costs and value of
insurance in force declined by 66% or $4.1 million to $2.1 million for the
three months ended June 30, 1996 as compared to the three months ended
June 30, 1995, primarily as a result of the sale of the long term care
business and the extinguishment of deferred costs associated with that
business upon sale.
INTEREST EXPENSE
Interest expense was $2.2 million for the three months ended
June 30, 1996. There was no interest expense in the second quarter of 1995,
which was prior to the date of the Company's long term borrowings.
OTHER OPERATING EXPENSES
Administrative expenses decreased by 44% or $2.9 million to $3.8
million for the three months ended June 30, 1996 ascompared to the three
months ended June 30, 1995. In the second quarter of 1996, the Company
received $1.4 million of expense reimbursements related to long term care
insurance for costs of administering the
10
<PAGE>
business on behalf of the buyer and premium tax reimbursements. The
remainder of the decrease resulted primarily from staff reductions made in
connection with the sale of the long term care business.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
PREMIUM INCOME
Premium income, net of reinsurance, decreased by 49% or $53 million
to $55.6 million for the six months ended June 30, 1996 as compared to the
six months ended June 30, 1995, principally as a result of the sale of the
long term care business. Long term care insurance premiums were $50.4
million in the first six months of 1995 as compared to none in the first
six months of 1996. Cancer insurance premiums declined $1.1 million or 3%
to $34.6 million. The decrease for cancer insurance premiums is
attributable to reduced sales in the past several years. The Company
expects the decline in premium income to continue for at least six months
as a result of the declines in new sales in prior periods.
New annualized premium for cancer and heart/stoke insurance decreased
17% or $1.0 million to $5.1 million for the six months ended June 30, 1996
as compared to the six months ended June 30, 1995. The Company believes
that the factors which resulted in sales declines in 1995, 1994 and 1993
have continued to impact new annualized premium. These factors include the
Company's cancer insurance marketing agencies' process of adjusting to a
rate increase environment and to selling policies with more limited
radiation and chemotherapy benefits.
NET INVESTMENT INCOME
Net investment income decreased by 24% or $6.2 million to $19.9
million for the six months ended June 30, 1996 as compared to the six
months ended June 30, 1995. The decrease resulted primarily from lower
levels of invested assets because of the sale of the long term care
business as discussed previously in the analysis of second quarter results.
The use of $25 million of invested assets for the redemption of
preferred stock on June 28, 1996 will result in a decrease in investment
income in future quarters. In addition, investment income is impacted by,
among other things, changes in prevailing market interest rates and the
creditworthiness and period to maturity of the Company's investments.
Investment income in future periods may differ from past experience as a
result of changes in any or all of these factors. Significant increases or
decreases in investment income could correspondingly affect future results
of operations.
11
<PAGE>
OTHER INCOME
Other income was $0.6 million in the six months ended June 30, 1996,
relating to incentive management fees on business the Company administers
for a third party. There was no other income in 1995.
NET CLAIMS AND OTHER POLICY BENEFITS
Benefits decreased by 50% or $36.7 million to $37.1 million for the six
months ended June 30, 1996 as compared to the six months ended June 30, 1995,
primarily as a result of the sale of the long term care business. Benefits
for long term care business were $37.9 million in the first six months of
1995, and none in the first six months of 1996. Benefits for cancer insurance
increased by $0.5 million to $22.5 million and benefits for
major/catastrophic hospital insurance decreased by $1.6 million. The
provision for benefits is impacted by the number of policyholders who qualify
for benefits, along with the severity and duration of their claims, as well
as the Company's estimates of future obligations on policies currently in
force. Any or all of these factors may change in the future, causing the
provision for benefits to increase or decrease with a corresponding impact
on results of operations.
COMMISSIONS AND DEFERRED POLICY ACQUISITION COSTS
Commissions paid decreased by 51% or $11.8 million to $11.3 million for
the six months ended June 30, 1996 as compared to the six months ended
June 30, 1995, primarily as a result of the sale of the long term care
business. Commissions for long term care business declined by $10.3 million
as compared to the first six months of 1996. Commissions paid on cancer,
heart/stroke, and other accident and health insurance declined by $1 million
or 8% as a result of lower new sales. First year commissions capitalized
declined $3 million and other capitalized expenses related to the production
of new business declined $2 million as a result of the sale of the long term
care business and lower new sales of cancer, heart/stroke, and other
accident and health insurance.
Amortization of deferred policy acquisition costs and value of
insurance in force declined by 63% or $7.1 million to $4.2 million for the
six months ended June 30, 1996 as compared to the six months ended June 30,
1995, primarily as a result of the sale of the long term care business and
the extinguishment of deferred costs associated with that business upon sale.
INTEREST EXPENSE
Interest expense was $4.6 million for the six months ended June 30,
1996. There was no interest expense in the first six months of 1995, which
was prior to the date of the Company's long term borrowings.
12
<PAGE>
OTHER OPERATING EXPENSES
Administrative expenses decreased by 40% or $5.4 million to $8 million
for the six months ended June 30, 1996 as compared to the six months ended
June 30, 1995. In the first six months of 1996, the Company received $2.9
million of expense reimbursements related to long term care insurance for
cost of administering the business on behalf of the buyer and premium tax
reimbursements. The remainder of the decrease resulted primarily from staff
reductions made in connection with the sale of the long term care business.
EARNINGS PER SHARE
The Company was a wholly owned subsidiary of Travelers Group Inc.
until September 29, 1995, and no earnings per share are presented for the
1995 periods. Earnings per share are presented for the quarter and six
months ended June 30, 1996. For the quarter and six months, respectively,
$1.4 million and $2.8 million of earnings accrued to the benefit of the
preferred stockholder. Primary and fully diluted earnings per share
include the effect of outstanding stock options using the treasury stock
method. None of the Company's stock options outstanding are presently
exercisable. Fully diluted earnings per share also includes the effect
on earnings per share had the subordinated convertible notes been
converted into Class A Common shares. These notes are not presently
convertible. They become convertible into Class B Common stock in
September 1996 and into Class A Common stock in 2000 (earlier under certain
circumstances).
13
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Stockholders on May 9, 1996, stockholders
elected two nominees for Class I Directors for three-year terms expiring
in 1999 as set forth in the Company's Proxy Statement relating to the
Meeting. With respect to such election, proxies were solicited pursuant
to Regulation 14 under the Securities Exchange Act of 1934 and there was no
solicitation in opposition to such nominees. The following numbers of votes
were cast by the holders of the Class A Common Stock and the Series A
Cumulative Exchangeable Preferred Stock as to the Class I Director nominees:
J. Luther King, Jr. 1,540,384.93 votes for and 4,664.82 votes withheld; and
A. Foster Nelson, 1,540,148.26 votes for and 4,903.30 votes withheld. The
terms as directors of Daniel L. Doctoroff, Gerald Grinstein, Garland M.
Lasater, Jr. and John T. Sharpe continued after the Annual Meeting of
Stockholders.
Additionally, KPMG Peat Marwick LLP was ratified as the Company's
independent auditors for the 1996 fiscal year by a vote of 1,533,377.79 for,
3,803.43 against, and 7,870.35 abstained.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
<S> <C>
3.1(i) Restated Certificate of Incorporation of Registrant. (1) <F3>
3.2(i) Certificate of Designation of Series A Cumulative Exchangeable
Preferred Stock of Registrant. (2) <F4>
14
<PAGE>
3.3(ii) Amended and Restated Bylaws of Registrant. (1) <F3>
4.1 Form of Class A Common Stock Certificate. (3) <F5>
4.2 Subordinated Convertible Loan Agreement dated as of June 12, 1995,
among the Registrant, Travelers Group Inc. ("Travelers") and the
Lenders named therein (the "Lenders"). (3) <F5>
4.3 Amendment No. 1 to Subordinated Convertible Loan Agreement dated
as of August 7, 1995, among the Registrant, Travelers and the
Lenders. (2) <F4>
4.4 Amendment No. 2 to Subordinated Convertible Loan Agreement dated as
of January 16, 1996, among the Registrant, Insurance Partners, L.P.
and Insurance Partners Offshore (Bermuda), L.P. (4) <F6>
4.5 Form of Series A Note. (3) <F5>
4.6 Form of Series B Note. (3) <F5>
4.7 Preferred Stock Registration Rights Agreement among Travelers and
Registrant dated as of June 12, 1995. (3) <F5>
4.8 Convertible Debt Registration Rights Agreement among the Registrant
and the Lenders dated as of June 12, 1995. (3) <F5>
4.9 Warrants to purchase Class A Common Stock of the Registrant. (2) <F4>
4.10 Warrant Stock Registration Rights Agreement, dated September 29,
1995, between Registrant and The Lasater Children's 1995 GST Exempt
Trusts and The Sharpe Children's 1995 GST Exempt Trusts. (2) <F4>
4.11 Form of Indenture between the Registrant as Issuer and ____________ as
Trustee for the Junior Subordinated Exchange Debentures due 2006.
(3) <F5>
4.12 Pledge Agreement between the Registrant and Insurance Partners
Advisors, L.P. as agent. (1) <F3>
10.1 Second Amendment to Credit Agreement dated as of June 26, 1996,
among Intermediate Holdings, various lending institutions and Chase
Manhattan Bank, N.A. ("Chase") as administrative agent. (5) <F7>
10.2 Pledge Agreement, dated as of June 26, 1996, between THD Inc.
("THD") and Chase. (5) <F7>
15
<PAGE>
10.3 Guaranty, dated as of June 26, 1996, between THD and Chase. (5) <F7>
11.1 Schedule of Computation of Earnings Per Share. (5) <F7>
27 Financial Data Schedule (5) <F7>
__________
<FN>
<F3>
(1) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1995, and incorporated herein
by reference.
<F4>
(2) Previously filed as an exhibit to the Company's Current Report on Form 8-K
dated September 29, 1995, and incorporated herein by reference.
<F5>
(3) Previously filed as an exhibit to the Company's Registration Statement No.
33-94960 on Form S-1, and incorporated herein by reference.
<F6>
(4) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the year ended December 31, 1995, and incorporated herein by reference.
<F7>
(5) Filed herewith.
</FN>
</TABLE>
b. Reports on Form 8-K
None
16
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Transport Holdings Inc.
August 14, 1996 By: DEBORAH V. GREER
------------------------------
Deborah V. Greer
Vice President and Controller
(Chief accounting officer and duly authorized
officer of registrant)
17
<PAGE>
EXHIBIT
10.1
[CONFORMED COPY]
SECOND AMENDMENT
SECOND AMENDMENT, dated as of June 26, 1996 (this "Amendment"),
among INTERMEDIATE HOLDINGS INC. (the "Borrower"), the lending institutions
party to the Credit Agreement referred to below (the "Banks"), and THE
CHASE MANHATTAN BANK, N.A., as administrative agent (in such capacity, the
"Administrative Agent") for the Banks. All capitalized terms used herein
and not otherwise defined shall have the meanings specified in the Credit
Agreement referred to below.
W I T N E S S E T H :
WHEREAS, the Borrower, the Banks and the Administrative Agent are
parties to a Credit Agreement, dated as of September 29, 1995, as amended,
modified and supplemented by the First Amendment thereto, dated as of
December 14, 1995 (as so modified, supplemented and amended, the "Credit
Agreement");
WHEREAS, subject to the terms and conditions hereof, the Banks
and the Borrower have agreed to amend the Credit Agreement as set forth
herein;
NOW, THEREFORE, in consideration of the mutual premises contained
herein and other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
I. AMENDMENTS TO THE CREDIT AGREEMENT.
1. Section 7.01 of the Credit Agreement is hereby amended by
inserting at the end thereof the following new clause (e):
"(e) The Borrower shall not permit Newco II to engage in any
business other than the ownership and pledge of the capital stock of
TLIC (the "TLIC Capital Stock"). Newco II shall have no assets other
than the TLIC Capital Stock and no more than $1,000 in the aggregate
of cash or Cash Equivalents
0000CWPW.W51
<PAGE>
and shall have no liabilities other than
liabilities under the Newco II Guaranty and the Newco II Pledge
Agreement."
2. Section 7.02 of the Credit Agreement is hereby amended by
(a) deleting the word "and" at the end of clause (i) thereof, (b) deleting
the period at the end of clause (j) thereof and inserting "; and" in lieu
thereof and (c) inserting the following new clause (k) immediately after
clause (j) thereof:
"(k) The Borrower may transfer the TLIC Capital Stock to Newco
II; PROVIDED that (i) Newco II shall be and shall at all times remain
a Wholly-Owned Subsidiary of the Borrower, (ii) Newco II shall have
executed and delivered the Newco II Guaranty, (iii) Newco II shall
have executed and delivered the Newco II Pledge Agreement, (iv) the
common stock of Newco II shall be pledged to the Collateral Agent
pursuant to the Pledge Agreement, (v) the TLIC Capital Stock shall be
pledged to the Collateral Agent under the Newco II Pledge Agreement
and (vi) all required regulatory approvals for such transfer have been
obtained (collectively, the 'TLIC Capital Stock Transfer')."
3. Section 7.06 of the Credit Agreement is hereby amended by
(a) deleting the word "and" at the end of clause (k) thereof, (b) deleting
the period at the end of clause (l) thereof and inserting "; and" in lieu
thereof and (c) inserting the following new clause (m) immediately
following clause (l) thereof:
"(m) The Borrower may capitalize Newco II with up to $1,000 in
cash, and may transfer all of the TLIC Capital Stock to Newco II in
accordance with Section 7.02(k)."
4. Section 7.08(a) of the Credit Agreement is hereby amended by
(a) deleting the word "and" at the end of clause (iv) thereof, (b) deleting
the period at the end of clause (v) thereof and inserting "; and" in lieu
thereof and (c) inserting the following new clause (vi) immediately
following clause (k) thereof:
"(vi) At the time of, or immediately prior to, the Preferred
Stock Redemption, the Borrower may pay a cash dividend to Holdings in
an amount equal to the amount required to effect the Preferred Stock
Redemption, so long as Holdings promptly uses the proceeds of such
dividend to effect such Preferred Stock Redemption."
5. Section 7.10 of the Credit Agreement is hereby amended by
(a) deleting clause (b) thereof in its entirety, and (b) inserting the
following new clause (b) in lieu thereof:
0000CWPW.W51 -2-
<PAGE>
"(b) The Borrower will not permit the ratio of (i) Consolidated
Indebtedness to (ii) Consolidated Total Capital at any time during any
period set forth below to be greater than the ratio set forth opposite
such period:
"PERIOD RATIO
Closing Date to and
including March 30, 1998 0.40:1.00
Thereafter 0.35:1.00"
6. Section 7.12(a) of the Credit Agreement is hereby amended to
read in its entirety as follows:
"7.12 STATUTORY SURPLUS. (a) The Borrower will not permit the
sum of (i) Statutory Surplus for TLIC plus (ii) the aggregate amount
of cash, Cash Equivalents and Investment Grade Securities of the
Borrower (on a stand alone basis), in each case at any time during a
period set forth below to be less than the amount set forth opposite
such period below:
PERIOD AMOUNT
Closing Date to and
including December 30, 1996 $105,000,000
Thereafter to and
including December 30, 1998 $110,000,000
Thereafter $120,000,000
(b) The Borrower will not permit Statutory Surplus for Transport
at any time during a period set forth below to be less than the amount
set forth opposite such period below:
PERIOD AMOUNT
Closing Date to and
including December 30, 1998 $95,000,000
Thereafter $105,000,000"
0000CWPW.W51 -3-
<PAGE>
7. Section 7.15 of the Credit Agreement is hereby amended by
(a) deleting the word "and" at the end of clause (ii) thereof, and (b)
inserting the following new clause (iv) immediately following clause (iii)
thereof:
", and (iv) Newco II, so long as (x) the Borrower owns 100% of the
capital stock of Newco II, (y) all of the capital stock of Newco II is
pledged pursuant to the Pledge Agreement and (z) Newco II enters into
the Newco II Guaranty and the Newco II Pledge Agreement."
8. Section 8.07 of the Credit Agreement is hereby amended to
read in its entirety as follows:
"8.07 PLEDGE AGREEMENT. Except in each case to the extent
resulting from the negligent or willful failure of the Collateral
Agent to retain possession of any Pledged Securities, the Pledge
Agreement, the Newco Pledge Agreement or the Newco II Pledge Agreement
shall cease to be in full force and effect, or shall cease to give the
Collateral Agent the Liens, rights, powers and privileges purported to
be created thereby (including, without limitation, a first priority
perfected security interest in, and Lien on, all of the Collateral
subject thereto, in favor of the Collateral Agent, superior to and
prior to the rights of all third Persons and subject to no other
Liens), or the Borrower, Newco or Newco II, as the case may be, shall
default in the due performance or observance of any term, covenant or
agreement on its part to be performed or observed pursuant to the
Pledge Agreement, the Newco Pledge Agreement or the Newco II Pledge
Agreement; or".
9. Section 8 of the Credit Agreement is hereby amended by (a)
adding the word "or" at the end of Section 8.13 thereof and (b) adding the
following new Section 8.14 immediately following Section 8.13 thereof:
"8.14 NEWCO II GUARANTY. At any time after the execution and
delivery thereof, the Newco II Guaranty or any provision thereof shall
cease to be in full force or effect as to Newco II, or Newco II or any
Person acting by or on behalf of Newco II shall deny or disaffirm
Newco II's obligations under the Newco II Guaranty, or Newco II shall
default in the due performance or observance of any term, covenant or
agreement on its part to be performed or observed pursuant to the
Newco II Guaranty;".
10. The remedies provisions at the end of Section 8 of the
Credit Agreement are hereby amended by (a) deleting the phrase "the Pledge
Agreement and/or the Newco Pledge Agreement" in clause (iii) thereof and
(b) inserting in lieu
0000CWPW.W51 -4-
<PAGE>
thereof the phrase "the Pledge Agreement, the Newco Pledge Agreement and/or
the Newco II Pledge Agreement".
11. The definition of "Change of Control" appearing in Section
10 of the Credit Agreement is hereby amended by (a) deleting clause (e)
contained therein, and (b) inserting in lieu thereof the following new
clause (e):
"(e) the Borrower shall cease to own directly 100% on a fully diluted
basis of the economic and voting interest in Newco's or Newco II's
capital stock;".
12. The definition of "Change of Control" appearing in Section
10 of the Credit Agreement is hereby further amended by inserting the
following new clause (g) immediately before the period at the end thereof:
"; and (g) Newco II shall cease to own directly 100% on a fully
diluted basis of the economic and voting interest in the TLIC Capital
Stock".
13. Section 9 of the Credit Agreement is hereby further amended
by (a) deleting the definitions of "Credit Documents," "Pledged Securities"
and "Specified Percentage" in their entirety and (b) inserting the
following new definitions in appropriate alphabetical order:
"Credit Documents" shall mean this Agreement, the Notes, the
Pledge Agreement, the Holdings Covenant Agreement, the Newco Pledge
Agreement, the Newco Guaranty, the Newco II Pledge Agreement and the
Newco II Guaranty.
"Newco II" shall mean THD INC., a Delaware corporation and a
Wholly-Owned Subsidiary of the Borrower.
"Newco II Guaranty" shall mean the Guaranty in the form of
Exhibit L to this Agreement.
"Newco II Pledge Agreement" shall mean the Pledge Agreement in
the form of Exhibit M to this Agreement.
"Permitted TLIC Capital Stock Transfer" shall have the meaning
set forth in Section 7.02(k)."
"Pledged Securities" shall mean (i) all the Pledged Securities as
defined in the Pledge Agreement, (ii) all the Pledged Securities as
defined in the Newco
0000CWPW.W51 -5-
<PAGE>
Pledge Agreement, and (iii) all the Pledged Securities as defined in
the Newco II Pledge Agreement.
"Preferred Stock Redemption" shall have the meaning set forth in
Section 3.08(iii) of the Holdings Covenant Agreement.
"Specified Percentage" shall
"TLIC Capital Stock" shall have the meaning set forth in Section
7.01(e).
14. The Credit Agreement is hereby further amended by adding
thereto Exhibit L and M in the form of Exhibits L and M hereto.
II. CONSENTS.
The Banks hereby (i) approve and consent to the amendment to the
Subordinated Debt Documents referred to in Section IV(2) below, (ii)
approve and consent to the release of the TLIC Capital Stock from the
pledge pursuant to the Pledge Agreement so long as such TLIC Capital Stock
is concurrently repledged pursuant to the Newco II Pledge Agreement and
(iii) approve and consent to the payment of an extraordinary dividend by
Transport to TLIC, by TLIC to Newco II and by Newco II to the Borrower and
waive the provisions of Section 6 of the Pledge Agreement and the Newco II
Pledge Agreement with respect to the payment of such dividend only to the
extent such amounts are used by the Borrower to pay a dividend to Holdings
(the proceeds of which are used by Holdings to effect the Preferred Stock
Redemption).
III. AMENDMENT TO THE HOLDINGS COVENANT AGREEMENT.
The Banks, the Borrower and Holdings hereby agree, approve and
consent to the amendment of the Holdings Covenant Agreement as follows:
1. Section 3.08(iii) of the Holdings Covenant Agreement is
hereby amended to read in its entirety as follows:
"(iii) At any time prior to August 31, 1996, Holdings may effect
a one-time redemption of 50% of the Preferred Stock for cash, for a
redemption price not to exceed $25,000,000 (the "Preferred Stock
Redemption") PROVIDED that (i) all required regulatory approvals for
such redemption shall have been obtained and (ii) no Default or Event of
Default shall exist either before or after giving effect to such Preferred
Stock Redemption."
0000CWPW.W51 -6-
<PAGE>
IV. MISCELLANEOUS.
1. In order to induce the Banks to enter into this Amendment,
the Borrower hereby:
(i) makes each of the representations, warranties and agreements
contained in Section 5 of the Credit Agreement on the Second Amendment
Effective Date, after giving effect to this Amendment; and
(ii) represents and warrants that no Default or Event of Default
is in existence either on the Second Amendment Effective Date, or
after giving effect to this Amendment and the transactions
contemplated hereby;
2. This Amendment shall become effective on the date (the
"Second Amendment Effective Date") on which each of the following
conditions precedent shall have been satisfied:
(i) the Borrower and the Required Banks shall have executed and
delivered a counterpart of this Amendment;
(ii) the common stock of Newco II shall have been pledged to the
Collateral Agent pursuant to the Pledge Agreement;
(iii) Newco II shall have executed and delivered to the
Administrative Agent a guaranty in the form of Exhibit J hereto (the
"Newco II Guaranty");
(iv) Newco II shall have executed and delivered to the Collateral
Agent a Pledge Agreement in the form of Exhibit M hereto (the "Newco
II Pledge Agreement"), and shall have delivered to the Collateral
Agent the TLIC Capital Stock pledged pursuant to such Newco II Pledge
Agreement (together with stock powers and any other documents required
thereby); and
(v) the Subordinated Debt Documents shall have been amended in a
manner satisfactory to the Administrative Agent to permit the
transactions contemplated by this Second Amendment.
Except as expressly amended hereby, the terms and conditions of the
Credit Agreement shall remain unchanged and in full force and effect.
3. This Amendment may be executed in any number of counterparts
and by the different parties hereto on separate counterparts, each of which
when so
0000CWPW.W51 -7-
<PAGE>
executed and delivered shall be an original, but all of which shall
together constitute one and the same instrument.
4. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
0000CWPW.W51 -8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Amendment as of the date
first above written.
INTERMEDIATE HOLDINGS INC.
By /s/ A. Foster Nelson
-----------------------------
Title: Vice President
TRANSPORT HOLDINGS INC.
By /s/ A. Foster Nelson
-----------------------------
Title: Vice President
THE CHASE MANHATTAN BANK, N.A.
Individually and as Administrative Agent
By /s/ Robert Foster
-----------------------------
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON
By /s/ Deidre Holland Cobery
-----------------------------
Title: Vice President
BANK ONE, TEXAS, N.A.
By /s/ Jim V. Miller
-----------------------------
Title: Vice President
0000CWPW.W51
<PAGE>
DRESDNER BANK AG, NEW YORK AND/OR
GRAND CAYMAN BRANCH
By /s/ Anthony C. Valencourt
-----------------------------
Title: First Vice-President
By /s/ Latisha Azweem
-----------------------------
Title: Assistant Treasurer
DEUTSCHE BANK AG, NEW YORK AND/OR
CAYMAN ISLANDS BRANCH
By /s/ Cynthia A. Gavenda
-----------------------------
Title: Associate
By /s/ Louis Caltavuturo
-----------------------------
Title: Associate
FIRST INTERSTATE BANK OF TEXAS, N.A.
By /s/ John R. Peloubet
-----------------------------
Title: Vice President
MELLON BANK, N.A.
By /s/ Susan M. Whitewood
-----------------------------
Title: Assistant Vice President
FLEET BANK, N.A.
By /s/ David Wilkie
-----------------------------
Title: Assistant Vice President
0000CWPW.W51
<PAGE>
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION
By /s/ Michael J. Burr
-----------------------------
Title: Sr. Vice President
0000CWPW.W51
<PAGE>
EXHIBIT
10.2
[EXHIBIT M, CONFORMED AS EXECUTED]
NEWCO II PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of June 26, 1996 (as amended, modified
or supplemented from time to time, this "Agreement"), made by THD Inc. a
Delaware corporation (the "Pledgor"), in favor of THE CHASE MANHATTAN BANK,
N.A., as Collateral Agent (the "Pledgee"), for the benefit of the Secured
Creditors (as defined below). Except as otherwise defined herein, terms
used herein and defined in the Credit Agreement (as defined below) shall be
used herein as therein defined.
W I T N E S S E T H :
WHEREAS, Intermediate Holdings Inc. (the "Borrower"), various
financial institutions from time to time party thereto (the "Banks"), and
The Chase Manhattan Bank, N.A., as Administrative Agent (together with any
successor agent, the "Administrative Agent", and together with the Banks,
the "Bank Creditors"), have entered into a Credit Agreement, dated as of
September 29, 1995, as amended, modified and supplemented by the First
Amendment dated as of December 14, 1995 (as further amended, modified or
supplemented from time to time, the "Credit Agreement"), providing for the
making of Loans to the Borrower as contemplated therein;
WHEREAS, the Borrower may from time to time be party to one or
more (i) interest rate agreements, interest rate cap agreements, interest
rate collar agreements or other similar agreements or arrangements, (ii)
foreign exchange contracts, currency swap agreements or similar agreements
or arrangements designed to protect against the fluctuations in currency
values and\or (iii) other types of hedging agreements from time to time
(each such agreement or arrangement with an Other Creditor (as hereinafter
defined), an "Interest Rate Protection Agreement or Other Hedging
Agreement"), with a Bank or an affiliate of a Bank (each such Bank or
affiliate, even if the respective Bank subsequently ceases to be a Bank
under the Credit Agreement for any reason, together with such Bank's or
affiliate's successors and
0000CWUT.W51 -1-
<PAGE>
assigns, collectively, the "Other Creditors," and together with Bank
Creditors, the "Secured Creditors");
WHEREAS, the Pledgor is a direct Wholly-Owned Subsidiary of the
Borrower;
WHEREAS, pursuant to a Guaranty, dated as of June 26, 1996 (the
"Newco II Guaranty") the Pledgor has guaranteed to the Secured Creditors
the payment when due of all obligations and liabilities of the Borrower
under or with respect to the Credit Documents and the Interest Rate
Protection Agreements or Other Hedging Agreements;
WHEREAS, it is a condition precedent to the effectiveness of the
Second Amendment, dated as of June 26, 1996, to the Credit Agreement that
the Pledgor shall have executed and delivered to the Pledgee this
Agreement;
WHEREAS, the Pledgor desires to execute this Agreement to satisfy
the conditions described in the preceding paragraph;
NOW, THEREFORE, in consideration of the benefits accruing to the
Pledgor, the receipt and sufficiency of which are hereby acknowledged, the
Pledgor hereby makes the following representations and warranties to the
Pledgee and hereby covenants and agrees with the Pledgee as follows:
1. SECURITY FOR OBLIGATIONS. This Agreement is made by the
Pledgor for the benefit of the Secured Creditors to secure:
(i) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations and
liabilities (including obligations which, but for the automatic stay
under Section 362(a) of the Bankruptcy Code, would become due) of the
Borrower, now existing or hereafter incurred under, arising out of or
in connection with the Pledgor's guaranty under the Newco II Guaranty
of the Credit Agreement and the other Credit Documents (the Credit
Documents, together with Interest Rate Protection Agreements and Other
Hedging Agreements being hereinafter collectively called the "Secured
Debt Agreements") (all such obligations and liabilities under this
clause (i), except to the extent consisting of obligations or
indebtedness with respect to Interest Rate Protection Agreements or
Other Hedging Agreements, being herein collectively called the "Credit
Document Obligations");
0000CWUT.W51 -2-
<PAGE>
(ii) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations (including
obligations which, but for the automatic stay under Section 362(a) of
the Bankruptcy Code, would become due) and liabilities of the
Borrower, now existing or hereafter incurred under, arising out of or
in connection with the Pledgor's guarantyunder the Newco II Guaranty
of any Interest Rate Protection Agreement or Other Hedging Agreement
(all such obligations and liabilities under
this clause (ii) being herein collectively called the "Other
Obligations");
(iii) any and all sums advanced by the Pledgee in order to
preserve the Collateral (as hereinafter defined) or preserve its
security interest in the Collateral;
(iv) in the event of any proceeding for the collection or
enforcement of any indebtedness, obligations, or liabilities of the
Borrower referred to in clauses (i), (ii) and (iii) above, after an
Event of Default (such term, as used in this Agreement, shall mean any
Event of Default under, and as defined in, the Credit Agreement, or
any payment default by the Borrower under any Interest Rate Protection
Agreement or Other Hedging Agreement and shall in any event include,
without limitation, any payment default (after the expiration of any
applicable grace period) on any of the Obligations (as hereinafter
defined)) shall have occurred and be continuing, the reasonable
expenses of retaking, holding, preparing for sale or lease, selling or
otherwise disposing or realizing on the Collateral, or of any exercise
by the Pledgee of its rights hereunder, together with reasonable
attorneys' fees and court costs; and
(v) all amounts paid by any Secured Creditor as to which such
Secured Creditor has the right to reimbursement under Section 11 of
this Agreement;
all such obligations, liabilities, sums and expenses set forth in clauses
(i) through (v) of this Section 1 being herein collectively called the
"Obligations".
2. DEFINITION OF STOCK, NOTES, SECURITIES, ETC. As used herein:
(i) the term "Stock" shall mean all of the issued and outstanding shares of
capital stock of any corporation at any time owned by the Pledgor,
including, without limitation, the TLIC Capital Stock, (ii) the term
"Notes" shall mean all promissory notes from time to time issued to, or
held by, the Pledgor, and (iii) the term "Securities" shall mean all of the
Stock and Notes. The Pledgor represents and warrants that on the date
hereof (i) each Subsidiary of the Pledgor, and the direct ownership
thereof, is listed in Annex A hereto; (ii) the Stock held by the Pledgor
consists of the number and type of shares of the stock of the corporations
as described in Annex B hereto; (iii) such Stock constitutes that
percentage of the issued and out-
0000CWUT.W51 -3-
<PAGE>
standing capital stock of the issuing corporation as is set forth in Annex
B hereto; (iv) the Notes held by the Pledgor consist of the promissory
notes described in Annex C hereto; and (v) on the date hereof, the Pledgor
owns no other Securities.
3. PLEDGE OF SECURITIES, ETC.
3.1. PLEDGE. To secure the Obligations and for the purposes set
forth in Section 1 hereof, the Pledgor hereby: (i) grants to the Pledgee a
security interest in all of the Collateral owned by the Pledgor; (ii)
pledges and deposits as security with the Pledgee the Securities owned by
the Pledgor on the date hereof, and delivers to the Pledgee certificates or
instruments therefor, duly endorsed in blank in the case of Notes and
accompanied by undated stock powers duly executed in blank by the Pledgor
in the case of Stock, or such other instruments of transfer as are
acceptable to the Pledgee; and (iii) assigns, transfers, hypothecates,
mortgages, charges and sets over to the Pledgee all of the Pledgor's right,
title and interest in and to such Securities (and in and to all
certificates or instruments evidencing such Securities), to be held by the
Pledgee, upon the terms and conditions set forth in this Agreement.
3.2. SUBSEQUENTLY ACQUIRED SECURITIES. If the Pledgor shall
acquire (by purchase, stock dividend or otherwise) any additional
Securities at any time or from time to time after the date hereof, the
Pledgor will forthwith pledge and deposit such Securities (or certificates
or instruments representing such Securities) as security with the Pledgee
and deliver to the Pledgee certificates therefor or instruments thereof,
duly endorsed in blank in the case of Notes and accompanied by undated
stock powers duly executed in blank in the case of Stock, or such other
instruments of transfer as are acceptable to the Pledgee, and will promptly
thereafter deliver to the Pledgee a certificate executed by any Authorized
Officer of the Pledgor describing such Securities and certifying that the
same have been duly pledged with the Pledgee hereunder.
3.3. UNCERTIFICATED SECURITIES. Notwithstanding anything to the
contrary contained in Sections 3.1 and 3.2 hereof, if any Securities
(whether now owned or hereafter acquired) are uncertificated securities,
the Pledgor shall promptly notify the Pledgee thereof, and shall promptly
take all actions required to perfect the security interest of the Pledgee
under applicable law (including, in any event, under Sections 8-313 and 8-
321 of the New York UCC, if applicable). The Pledgor further agrees to
take such actions as the Pledgee deems reasonably necessary or desirable to
effect the foregoing and to permit the Pledgee to exercise any of its
rights and remedies hereunder, and agrees to provide an opinion of counsel
reasonably satisfactory to the Pledgee with respect to any such pledge of
uncertificated Securities promptly upon request of the Pledgee.
0000CWUT.W51 -4-
<PAGE>
3.4 DEFINITIONS OF PLEDGED STOCK, PLEDGED NOTES, PLEDGED
SECURITIES AND COLLATERAL. All Stock at any time pledged or required to be
pledged hereunder is hereinafter called the "Pledged Stock," all Notes at
any time pledged or required to be pledged hereunder are hereinafter called
the "Pledged Notes," and all of the Pledged Stock and Pledged Notes
together are hereinafter called the "Pledged Securities." The Pledged
Securities, together with all Other Collateral (as hereinafter defined),
and together with all proceeds of such Pledged Securities and other
Collateral,
including any securities and moneys received and at the time held by the
Pledgee hereunder, is hereinafter called the "Collateral." For purposes of
this Agreement, the term "Other Collateral" shall mean all of the right,
title and interest of the Pledgor in, to and under all of the following,
whether now existing or hereafter from time to time acquired: (i) all
accounts receivable, (ii) all contracts, together with all contract rights
arising thereunder (including, without limitation, all rights under
Management Agreements and the Transaction Documents), (iii) all inventory,
(iv) all equipment, (v) all trademarks, service marks and trade names
together with the registrations and right to all renewals thereof, and the
goodwill of the business of the Pledgor symbolized by all trademark,
service marks and trade names (vi) all copyrights, (vii) all computer
programs of the Pledgor and all intellectual property rights therein and
all other proprietary information of the Pledgor, including, but not
limited to, trade secrets, (viii) all other goods, general intangibles,
chattel paper, documents and instruments, and (ix) all proceeds and
products of any and all of the foregoing.
4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. The Pledgee
shall have the right to appoint one or more sub-agents for the purpose of
retaining physical possession of the Pledged Securities, which may be held
(in the discretion of the Pledgee) in the name of the Pledgor, endorsed or
assigned in blank or in favor of the Pledgee or any nominee or nominees of
the Pledgee or a sub-agent appointed by the Pledgee. The Pledgee agrees to
promptly notify the Pledgor after the appointment of any sub-agent;
PROVIDED, HOWEVER, that the failure to give such notice shall not affect
the validity of such appointment.
5. VOTING, ETC., WHILE NO EVENT OF DEFAULT. Unless and until
(i) an Event of Default shall have occurred and be continuing and (ii)
written notice thereof shall have been given by the Pledgee to the Pledgor
(PROVIDED, that if an Event of Default specified in Section 8.05 of the
Credit Agreement shall occur, no such notice shall be required), the
Pledgor shall be entitled to exercise any and all voting and other
consensual rights pertaining to the Pledged Securities and to give all
consents, waivers or ratifications in respect thereof; PROVIDED, that no
vote shall be cast or any consent, waiver or ratification given or any
action taken which would violate or be inconsistent with any of the terms
of any Secured Debt Agreements, or which would have the effect of impairing
the position or interests of the Pledgee or any other Secured Creditor.
All the rights of the Pledgor to vote and to give consents, waivers
0000CWUT.W51 -5-
<PAGE>
and ratifications shall cease in case an Event of Default shall occur and
be continuing and, to the extent applicable, written notice thereof shall
have been given as provided in clause (ii) above, in which case Section 7
shall be come applicable.
6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless an Event of
Default shall have occurred and be continuing, all cash dividends payable
in respect of the Pledged Stock and all payments in respect of the Pledged
Notes shall be paid tothe Pledgor; PROVIDED, that all cash dividends
payable in respect of the
Pledged Stock which are determined by the Pledgee to represent in whole or
in part a liquidating or other distribution in return of capital shall be
paid, to the extent so determined to represent a liquidating or other
distribution in return of capital, to the Pledgee and retained by it as
part of the Collateral. The Pledgee shall also be entitled to receive
directly, and to retain as part of the Collateral:
(i) all other or additional stock or other securities or
property (other than cash) paid or distributed by way of dividend or
otherwise in respect of the Pledged Stock;
(ii) all other or additional stock or other securities or
property (including cash), which may be paid or distributed in respect
of the Pledged Stock by way of stock-split, spin-off, split-up,
reclassification, combination of shares or similar rearrangement; and
(iii) all other or additional stock or other securities or
property (including cash) which may be paid in respect of the
Collateral by reason of any consolidation, merger, exchange of stock,
conveyance of assets, liquidation or similar corporate reorganization;
All dividends, distributions or other payments which are received by the
Pledgor in contravention of the provisions of this Section 6 or Section 7
shall be received in trust for the benefit of the Pledgee, shall be
segregated from other property or funds of the Pledgor and shall be
forthwith paid over to the Pledgee as Collateral in the same form as so
received (with any necessary endorsement).
7. REMEDIES IN CASE OF EVENT OF DEFAULT. In case an Event of
Default shall have occurred and be continuing, the Pledgee shall be
entitled to exercise all of the rights, powers and remedies (whether vested
in it by this Agreement or by any other Secured Debt Agreement or by law)
for the protection and enforcement of its rights in respect of the
Collateral, including, without limitation, all the rights and remedies of a
secured party upon default under the Uniform Commercial Code of the State
of New York, and the Pledgee shall be entitled, without limitation, to
exercise the following rights, which the Pledgor hereby agrees to be
commercially reasonable:
0000CWUT.W51 -6-
<PAGE>
(i) to receive all amounts payable in respect of the Collateral
payable to Pledgor under Section 6 hereof;
(ii) to transfer all or any part of the Pledged Securities into
the Pledgee's name or the name of its nominee or nominees (the Pledgee
agrees to promptly notify the Pledgor after such transfer; PROVIDED,
HOWEVER, that the failure to give such notice shall not affect the
validity of such transfer);
(iii) to accelerate any Pledged Note which may be accelerated in
accordance with its terms, and take any other action to collect upon
any Pledged Note (including, without limitation, to make any demand
for payment thereon);
(iv) subject to the giving of written notice to the Pledgor in
accordance with clause (ii) of Section 5 hereof, to vote all or any
part of the Pledged Stock (whether or not transferred into the name of
the Pledgee) and give all consents, waivers and ratifications in
respect of the Collateral and otherwise act with respect thereto as
though it were the outright owner thereof (the Pledgor hereby
irrevocably constituting and appointing the Pledgee the proxy and
attorney-in-fact of the Pledgor, with full power of substitution to do
so); and
(v) at any time or from time to time to sell, assign and
deliver, or grant options to purchase, all or any part of the
Collateral, or any interest therein, at any public or private sale,
without demand of performance, advertisement or notice of intention to
sell or of the time or place of sale or adjournment thereof or to
redeem or otherwise (all of which are hereby waived by the Pledgor),
for cash, on credit or for other property, for immediate or future
delivery without any assumption of credit risk, and for such price or
prices and on such terms as the Pledgee in its absolute discretion may
determine; PROVIDED, that at least 10 days' notice of the time and
place of any such sale shall be given to the Pledgor. The Pledgor
hereby waives and releases to the fullest extent permitted by law any
right or equity of redemption with respect to the Collateral, whether
before or after sale hereunder, and all rights, if any, of marshalling
the Collateral and any other security for the Obligations or
otherwise. At any such sale, unless prohibited by applicable law, the
Pledgee on behalf of the Secured Creditors may bid for and purchase
all or any part of the Collateral so sold free from any such right or
equity of redemption. Neither the Pledgee nor any Secured Creditor
shall be liable for failure to collect or realize upon any or all of
the Collateral or for any delay in so doing nor shall any of them be
under any obligation to take any action whatsoever with regard
thereto.
8. REMEDIES, ETC., CUMULATIVE. Each right, power and remedy of
the Pledgee provided for in this Agreement or any other Secured Debt
Agreement
0000CWUT.W51 -7-
<PAGE>
or now or hereafter existing at law or in equity or by statute
shall be cumulative and concurrent and shall be in addition to every other
such right, power or remedy. The exercise or beginning of the exercise by
the Pledgee or any other Secured Creditor of any one or more of the rights,
powers or remedies provided for in this Agreement or any other Secured Debt
Agreement or now or hereafter existing at law or in equity or by statute or
otherwise shall not preclude the simultaneous or later exercise by the
Pledgee or any other Secured Creditor of all such other rights, powers or
remedies, and no failure or delay on the part of the Pledgee or any other
Secured Creditor to exercise any such right, power or remedy shall operate
as a waiver thereof. The Secured Creditors agree that this Agreement may
be enforced only by the action of the Administrative Agent or the Pledgee,
in each case acting upon the instructions of the Required Banks (or, after
the date on which all Credit Document Obligations have been paid in full,
the holders of at least the majority of the outstanding Other Obligations)
and that no other Secured Creditor shall have any right individually to
seek to enforce or to enforce this Agreement or to realize upon the
security to be granted hereby, it being understood and agreed that such
rights and remedies may be exercised by the Administrative Agent or the
Pledgee or the holders of at least a majority of the outstanding Other
Obligations, as the case maybe, for the benefit of the Secured Creditors
upon the terms of this Agreement.
9. APPLICATION OF PROCEEDS. (a) All moneys collected by the
Pledgee upon any sale or other disposition of the Collateral pursuant to
the terms of this Agreement, together with all other moneys received by the
Pledgee hereunder, shall be applied as follows:
(i) first, to the payment of all Obligations owing the Pledgee
of the type provided in clauses (iii) and (iv) of the definition of
Obligations;
(ii) second, to the extent proceeds remain after the application
pursuant to the preceding clause (i), an amount equal to the
outstanding Obligations shall be paid to the Secured Creditors as
provided in Section 9(c) hereof with each Secured Creditor receiving
an amount equal to its outstanding Obligations or, if the proceeds are
insufficient to pay in full all such Obligations, its Pro Rata Share
(as defined below) of the amount remaining to be distributed; and
(iii) third, to the extent proceeds remain after the application
pursuant to the preceding clauses (i) and (ii) and following the
termination of this Agreement pursuant to Section 18 hereof, to the
Pledgor or, to the extent directed by the Pledgor or a court of
competent jurisdiction, to whomever may be lawfully entitled to
receive such surplus.
0000CWUT.W51 -8-
<PAGE>
(b) For purposes of this Agreement, "Pro Rata Share" shall mean,
when calculating a Secured Creditor's portion of any distribution or
amount, that amount (expressed as a percentage) equal to a fraction the
numerator of which is the then unpaid amount of such Secured Creditor's
Obligations and the denominator of which is the then outstanding amount of
all Obligations.
(c) All payments required to be made to the Bank Creditors
hereunder shall be made to the Administrative Agent under the Credit
Agreement for the account of the Bank Creditors and all payments required
to be made to the Other Creditors hereunder shall be made directly to the
respective Other Creditor.
(d) For purposes of applying payments received in accordance
with this Section 9, the Pledgee shall be entitled to rely upon (i) the
Administrative Agent under the Credit Agreement and (ii) the Other
Creditors for a determination (which the Administrative Agent, each Other
Creditor and the Secured Creditors agree (or shall agree) to provide upon
request of the Collateral Agent) of the outstanding Obligations owed to the
Bank Creditors or the Other Creditors, as the case may be. Unless it has
actual knowledge (including by way of written notice from a Bank Creditor
or an Other Creditor) to the contrary, the Administrative Agent under the
Credit Agreement, in furnishing information pursuant to the preceding
sentence, and the Collateral Agent, in acting hereunder, shall be entitled
to assume that (x) no Credit Document Obligations other than principal,
interest and regularly accruing fees are owing to any Bank Creditor and (y)
no Interest Rate Protection Agreement or Other Hedging Agreement, or Other
Obligations in respect thereof, are in existence.
(e) It is understood and agreed that the Pledgor shall remain
liable to the extent of any deficiency between the amount of the proceeds
of the Collateral hereunder and the aggregate amount of the Obligations.
10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral
by the Pledgee hereunder (whether by virtue of the power of sale herein
granted, pursuant to judicial process or otherwise), the receipt of the
Pledgee or the officer making the sale shall be a sufficient discharge to
the purchaser or purchasers of the Collateral so sold, and such purchaser
or purchasers shall not be obligated to see to the application of any part
of the purchase money paid over to the Pledgee or such officer or be
answerable in any way for the misapplication or nonapplication thereof.
11. INDEMNITY. The Pledgor agrees (i) to indemnify and hold
harmless the Pledgee in such capacity and each other Secured Creditor from
and against any and all claims, demands, losses, judgments and liabilities
of whatsoever kind or nature, and (ii) to reimburse the Pledgee and each
other Secured Creditor for all costs and expenses, including attorneys'
fees, growing out of or resulting from this Agree-
0000CWUT.W51 -9-
<PAGE>
ment or the exercise by the Pledgee of any right or remedy granted to it
hereunder or under any other Secured Debt Agreement except, with respect to
clauses (i) and (ii) above, for those arising from the Pledgee's or such
other Secured Creditor's gross negligence or willful misconduct. In no
event shall the Pledgee be liable, in the absence of gross negligence or
willful misconduct on its part, for any matter or thing in connection with
this Agreement other than to account for moneys actually received by it in
accordance with the terms hereof. If and to the extent that the
obligations of the Pledgor under this Section 11 are unenforceable for any
reason, the Pledgor hereby agrees to make the maximum contribution to the
payment and satisfaction of such obligations which is permissible under
applicable law.
12. FURTHER ASSURANCES, POWER OF ATTORNEY. (a) The Pledgor
agrees that it will join with the Pledgee in executing and, at the
Pledgor's own expense, file and refile under the applicable UCC or
appropriate local equivalent, such financing statements, continuation
statements and other documents in such offices as the Pledgee may deem
necessary or appropriate and wherever required or permitted by law in order
to perfect and preserve the Pledgee's security interest in the Collateral
and hereby authorizes the Pledgee to file financing statements and
amendments thereto relative to all or any part of the Collateral without
the signature of the Pledgor where permitted by law, and agrees to do such
further acts and things and to execute and deliver to the Pledgee such
additional conveyances, assignments, agreements and instruments as the
Pledgee may reasonably require or deem advisable to carry into effect the
purposes of this Agreement or to further assure and confirm unto the
Pledgee its rights, powers and remedies hereunder. The Pledgor will pay
any applicable filing fees, recordation taxes and related expenses relating
to its Collateral.
(b) The Pledgor hereby appoints the Pledgee the Pledgor's
attorney in fact, with full authority in the place and stead of the Pledgor
and in the name of the Pledgor or otherwise, from time to time after the
occurrence and during the continuance of an Event of Default, in the
Pledgee's discretion to take any action and to execute any instrument which
the Pledgee may reasonably deem necessary or advisable to accomplish the
purposes of this Agreement.
13. THE PLEDGEE AS AGENT. The Pledgee will hold in accordance
with this Agreement all items of the Collateral at any time received under
this Agreement. It is expressly understood and agreed that the obligations
of the Pledgee as holder of the Collateral and interests therein and with
respect to the disposition thereof, and otherwise under this Agreement, are
only those expressly set forth in this Agreement. The Pledgee shall act
hereunder on the terms and conditions set forth herein and in Section 10 of
the Credit Agreement.
0000CWUT.W51 -10-
<PAGE>
14. TRANSFER BY THE PLEDGOR. Except for sales of Collateral
permitted pursuant to the Credit Agreement, the Pledgor will not sell or
otherwise dispose of, grant any option with respect to, or mortgage, pledge
or otherwise encumber any of the Collateral or any interest therein (except
in accordance with the terms of this Agreement).
15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PLEDGOR.
(a) The Pledgor represents, warrants and covenants that (i) it
is the legal, record and beneficial owner of, and has good and marketable
title to, all Securities pledged by it hereunder, subject to no pledge,
lien, mortgage, hypothecation, security interest, charge, option or other
encumbrance whatsoever, except the liens and security interests created by
this Agreement; (ii) it has full power, authority and legal right to pledge
all the Securities pledged by it pursuant to this Agreement; (iii) this
Agreement has been duly authorized,
executed and delivered by the Pledgor and constitutes a legal, valid and
binding obligation of the Pledgor enforceable against it in accordance with
its terms, except to the extent that the enforceability hereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally and by equitable
principles (regardless of whether enforcement is sought in equity or at
law); (iv) no consent of any other party (including, without limitation,
any stockholder or creditor of the Pledgor or any of its Subsidiaries) and
no consent, license, permit, approval or authorization of, exemption by,
notice or report to, or registration, filing or declaration with, any
governmental authority is required to be obtained by the Pledgor in
connection with the execution, delivery or performance of this Agreement,
or in connection with the exercise of its rights and remedies pursuant to
this Agreement, except as may be required in connection with the
disposition of the Securities by laws affecting the offering and sale of
securities generally; (v) the execution, delivery and performance of this
Agreement by the Pledgor does not violate any provision of any applicable
law or regulation or of any order, judgment, writ, award or decree of any
court, arbitrator or governmental authority, domestic or foreign, or of the
certificate of incorporation or by-laws of the Pledgor or of any securities
issued by the Pledgor or any of its Subsidiaries, or of any mortgage,
indenture, lease, deed of trust, agreement, instrument or undertaking to
which the Pledgor or any of its Subsidiaries is a party or which purports
to be binding upon the Pledgor or any of its Subsidiaries or upon any of
their respective assets and will not result in the creation or imposition
of any lien or encumbrance on any of the assets of the Pledgor or any of
its Subsidiaries except as contemplated by this Agreement; (vi) all of the
shares of Pledged Stock have been duly and validly issued, are fully paid
and nonassessable; (vii) each of the Pledged Notes is the legal, valid and
binding obligation of the respective obligor, enforceable against such
obligor in accordance with its terms, except to the extent that the
enforceability
0000CWUT.W51 -11-
<PAGE>
thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally and by equitable principles (regardless of whether
enforcement is sought in equity or at law); and (viii) the pledge and
assignment of the Securities pursuant to this Agreement, together with the
delivery of such Securities pursuant to this Agreement (which delivery has
been made), creates a valid and perfected first security interest in such
Securities and the proceeds thereof, subject to no prior lien or
encumbrance or to any agreement purporting to grant to any third party a
lien or encumbrance on the property or assets of the Pledgor which would
include the Securities. The Pledgor covenants and agrees that it will
defend the Pledgee's right, title and security interest in and to the
Securities and the proceeds thereof against the claims and demands of all
persons whomsoever; and the Pledgor covenants and agrees that it will have
like title to and right to pledge any other property at any time hereafter
pledged to the Pledgee as Collateral hereunder and will likewise defend the
right thereto and security interest therein of the Pledgee and the other
Secured Creditors.
(b) The Pledgor represents, warrants, and covenants that all
filings, registrations and recordings necessary or appropriate to create,
preserve and perfect the security interest granted by the Pledgor to the
Pledgee hereby in respect of the Collateral have been accomplished and the
security interest granted to the Pledgee pursuant to this Agreement in and
to the Collateral creates a perfected security interest therein prior to
the rights of all other Persons therein and subject to no other Liens and
is entitled to all the rights, priorities and benefits afforded by the
Uniform Commercial Code or other relevant law as enacted in any relevant
jurisdiction to perfected security interests.
(c) The Pledgor represents, warrants, and covenants that as of
the date hereof, there is no financing statement (or similar statement or
instrument of registration under the law of any jurisdiction) covering or
purporting to cover any interest of any kind in the Collateral, and so long
as the Total Commitment has not been terminated or any Note remains unpaid
or any of the Obligations remain unpaid or any Interest Rate Protection
Agreement or Other Hedging Agreement remains in effect or any Obligations
are owed with respect thereto, the Pledgor will not execute or authorize to
be filed in any public office any financing statement (or similar statement
or instrument of registration under the law of any jurisdiction) or
statements relating to the Collateral, except financing statements filed or
to be filed in respect of and covering the security interests granted
hereby by the Pledgor.
(d) The Pledgor represents, warrants and covenants that the
chief executive office of the Pledgor is located at 900 Market Street,
Wilmington, Delaware. The Pledgor will not move its chief executive office
except to such new location as the Pledgor may establish in accordance with
the last sentence of this Section 15(d). The
0000CWUT.W51 -12-
<PAGE>
Pledgor shall not establish a
new chief executive office until (i) it shall have given to the Pledgee not
less than 30 days' prior written notice of its intention to do so, clearly
describing such new location and providing such other information in
connection therewith as the Pledgee may reasonably request and (ii) with
respect to such new location, it shall have taken all action, satisfactory
to the Pledgee, to maintain the security interest of the Pledgee in the
Collateral intended to be granted hereby at all times fully perfected and
in full force and effect.
(e) CHANGE OF NAME. The Pledgor represents, warrants and
covenants that the Pledgor shall not change its legal name or assume or
operate in any jurisdiction under any trade, fictitious or other name
except new names established in accordance with the last sentence of this
Section 15(e). The Pledgor shall not assume or operate in any jurisdiction
under any new trade, fictitious or other name until (i) it shall have given
to the Pledgee not less than 30 days' prior written notice of its intention
so to do, clearly describing such new name and the jurisdictions in which
such new name shall be used and providing such other information in
connection therewith as the Pledgee may request and (ii) with respect to
such new name, it shall have taken all action requested by the Pledgee, to
maintain the security interest of the Pledgee in the Collateral intended to
be granted hereby at all times fully perfected and in full force and
effect.
16. PLEDGOR'S OBLIGATIONS ABSOLUTE, ETC. The obligations of the
Pledgor under this Agreement shall be absolute and unconditional and shall
remain in full force and effect without regard to, and shall not be
released, suspended, discharged, terminated or otherwise affected by, any
circumstance or occurrence whatsoever, including, without limitation: (i)
any renewal, extension, amendment or modification of or addition or
supplement to or deletion from any Secured Debt Agreement or any other
instrument or agreement referred to therein, or any assignment or transfer
of any thereof; (ii) any waiver, consent, extension, indulgence or other
action or inaction under or in respect of any such agreement or instrument
or this Agreement; (iii) any furnishing of any additional security to the
Pledgee or its assignee or any acceptance thereof or any release of any
security by the Pledgee or its assignee; (iv) any limitation on any party's
liability or obligations under any such instrument or agreement or any
invalidity or unenforceability, in whole or in part, of any such instrument
or agreement or any term thereof; or (v) any bankruptcy, insolvency,
reorganization, composition, adjustment, dissolution, liquidation or other
like proceeding relating to the Borrower or any Subsidiary of the Borrower,
or any action taken with respect to this Agreement by any trustee or
receiver, or by any court, in any such proceeding, whether or not the
Pledgor shall have notice or knowledge of any of the foregoing.
0000CWUT.W51 -13-
<PAGE>
17. REGISTRATION, ETC. (a) If an Event of Default shall have
occurred and be continuing and the Pledgor shall have received from the
Pledgee a written request or requests that the Pledgor cause any
registration, qualification or compliance under any Federal or state
securities law or laws to be effected with respect to all or any part of
the Pledged Stock, the Pledgor as soon as practicable and at its expense
will use its reasonable efforts to cause such registration to be effected
(and be kept effective) and will use its reasonable efforts to cause such
qualification and compliance to be effected (and be kept effective) as may
be so requested and as would permit or facilitate the sale and distribution
of such Pledged Stock, including, without limitation, registration under
the Securities Act of 1933 as then in effect (or any similar statute then
in effect), appropriate qualifications under applicable blue sky or other
state securities laws and appropriate compliance with any other government
requirements; PROVIDED, that the Pledgee shall furnish to the Pledgor such
information regarding the Pledgee as the Pledgor may request in writing and
as shall be required in connection with any such registration,
qualification or compliance. The Pledgor will cause the Pledgee to be kept
reasonably advised in writing as to the progress of each such registration,
qualification or compliance and as to the completion thereof,
will furnish to the Pledgee such number of prospectuses, offering circulars
or other documents incident thereto as the Pledgee from time to time may
reasonably request, and will indemnify the Pledgee, each other Secured
Creditor and all others participating in the distribution of the Pledged
Stock against all claims, losses, damages and liabilities caused by any
untrue statement (or alleged untrue statement) of a material fact contained
therein (or in any related registration statement, notification or the
like) or by any omission (or alleged omission) to state therein (or in any
related registration statement, notification or the like) a material fact
required to be stated therein or necessary to make the statements therein
in light of the circumstances under which made, not misleading, except
insofar as the same may have been caused by an untrue statement or omission
based upon information furnished in writing to the Pledgor by the Pledgee
or such other Secured Creditor expressly for use therein.
(b) If at any time when the Pledgee shall determine to exercise
its right to sell all or any part of the Pledged Securities pursuant to
Section 7 hereof, such Pledged Securities or the part thereof to be sold
shall not, for any reason whatsoever, be effectively registered under the
Securities Act of 1933, as then in effect, the Pledgee may, in its sole and
absolute discretion, sell such Pledged Securities or part thereof by
private sale in such manner and under such circumstances as the Pledgee may
deem necessary or advisable in order that such sale may legally be effected
without such registration; PROVIDED, that at least 10 days' notice of the
time and place of any such sale shall be given to the Pledgor. Without
limiting the generality of the foregoing, in any such event the Pledgee, in
its sole and absolute discretion: (i) may proceed to make such private
sale notwithstanding that a registration statement for the purpose of
registering such Pledged Securities or part thereof shall have been filed
under such
0000CWUT.W51 -14-
<PAGE>
Securities Act; (ii) may approach and negotiate with a single
possible purchaser to effect such sale; and (iii) may restrict such sale to
a purchaser who will represent and agree that such purchaser is purchasing
for its own account, for investment, and not with a view to the
distribution or sale of such Pledged Securities or part thereof. In the
event of any such sale, the Pledgee shall incur no responsibility or
liability for selling all or any part of the Pledged Securities at a price
which the Pledgee, in its sole and absolute discretion, may in good faith
deem reasonable under the circumstances, notwithstanding the possibility
that a substantially higher price might be realized if the sale were
deferred until after registration as aforesaid.
18. TERMINATION, RELEASE. (a) After the Termination Date (as
defined below), this Agreement shall terminate (provided that all
indemnities set forth herein including, without limitation, in Section 11
hereof shall survive any such termination) and the Pledgee, at the request
and expense of the Pledgor, will promptly execute and deliver to the
Pledgor a proper instrument or instruments acknowledging the satisfaction
and termination of this Agreement, and will duly release from the security
interest created hereby and assign, transfer and deliver to the Pledgor
(without recourse and without any representation or warranty) such of the
Collateral as may be in the possession of the Pledgee and as has not
theretofore been sold or otherwise applied or released pursuant to this
Agreement. As used in this Agreement, "Termination Date" shall mean the
date upon which the Total Commitment and all Interest Rate Protection
Agreements or Other Hedging Agreements have been terminated, no Note (as
defined in the Credit Agreement) is outstanding and all other Obligations
(other than indemnities described in Section 11 hereof and in Section 11.13
of the Credit Agreement which are not then due and payable) have been paid
in full.
(b) In the event that any part of the Collateral is sold in
connection with a sale permitted by Section 7.02 of the Credit Agreement or
is otherwise released at the direction of the Required Banks (or all the
Banks if required by Section 11.12 of the Credit Agreement), the Pledgee,
at the request and expense of the Pledgor will duly release from the
security interest created hereby and assign, transfer and deliver to the
Pledgor (without recourse and without any representation or warranty) such
of the Collateral as is then being (or has been) so sold or released and as
may be in possession of the Pledgee and has not theretofore been released
pursuant to this Agreement.
(c) At any time that a Pledgor desires that Collateral be
released as provided in the foregoing Section 18(a) or (b), it shall
deliver to the Pledgee a certificate signed by an Authorized Officer of the
Pledgor stating that the release of the respective Collateral is permitted
pursuant to Section 18(a) or (b).
0000CWUT.W51 -15-
<PAGE>
19. NOTICES, ETC. All notices and other communications
hereunder shall be in writing and shall be delivered or mailed by first
class mail, postage prepaid, or telecopied, addressed:
(a) if to the Pledgor, at its address set forth opposite its
signature below;
(b) if to the Pledgee, at:
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, New York 10081
Attention: Richard Bosek
Telephone No.: (212) 278-4552
Telecopier No.: (212) 552-1999
(c) if to any Bank (other than the Pledgee), at such address as
such Bank shall have specified in the Credit Agreement;
(d) if to any Other Creditor, at such address as such Other
Creditor shall have specified in writing to the Pledgor and the
Pledgee;
or at such other address as shall have been furnished in writing by any
Person described above to the party required to give notice hereunder.
20. WAIVER; AMENDMENT. None of the terms and conditions of this
Agreement may be changed, waived, modified or varied in any manner
whatsoever unless in writing duly signed by the Pledgor and the Pledgee
(with the written consent of either (x) the Required Banks (or all the
Banks if required by Section 11.12 of the Credit Agreement) at all times
prior to the time on which all Credit Document Obligations have been paid
in full or (y) the holders of at least a majority of the outstanding Other
Obligations at all times after the time on which all Credit Document
Obligations have been paid in full); PROVIDED, that any change, waiver,
modification or variance affecting the rights and benefits of a single
Class (as defined below) of Secured Creditors (and not all Secured
Creditors in a like or similar manner) shall require the written consent of
the Requisite Creditors (as defined below) of such Class. For the purpose
of this Agreement, the term "Class" shall mean each class of Secured
Creditors, I.E., whether (i) the Bank Creditors as holders of the Credit
Document Obligations or (ii) the Other Creditors as holders of the Other
Obligations. For the purpose of this Agreement, the term "Requisite
Creditors" of any Class shall mean each of (i) with respect to the Credit
Document Obligations, the Required Banks and (ii) with respect to the Other
Obligations, the holders of at least a majority of all obligations
out-
0000CWUT.W51 -16-
<PAGE>
standing from time to time under the Interest Rate Protection Agreements
or Other Hedging Agreements.
21. PLEDGOR'S DUTIES. It is expressly agreed, anything herein
contained to the contrary notwithstanding, that the Pledgor shall remain
liable to perform all of the obligations, if any, assumed by it with
respect to the Collateral, and the Pledgee shall not have any obligations
or liabilities with respect to any Collateral by reason of or arising out
of this Agreement, nor shall the Pledgee be required or obligated in any
manner to perform or fulfill any of the obligations of the Pledgor under or
with respect to any Collateral.
22. MISCELLANEOUS. This Agreement shall be binding upon the
successors and assigns of the Pledgor and shall inure to the benefit of and
be enforceable by the Pledgee and its successors and assigns. THIS
AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED
BY THE LAW OF THE STATE OF NEW YORK. The headings in this Agreement are
for purposes of reference only and shall not limit or define the meaning
hereof. This Agreement may be executed in any number of counterparts, each
of which shall be an original, but all of which shall constitute one
instrument.
IN WITNESS WHEREOF, the Pledgor and the Pledgee have caused this
Agreement to be executed by their duly elected officers duly authorized as
of the date first above written.
Address: THD INC.
as Pledgor
900 Market Street
Wilmington, Delaware 19801
By /s/ Francis B. Jacobs
---------------------
Title: President
THE CHASE MANHATTAN BANK,
N.A., as Pledgee
By /s/ Robert Foster
-----------------
Title: Vice President
0000CWUT.W51 -17-
<PAGE>
0000CWUT.W51 -18-
<PAGE>
<PAGE>
ANNEX A
to
PLEDGE AGREEMENT
LIST OF SUBSIDIARIES
SUBSIDIARY PERCENTAGE OWNED
THD Inc. 100%
TLIC Life Insurance Company 100% (owned by THD Inc.)
Transport Life Insurance Company 100% (owned by TLIC Life
Insurance Company)
Continental Life Insurance Company 100% (owned By Transport Life
Insurance Company)
0000CWUT.W51 -19-
<PAGE>
ANNEX B
to
PLEDGE AGREEMENT
LIST OF STOCK
TLIC LIFE INSURANCE COMPANY
700,000 shares of Common Stock, par value $1.00 per share
0000CWUT.W51 -20-
<PAGE>
ANNEX C
to
PLEDGE AGREEMENT
LIST OF NOTES
NONE
0000CWUT.W51
<PAGE>
[EXHIBIT L, CONFORMED AS EXECUTED]
EXHIBIT
10.3
NEWCO II GUARANTY
GUARANTY, dated as of June 26, 1996, made by THD, Inc. (the
"Guarantor"). Except as otherwise defined herein, terms used herein and
defined in the Credit Agreement (as hereinafter defined) shall be used
herein as therein defined.
W I T N E S S E T H :
WHEREAS, Intermediate Holdings Inc., a Delaware corporation (the
"Borrower"), various lending institutions from time to time party thereto
(the "Banks"), and The Chase Manhattan Bank, N.A. as administrative agent
(the "Administrative Agent") have entered into a Credit Agreement, dated as
of September 29, 1995 as amended, modified and supplemented by the First
Amendment, dated as of December 14, 1995 (as further modified, supplemented
or amended from time to time, the "Credit Agreement"), providing for the
making of Loans as contemplated therein (the Banks and the Administrative
Agent herein called the "Bank Creditors");
WHEREAS, the Borrower may from time to time enter into one or
more interest rate protection agreements (including, without limitation,
interest rate swaps, caps, floors, collars and similar agreements) (each,
an "Interest Rate Protection or Other Hedging Agreement") with one or more
Banks or affiliates of a Bank (each such Bank or affiliate party to any
such Interest Rate Protection or Other Hedging Agreement, even if any such
Bank subsequently ceases to be a Bank under the Credit Agreement for any
reason, together with their subsequent assigns, if any, herein called
"Interest Rate Protection Creditors," and all Interest Rate Protection
Creditors, together with the Bank Creditors, herein collectively called the
"Creditors");
WHEREAS, the Guarantor is a direct Wholly-Owned Subsidiary of the
Borrower;
WHEREAS, the Borrower has requested the Bank Creditors to amend
the Credit Agreement as set forth in the Second Amendment, dated as of June
26, 1996 (the "Second Amendment");
0000CWTR.W51
<PAGE>
WHEREAS, it is a condition to the effectiveness of the Second
Amendment that the Guarantor shall have executed and delivered this
Guaranty; and
WHEREAS, the Guarantor will obtain benefits from the incurrence
of Loans by the Borrower under the Credit Agreement and the entering into
of any Interest Rate Protection or Other Hedging Agreement and,
accordingly, desires to execute this Guaranty in order to satisfy the
conditions described in the preceding paragraph.
NOW, THEREFORE, in consideration of the foregoing and other
benefits accruing to the Guarantor, the receipt and sufficiency of which
are hereby acknowledged, the Guarantor hereby makes the following
representations and warranties to the Creditors and hereby covenants and
agrees with each Creditor as follows:
1. The Guarantor irrevocably and unconditionally guarantees (i)
to the Bank Creditors the full and prompt payment when due (whether at the
stated maturity, by acceleration or otherwise) of (x) the principal of and
interest on the Notes issued by, and the Loans made to the Borrower under
the Credit Agreement and (y) all other obligations (including obligations
which, but for any automatic stay under Section 362(a) of the Bankruptcy
Code, would become due) and liabilities owing by the Borrower to the Bank
Creditors under the Credit Agreement (including, without limitation,
indemnities, Fees and interest thereon) now existing or hereafter incurred
under, arising out of or in connection with the Credit Agreement or any
other Credit Document and the due performance and compliance with the terms
of the Credit Documents by the Borrower (all such principal, interest,
liabilities and obligations being herein collectively called the "Credit
Agreement Obligations") and (ii) to each Interest Rate Protection Creditor
the full and prompt payment when due (whether at the stated maturity, by
acceleration or otherwise) of all obligations and liabilities owing by the
Borrower under any Interest Rate Protection or Other Hedging Agreement,
whether now in existence or hereafter arising, and the due performance and
compliance by the Borrower with all terms, conditions and agreements
contained therein (all such obligations and liabilities being herein
collectively called the "Interest Rate Protection Obligations," and
together with the Credit Agreement Obligations herein collectively called
the "Guaranteed Obligations"). The Guarantor understands, agrees and
confirms that the Creditors may enforce this Guaranty up to the full amount
of the Guaranteed Obligations against the Guarantor without proceeding
against any other Guarantor, the Borrower, against any security for the
Guaranteed Obligations, or under any other guaranty covering all or a
portion of the Guaranteed Obligations. All payments by the Guarantor under
this Guaranty shall be made on the same basis as payments by the Borrower
under Sections 3.03 and 3.04 of the Credit Agreement.
0000CWTR.W51 -2-
<PAGE>
2. Additionally, the Guarantor unconditionally and irrevocably
guarantees the payment of any and all Guaranteed Obligations of the
Borrower to the Creditors whether or not due or payable by the Borrower
upon the occurrence in respect of the Borrower of any of the events
specified in Section 8.05 of the Credit Agreement, and unconditionally and
irrevocably promises to pay such Guaranteed Obligations to the Creditors,
or order, on demand, in lawful money of the United States.
3. The liability of the Guarantor hereunder is exclusive and
independent of any security for or other guaranty of the indebtedness of
the Borrower whether executed by such Guarantor, any other guarantor or by
any other party, and the liability of the Guarantor hereunder shall not be
affected or impaired by (a) any direction as to application of payment by
the Borrower or by any other party, (b) any other continuing or other
guaranty, undertaking or maximum liability of the guarantor or of any other
party as to the indebtedness of the Borrower, (c) any payment on or in
reduction of any such other guaranty or undertaking, (d) any dissolution,
termination or increase, decrease or change in personnel by the Borrower or
(e) any payment made to any Creditor on the indebtedness which any Creditor
repays the Borrower pursuant to court order in any bankruptcy,
reorganization, arrangement, moratorium or other debtor relief proceeding,
and the Guarantor waives any right to the deferral or modification of its
obligations hereunder by reason of any such proceeding.
4. The obligations of the Guarantor hereunder are independent
of the obligations of any other guarantor or the Borrower, and a separate
action or actions may be brought and prosecuted against the Guarantor
whether or not action is brought against any other guarantor or the
Borrower and whether or not any other guarantor or the Borrower be joined
in any such action or actions. The Guarantor waives, to the fullest extent
permitted by law, the benefit of any statute of limitations affecting its
liability hereunder or the enforcement thereof. Any payment by the
Borrower or other circumstance which operates to toll any statute of
limitations as to the Borrower shall operate to toll the statute of
limitations as to the Guarantor.
5. Any Creditor may at any time and from time to time without
the consent of, or notice to, the Guarantor, without incurring
responsibility to such Guarantor, without impairing or releasing the
obligations of such Guarantor hereunder, upon or without any terms or
conditions and in whole or in part:
(a) change the manner, place or terms of payment of, and/or
change or extend the time of payment of, renew or alter, any of the
Guaranteed Obligations, any security therefor, or any liability
incurred directly or indirectly
0000CWTR.W51 -3-
<PAGE>
in respect thereof, and the guaranty herein made shall apply to the
Guaranteed Obligations as so changed, extended, renewed or altered;
(b) sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order any property by
whomsoever at any time pledged or mortgaged to secure, or howsoever
securing, the Guaranteed Obligations or any liabilities (including any
of those hereunder) incurred directly or indirectly in respect thereof
or hereof, and/or any offset thereagainst;
(c) exercise or refrain from exercising any rights against the
Borrower or others or otherwise act or refrain from acting;
(d) settle or compromise any of the Guaranteed Obligations, any
security therefor or any liability (including any of those hereunder)
incurred directly or indirectly in respect thereof or hereof, and may
subordinate the payment of all or any part thereof to the payment of
any liability (whether due or not) of the Borrower to creditors of
such Borrower;
(e) apply any sums by whomsoever paid or howsoever realized to
any liability or liabilities of the Borrower to the Creditors
regardless of what liabilities of the Borrower remain unpaid;
(f) consent to or waive any breach of, or any act, omission or
default under, any of the Interest Rate Protection or Other Hedging
Agreements, the Credit Documents or any of the instruments or
agreements referred to therein, or otherwise amend, modify or
supplement any of the Interest Rate Protection or Other Hedging
Agreements, the Credit Documents or any of such other instruments or
agreements; and/or
(g) act or fail to act in any manner referred to in this
Guaranty which may deprive such Guarantor of its right to subrogation
against the Borrower to recover full indemnity for any payments made
pursuant to this Guaranty.
6. No invalidity, irregularity or unenforceability of all or
any part of the Guaranteed Obligations or of any security therefor shall
affect, impair or be a defense to this Guaranty, and this Guaranty shall be
primary, absolute and unconditional notwithstanding the occurrence of any
event or the existence of any other circumstances which might constitute a
legal or equitable discharge of a surety or guarantor except payment in
full of the Guaranteed Obligations.
0000CWTR.W51 -4-
<PAGE>
7. This Guaranty is a continuing one and all liabilities to
which it applies or may apply under the terms hereof shall be conclusively
presumed to have been created in reliance hereon. No failure or delay on
the part of any Creditor in exercising any right, power or privilege
hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, power
or privilege. The rights and remedies herein expressly specified are
cumulative and not exclusive of any rights or remedies which any Creditor
would otherwise have. No notice to or demand on the Guarantor in any case
shall entitle such Guarantor to any other further notice or demand in
similar or other circumstances or constitute a waiver of the rights of any
Creditor to any other or further action in any circumstances without notice
or demand. It is not necessary for any Creditor to inquire into the
capacity or powers of the Borrower or any of the Borrower's Subsidiaries or
the officers, directors, partners or agents acting or purporting to act on
its behalf, and any indebtedness made or created in reliance upon the
professed exercise of such powers shall be guaranteed hereunder.
8. Any indebtedness of the Borrower now or hereafter held by
the Guarantor is hereby subordinated to the indebtedness of the Borrower to
the Creditors; and such indebtedness of the Borrower to the Guarantor, if
the Collateral Agent, after an Event of Default has occurred, so requests,
shall be collected, enforced and received by such Guarantor as trustee for
the Creditors and be paid over to the Creditors on account of the
Guaranteed Obligations, but without affecting or impairing in any manner
the liability of such Guarantor under the other provisions of this
Guaranty. Prior to the transfer by the Guarantor of any note or negotiable
instrument evidencing any indebtedness of the Borrower to such Guarantor,
such Guarantor shall mark such note or negotiable instrument with a legend
that the same is subject to this subordination.
9. (a) The Guarantor waives any right (except as shall be
required by applicable statute and cannot be waived) to require the
Creditors to (i) proceed against the Borrower, any other guarantor or any
other party, (ii) proceed against or exhaust any security held from the
Borrower, any other guarantor or any other party or (iii) pursue any other
remedy in the Administrative Agent's or the Creditors' power whatsoever.
The Guarantor waives any defense based on or arising out of any defense of
the Borrower, any other guarantor or any other party other than payment in
full of the Guaranteed Obligations, including without limitation
any defense based on or arising out of the disability of the Borrower, any
other guarantor or any other party, or the unenforceability of the
Guaranteed Obligations or any part thereof from any cause, or the cessation
from any cause of the liability of such Borrower other than payment in full
of the Guaranteed Obligations. The Creditors may, at their
0000CWTR.W51 -5-
<PAGE>
election,
foreclose on any security held by the Administrative Agent, the Collateral
Agent or the other Creditors by one or more judicial or nonjudicial sales,
whether or not every aspect of any such sale is commercially reasonable (to
the extent such sale is permitted by applicable law), or exercise any other
right or remedy the Creditors may have against the Borrower or any other
party, or any security, without affecting or impairing in any way the
liability of the Guarantor hereunder except to the extent the Guaranteed
Obligations have been paid in full. The Guarantor waives any defense
arising out of any such election by the Creditors, even though such
election operates to impair or extinguish any right of reimbursement or
subrogation or other right or remedy of such Guarantor against the Borrower
or any other party or any security.
(b) The Guarantor waives all presentments, demands for
performance, protests and notices, including without limitation notices of
nonperformance, notices of protest, notices of dishonor, notices of
acceptance of this Guaranty, and notices of the existence, creation or
incurring of new or additional indebtedness. The Guarantor assumes all
responsibility for being and keeping itself informed of the Borrower's
financial condition and assets, and of all other circumstances bearing upon
the risk of nonpayment of the Guaranteed Obligations and the nature, scope
and extent of the risks which such Guarantor assumes and incurs hereunder,
and agrees that the Creditors shall have no duty to advise the Guarantor of
information known to them regarding such circumstances or risks.
(c) The Guarantor hereby agrees with the Creditors that it will
not exercise any right of subrogation which it may at any time otherwise
have as a result of this Guaranty (whether contractual, under Section 509
of the Bankruptcy Code, or otherwise) until all the Guaranteed Obligations
have been irrevocably paid in full in cash.
10. If and to the extent that the Guarantor makes any payment to
any Creditor or to any other Person pursuant to or in respect of this
Guaranty, any claim which such Guarantor may have against the Borrower by
reason thereof shall be subject and subordinate to the prior payment in
full of the Guaranteed Obligations to each Creditor. Prior to the transfer
by the Guarantor of any note or negotiable instrument evidencing any
indebtedness of the Borrower to such Guarantor, such Guarantor shall make
such note or negotiable instrument with a legend that the same is
subject to this subordination.
11. In order to induce the respective Creditors to extend credit
as contemplated by the agreements referred to above, the Guarantor
represents, warrants and covenants that:
0000CWTR.W51 -6-
<PAGE>
(a) Such Guarantor (i) is a duly organized and validly existing
limited partnership or corporation in good standing under the laws of
the jurisdiction of its organization and has the corporate power and
authority to own its property and assets and to transact the business
in which it is engaged and presently proposes to engage and (ii) is
duly qualified and is authorized to do business and is in good
standing in all jurisdictions where the failure to be so qualified
would have a material adverse effect on the business, property,
assets, liabilities, condition (financial or otherwise) or prospects
of the Borrower and its Subsidiaries taken as a whole.
(b) Such Guarantor has the corporate power and authority to
execute, deliver and carry out the terms and provisions of this
Guaranty and has taken all necessary partnership or corporate action
to authorize the execution, delivery and performance by it of this
Guaranty. Such Guarantor has duly executed and delivered this
Guaranty, and this Guaranty constitutes the legal, valid and binding
obligation of such Guarantor enforceable against such Guarantor in
accordance with its terms, except to the extent that the
enforceability hereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws generally
affecting creditors' rights and by equitable principles (regardless of
whether enforcement is sought in equity or at law).
(c) Neither the execution, delivery or performance by such
Guarantor of this Guaranty, nor compliance by it with the terms and
provisions hereof, (i) will contravene any applicable provision of any
law, statute, rule or regulation or any order, writ, injunction or
decree of any court or governmental instrumentality, (ii) will
conflict or be inconsistent with or result in any breach of any of the
terms, covenants, conditions or provisions of, or constitute a default
under, or result in the creation or imposition of (or the obligation
to create or impose) any Lien upon any of the property or assets of
such Guarantor pursuant to the terms of any indenture, mortgage, deed
of trust, credit agreement, loan agreement or other material agreement
or instrument to which such Guarantor is a party or by which it or any
of its property or assets is bound or to which it may be subject or
(iii) will violate any provision of the Certificate of Incorporation
or Bylaws of such Guarantor.
(d) No order, consent, approval, license, authorization or
validation of, or filing, recording or registration with, or exemption
by, any governmental or public body or authority, or any subdivision
thereof, is required to authorize, or is required in connection with,
(i) the execution, delivery and performance of this Guaranty, or (ii)
the legality, validity, binding effect or enforceability of this
Guaranty, except those which have been obtained or made.
0000CWTR.W51 -7-
<PAGE>
12. The Guarantor covenants and agrees that on and after the
date hereof and until the termination of all Interest Rate Protection or
Other Hedging Agreements and when no Note remains outstanding and all
Guaranteed Obligations have been paid in full, such Guarantor shall take,
or will refrain from taking, as the case may be, all actions that are
necessary to be taken or not taken so that no violation of any provision,
covenant or agreement contained in Section 6 or 7 of the Credit Agreement,
and so that no Event of Default, is caused by the actions of such
Guarantor.
13. The Guarantor hereby agrees to pay all reasonable out-of-
pocket costs and expenses (x) of each Creditor in connection with the
enforcement of this Guaranty and, after an Event of Default shall have
occurred and be continuing, the protection of such Creditor's rights
hereunder and (y) of the Administrative Agent in connection with any
amendment, waiver or consent relating hereto (including, without
limitation, the reasonable fees and disbursements of counsel (including in-
house counsel) employed by any of the Creditors or by the Administrative
Agent, as the case may be).
14. This Guaranty shall be binding upon the Guarantor and its
successors and assigns and shall inure to the benefit of the Creditors and
their successors and assigns.
15. Neither this Guaranty nor any provision hereof may be
changed, waived, discharged or terminated except with the written consent
of the Required Banks (or to the extent required by the Credit Agreement,
with the written consent of each Bank) and the Guarantor affected thereby.
16. The Guarantor acknowledges that an executed (or conformed)
copy of each of the Credit Documents has been made available to its
principal executive officers and such officers are familiar with the
contents thereof.
17. In addition to any rights now or hereafter granted under
applicable law (including, without limitation, Section 151 of the New York
Debtor and Creditor Law) and not by way of limitation of any such rights,
upon the occurrence and during the continuance of an Event of Default (such
term to mean and include any "Event of Default" as defined in the Credit
Agreement or any payment default under any Interest Rate Protection or
Other Hedging Agreement continuing after any applicable grace period), each
Creditor is hereby authorized at any time or from time to time, without
notice to the Guarantor or to any other Person, any such notice being
expressly waived, to set off and to appropriate and apply any and all
deposits (general or special) and any other indebtedness at any time held
or owing by such Creditor to or for the credit or the account of such
Guarantor, against and on account of the obligations and liabilities
0000CWTR.W51 -8-
<PAGE>
of such Guarantor to such Creditor under this Guaranty, irrespective of
whether or not such Creditor shall have made any demand hereunder and
although said obligations, liabilities, deposits or claims, or any of them,
shall be contingent or unmatured.
18. All notices, requests, demands or other communications
pursuant hereto shall be deemed to have been duly given or made when
delivered to the Person to which such notice, request, demand or other
communication is required or permitted to be given or made under this
Guaranty, addressed to such party (i) in the case of any Bank Creditor, as
provided in the Credit Agreement, (ii) in the case of the Guarantor, at its
address set forth opposite its signature below and (iii) in the case of any
Interest Rate Protection Creditor, at such address as such Interest Rate
Protection Creditor shall have specified in writing to the Guarantors; or
in any case at such other address as any of the Persons listed above may
hereafter notify the others in writing.
19. If claim is ever made upon any Creditor for repayment or
recovery of any amount or amounts received in payment or on account of any
of the Guaranteed Obligations and any of the aforesaid payees repays all or
part of said amount by reason of (a) any judgment, decree or order of any
court or administrative body having jurisdiction over such payee or any of
its property or (b) any settlement or compromise of any such claim effected
by such payee with any such claimant (including the Borrower), then and in
such event the Guarantor agrees that any such judgment, decree, order,
settlement or compromise shall be binding upon such Guarantor,
notwithstanding any revocation hereof or other instrument evidencing any
liability of the Borrower, and such Guarantor shall be and remain liable to
the aforesaid payees hereunder for the amount so repaid or recovered to the
same extent as if such amount had never originally been received by any
such payee.
20. THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE
CREDITORS AND OF THE UNDERSIGNED HEREUNDER SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. Any legal
action or proceeding with respect to this Guaranty may be brought in the
courts of the State of New York or of the United States of America for the
Southern District of New York, and, by execution and delivery of this
Guaranty, the Guarantor hereby accepts for itself and in respect of its
property, generally and unconditionally, the jurisdiction of the aforesaid
courts and hereby irrevocably waives any right it may have to object to the
laying of venue of any such action or proceeding in the aforesaid courts
and hereby further irrevocably waives and agrees not to plead or claim that
any such action or proceeding has been brought in an inconvenient forum.
The Guarantor further irrevocably consents to the service of process out of
any of the aforementioned courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid,
to the Guara-
0000CWTR.W51 -9-
<PAGE>
ntor at its address set forth opposite its signature below.
Nothing herein shall affect the right of any of the Creditors to serve
process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against the Guarantor in any other
jurisdiction.
21. It is the desire and intent of the Guarantor and the
Creditors that this Guaranty shall be enforced to the fullest extent
permissible under the laws and public policies applied in each jurisdiction
in which enforcement is sought. If and to the extent that the obligations
of the Guarantor under this Guaranty shall be adjudicated to be invalid or
unenforceable for any reason (including, without limitation, because of any
applicable state or federal law relating to fraudulent conveyances or
transfers, which laws would determine the solvency of the Guarantor by
reference to the full amount of the Guaranteed Obligations at the time of
the execution and delivery of this Guaranty), then the amount of the
Guaranteed Obligations shall be deemed to be reduced and the Guarantor
agrees to pay the maximum amount of the Guaranteed Obligations which would
be permissible under applicable law.
22. This Guaranty may be executed in any number of counterparts
and by the different parties hereto on separate counterparts, each of which
when so executed and delivered shall be an original, but all of which shall
together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with the Borrower and
the Administrative Agent.
23. THE GUARANTOR HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO A
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS GUARANTY, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
0000CWTR.W51 -10-
<PAGE>
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be
executed and delivered as of the date first above written.
THD INC., as Guarantor
By /s/ Francis B. Jacobs
-------------------------
Title: President
Accepted and Agreed to:
THE CHASE MANHATTAN BANK, N.A.,
as Administrative Agent
By /s/ Robert Foster
-------------------------
Title: Vice President
0000CWTR.W51 -11-
TRANSPORT HOLDINGS INC.
Exhibit 11.1
Schedule of Computation of Earnings Per Share
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE: (a) <F8> (a) <F8>
Net income $ 4,506 $ 6,842 $ 9,021 $ 14,040
========== ==========
Less: income attributable to preferred stock (1,433) (2,841)
---------- ----------
Net income for primary earnings per share $ 3,073 $ 6,180
========== ==========
Weighted average common stock and common
stock equivalents outstanding during the period 1,609,332 1,606,242
========== ==========
Primary earnings per share $ 1.91 $ 3.85
========== ==========
FULLY DILUTED EARNINGS PER SHARE:
Net income for primary earnings per share $ 3,073 $ 6,180
Plus: interest on convertible subordinated notes,
net of applicable income taxes 691 1,397
---------- ----------
Net income for fully diluted earnings per share $ 3,764 $ 7,577
========== ==========
Weighted average number of common shares
outstanding during the period, assuming full dilution 3,135,601 3,135,070
========== ==========
Fully diluted earnings per share $ 1.20 $ 2.42
========== ==========
<FN>
<F8>
(a) No per share amounts were applicable to the 1995 period, which was prior
to the distribution of the Company's shares to the public.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
The schedule contains summary financial information extracted from Form 10-Q for
the period ended June 30, 1996 and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<DEBT-HELD-FOR-SALE> 480,515
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 886
<MORTGAGE> 8,579
<REAL-ESTATE> 279
<TOTAL-INVEST> 536,988
<CASH> (3,085)
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 28,781
<TOTAL-ASSETS> 924,538
<POLICY-LOSSES> 337,956
<UNEARNED-PREMIUMS> 36,619
<POLICY-OTHER> 235,322
<POLICY-HOLDER-FUNDS> 2,848
<NOTES-PAYABLE> 108,250
22,758
0
<COMMON> 16
<OTHER-SE> 145,355
<TOTAL-LIABILITY-AND-EQUITY> 924,538
55,622
<INVESTMENT-INCOME> 19,879
<INVESTMENT-GAINS> 314
<OTHER-INCOME> 600
<BENEFITS> 37,061
<UNDERWRITING-AMORTIZATION> 4,220
<UNDERWRITING-OTHER> 16,699
<INCOME-PRETAX> 13,878
<INCOME-TAX> 4,857
<INCOME-CONTINUING> 9,021
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,021
<EPS-PRIMARY> 3.85
<EPS-DILUTED> 2.42
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
