Execution Copy
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CREDIT AGREEMENT
among
FRONT ROYAL, INC.,
THE LENDERS NAMED HEREIN,
and
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA,
as Agent
$38,000,000 Senior Term Loan Facility
Arranged by
FIRST UNION CAPITAL MARKETS CORP.
Dated as of December 18, 1996
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TABLE OF CONTENTS
Page
RECITALS
ARTICLE I
DEFINITIONS
1.1 Defined Terms................................................... 1
1.2. Accounting Terms............................................... 25
1.3. Other Terms; Construction...................................... 25
ARTICLE II
AMOUNT AND TERMS OF THE LOANS
2.1. Loans.......................................................... 26
2.2. Borrowing...................................................... 26
2.3. Disbursements; Funding Reliance; Domicile of Loans............. 26
2.4. Term Notes..................................................... 27
2.5. Termination of Commitments..................................... 27
2.6. Mandatory Repayments and Prepayments........................... 27
2.7. Voluntary Prepayments.......................................... 30
2.8. Interest....................................................... 30
2.9. Fees........................................................... 31
2.10 Interest Periods............................................... 31
2.11 Conversions and Continuations.................................. 32
2.12 Method of Payments; Computations............................... 33
2.13 Recovery of Payments........................................... 34
2.14 Use of Proceeds................................................ 35
2.15 Pro Rata Treatment; Sharing of Payments........................ 35
2.16 Increased Costs; Change in Circumstances; Illegality; etc...... 35
2.17 Taxes.......................................................... 37
2.18 Compensation................................................... 39
2.19 Replacement of Lenders; Mitigation............................. 39
ARTICLE III
CONDITIONS OF BORROWING
3.1. Conditions of Closing.......................................... 40
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1. Corporate Existence and Power.................................. 45
4.2. Authorization; Enforceability.................................. 45
4.3. No Violation................................................... 45
4.4. Governmental Authorization; Permits............................ 45
4.5. Litigation..................................................... 46
4.6. Taxes.......................................................... 46
4.7. Subsidiaries................................................... 47
4.8. Full Disclosure................................................ 47
4.9. Margin Regulations............................................. 47
4.10 Financial Matters.............................................. 47
4.11 Ownership of Properties........................................ 49
4.12 Employee Plans................................................. 50
4.13 Solvency....................................................... 51
4.14 Environmental Matters.......................................... 51
4.15 Trade Relations................................................ 52
4.16 Labor Relations................................................ 52
4.17 Proprietary Rights............................................. 53
4.18 Compliance With Laws........................................... 53
4.19 Regulated Industries........................................... 53
4.20 Collateral..................................................... 53
4.21 Certain Contracts.............................................. 54
4.22 Reinsurance Agreements......................................... 54
4.23 No Burdensome Restrictions..................................... 54
4.24 Business Locations; Trade Names................................ 55
4.25 Carried Insurance.............................................. 55
4.26 Issued Policies................................................ 55
4.27 Certain Relationships.......................................... 55
4.28 Indebtedness................................................... 56
4.29 Representations and Warranties in Transaction Documents........ 56
4.30 Transaction Documents.......................................... 56
4.31 Consummation of Transactions................................... 56
ARTICLE V
AFFIRMATIVE COVENANTS
5.1. GAAP Financial Statements...................................... 56
5.2. Statutory Financial Statements................................. 57
5.3. Other Business and Financial Information....................... 58
5.4. Notice of Certain Events....................................... 59
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5.5. Corporate Existence; Franchises; Maintenance of Properties; e.. 61
5.6. Compliance with Laws........................................... 61
5.7. Performance of Obligations..................................... 61
5.8. Payment of Taxes............................................... 62
5.9. Insurance...................................................... 62
5.10 Maintenance of Books and Records; Inspection................... 62
5.11 Interest Rate Protection....................................... 62
5.12 Dividends...................................................... 63
5.13 Further Assurances............................................. 63
ARTICLE VI
NEGATIVE COVENANTS
6.1. Consolidated Statutory Surplus................................. 63
6.2. Capitalization Ratio........................................... 63
6.3. Operating Leverage Ratio....................................... 63
6.4. Fixed Charge Coverage Ratio.................................... 63
6.5. Earnings Coverage Ratio........................................ 63
6.6. RiskBased Capital.............................................. 64
6.7. Capital Expenditures........................................... 64
6.8. Merger, Consolidation.......................................... 64
6.9. Indebtedness................................................... 64
6.10 Liens.......................................................... 65
6.11 Investments.................................................... 66
6.12 Transactions with Affiliates................................... 67
6.13 Restricted Payments............................................ 68
6.14 Certain Amendments, etc........................................ 68
6.15 Limitation on Certain Restrictions............................. 69
6.16 New Business................................................... 69
6.17 Compliance of Employee Plans................................... 69
6.18 Fiscal Year.................................................... 69
6.19 Accounting Changes............................................. 69
6.20 Change of Location or Name..................................... 70
6.21 Best Rating.................................................... 70
6.22 Reinsurance Agreements......................................... 70
6.23 Hazardous Substances........................................... 71
ARTICLE VII
EVENTS OF DEFAULT
7.1. Events of Default.............................................. 71
7.2. Remedies: Acceleration, etc.................................... 74
7.3. Remedies: SetOff............................................... 75
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ARTICLE VIII
THE AGENT
8.2. Nature of Duties............................................... 75
8.3. Exculpatory Provisions......................................... 75
8.4. Reliance by Agent.............................................. 75
8.5. NonReliance on Agent and Other Lenders ........................ 76
8.6. Notice of Default ............................................. 77
8.7. Indemnification ............................................... 77
8.8. The Agent in its Individual Capacity........................... 77
8.9. Successor Agent................................................ 78
8.10. Collateral Matters............................................. 78
ARTICLE IX
MISCELLANEOUS
9.1. Fees and Expenses.............................................. 79
9.2. Indemnification................................................ 79
9.3. Governing Law; Consent to Jurisdiction......................... 80
9.4. Arbitration; Preservation and Limitation of Remedies........... 80
9.5. Notices........................................................ 81
9.6. Amendments, Waivers, etc....................................... 82
9.7. Assignments, Participations.................................... 82
9.8. No Waiver...................................................... 84
9.9. Successors and Assigns......................................... 85
9.10. Survival....................................................... 85
9.11. Severability................................................... 85
9.12. Construction................................................... 85
9.13. Confidentiality................................................ 85
9.14. Counterparts................................................... 85
9.15. Entire Agreement............................................... 86
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EXHIBITS
Exhibit A Form of Term Note
Exhibit B Form of Excess Cash Flow Certificate
Exhibit C Form of Notice of Conversion/Continuation
Exhibit D Form of Borrower Pledge and Security Agreement
Exhibit E Form of Subsidiaries Guaranty
Exhibit F-1 Form of Borrower Collateral Assignment of Agreements
Exhibit F-2 Form of Subsidiaries Collateral Assignment of Agreements
Exhibit G Form of Escrow Agreement
Exhibit H Borrower's Counsels' Opinions
Exhibit I Form of Financial Condition Certificate
Exhibit J-1 Form of Compliance Certificate (GAAP)
Exhibit J-2 Form of Compliance Certificate (SAP)
Exhibit K Form of Assignment and Acceptance
SCHEDULES
Schedule l.l(a) Exempted Persons
Schedule l.l(b) Liens
Schedule 4.1 Corporate Existence and Power
Schedule 4.4(a) Governmental Authorization; Permits
Schedule 4.4(c) Licenses
Schedule 4.5 Litigation
Schedule 4.6 Tax Matters
Schedule 4.7 Subsidiaries
Schedule 4.12 Employee Plans
Schedule 4.14 Environmental Matters
Schedule 4.21 Certain Contracts
Schedule 4.22 Reinsurance Agreements
Schedule 4.24 Business Locations; Trade Names
Schedule 4.25 Carried Insurance
Schedule 4.27 Certain Relationships
Schedule 4.28 Indebtedness
Schedule 6.16 Lines of Business
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Execution Copy
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of the 18th day of December, 1996 (this
"Agreement"), is made among FRONT ROYAL, INC., a North Carolina corporation with
its principal offices in Morrisville, North Carolina (the "Borrower"), the banks
and financial institutions listed on the signature pages hereof or that become
parties hereto after the date hereof (collectively, the "Lenders"), and FIRST
UNION NATIONAL BANK OF NORTH CAROLINA ("First Union"), as agent for the Lenders
(in such capacity, the "Agent").
RECITALS
A. The Borrower proposes to acquire from PIC Insurance Group, Inc., a
Pennsylvania stock insurance company ("PIC"), and Trirock Limited Partnership, a
Pennsylvania limited partnership ("Trirock"), all of the issued and outstanding
shares of capital stock (the "Acquisition") of Rockwood Casualty Insurance
Company, a Pennsylvania stock insurance company ("Rockwood"), pursuant to a
Stock Purchase Agreement, dated as of December 6, 1996, by and between the
Borrower, PIC and Trirock (as amended, modified or supplemented from time to
time in accordance with the terms of this Agreement, the "Stock Purchase
Agreement").
B. In order (i) to finance a portion of the purchase price of the
Acquisition, (ii) to refinance the Borrower's outstanding senior term loan from
First Union, (iii) to prepay certain other indebtedness of the Borrower, and
(iv) to pay or reimburse certain fees and expenses in connection with the
foregoing transactions and as otherwise contemplated by this Agreement, the
Borrower has requested that the Lenders extend term loans to the Borrower in the
aggregate principal amount of $38,000,000, all as more fully described herein.
C. The Lenders are willing to extend such term loans to the Borrower
subject to and on the terms and conditions set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual provisions, covenants and
agreements herein contained, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1. Defined Terms. For purposes of this Agreement, in addition to the
terms defined elsewhere herein, the following terms shall have the meanings set
forth below (such meanings to be equally applicable to the singular and plural
forms thereof):
"Account Designation Letter" shall mean a letter from the Borrower to the
Agent, duly completed and signed by an Authorized Officer and in form and
substance satisfactory to the Agent, listing any one or more accounts to which
the Borrower requests the Agent to forward the proceeds of the Loans made
hereunder.
"Acquisition" shall have the meaning given to such term in the recitals
hereof.
"Actuarial Report" shall mean, with respect to any Insurance Subsidiary
for any period, an actuarial review and valuation statement of, and opinion as
to the adequacy of, such Insurance Subsidiary's loss and loss adjustment expense
reserve positions as of the end of such period with respect to the insurance
business then in force, and covering such other subjects as are customary in
actuarial reviews and as may be reasonably requested by any Lender, prepared by
an independent actuarial firm reasonably acceptable to the Lenders in accordance
with reasonable actuarial assumptions and procedures not inconsistent with the
assumptions and procedures previously employed.
"Adjusted Base Rate" shall mean, at any time with respect to any Base Rate
Loan, a rate per annum equal to the Base Rate as in effect at such time plus
1.0%.
"Adjusted LIBOR Rate" shall mean, at any time with respect to any LIBOR
Loan, a rate per annum equal to the LIBOR Rate as in effect at such time plus
the Applicable LIBOR Margin as in effect at such time.
"Admitted Assets" shall mean, as to the Insurance Subsidiaries, the
aggregate amount shown on line 21, page 2 column 1 of the Annual Statements of
the Insurance Subsidiaries (or any similar line, page and column reference in
any successor form of Annual Statement), or the amount determined in a
consistent manner for any date other than one as of which the Annual Statements
are prepared.
"Affiliate" shall mean, as to any Person, each other Person that directly,
or indirectly through one or more intermediaries, owns or controls, is
controlled by or under common control with, such Person or is a director or
officer of such Person. For purposes of this definition, with respect to any
Person "control" shall mean the possession, direct or indirect, of the power to
direct or cause the direction of management and policies, whether through the
ownership of voting securities, by contract or otherwise; provided that, in any
event, any Person directly or indirectly owning 20% or more of the securities
having ordinary voting power for the election of directors or other governing
body of a corporation or 20% or more of the partnership or other ownership
interests of any other Person (other than as a limited partner of such other
Person) will be deemed to control such corporation or other Person.
"Agent" shall mean First Union, in its capacity as Agent appointed under
Article VIII, and its successors and permitted assigns in such capacity.
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"Agreement" shall mean this Credit Agreement, as amended, modified or
supplemented from time to time.
"Amended Charter" shall mean the Amended Articles of Incorporation of the
Borrower after the filing of two amendments with the North Carolina Secretary of
State on or before the Closing Date setting forth, among other things, the
terms, preferences, rights and limitations of the Series A Preferred Stock and
the Class C Common Stock, as in effect on the Closing Date and as amended or
restated from time to time in accordance with the terms of this Agreement.
"Annual Statement" shall mean, with respect to any Insurance Subsidiary
for any fiscal year, the annual financial statements of such Insurance
Subsidiary as required to be filed with the Department of its state of domicile,
together with all exhibits, schedules, certificates and actuarial opinions
required to be filed or delivered therewith.
"Applicable LIBOR Margin" shall mean, at any time from and after the
Closing Date with respect to any LIBOR Loan, 2.25%; provided, however, that on
each Adjustment Date (as defined below), the Applicable LIBOR Margin for all
LIBOR Loans shall be adjusted effective as of such date (based upon the
calculation of the Capitalization Ratio as of the last day of the fiscal period
to which such Adjustment Date relates) in accordance with the following matrix:
Capitalization Ratio Applicable LIBOR Margin
<= 0.40 to 1.0 2.25%
<= 0.35 to 1.00 but 2.00%
< 0.40 to 1.0
< 0.35 to 1.0 1.75%
Notwithstanding the foregoing, if at any time the Borrower shall have failed to
deliver the financial statements and a Compliance Certificate as required by
Section 5.1(a), 5.1(b), 5.2(a) or 5.2(b) (as the case may be) and Section
5.3(a), or if at any time an Event of Default shall have occurred and be
continuing, then, upon written notice from the Agent, whenever given, for the
entire period from and including the date on which such statements and
Compliance Certificate are required to have been delivered (or the date of
occurrence of such Event of Default, as the case may be) to the date on which
the same shall have been delivered (or such Default or Event of Default cured or
waived, as the case may be), the Applicable LIBOR Margin shall be determined as
if the Capitalization Ratio were greater than or equal to 0.40 to 1.0
(notwithstanding the actual Capitalization Ratio). For purposes of this
definition, "Adjustment Date" shall mean, with respect to any fiscal quarter of
the Borrower beginning with the fiscal quarter ending December 31, 1996, the
fifth (5th) day (or, if such day is not a Business Day, on the next succeeding
Business Day) after receipt by the Agent in accordance with Section 5.1(a) or
Section 5.1(b), as the case may be, of (i)
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financial statements for the most recently completed applicable fiscal period
and (ii) a duly completed Compliance Certificate with respect to such fiscal
period.
"Asset Backed Derivative Securities" shall mean Z bonds, floaters/inverse
floaters, PAC II, PAC III, Ioettes, support bonds, interest only investments,
principal only investments, residuals, inverse IO's, super floaters, and any
bonds backed in whole or in part by tranches of these bonds (including component
or kitchen sink bonds), and any other derivative of collateralized obligations,
whether such collateral is personally or realty.
"Asset Disposition" shall mean any sale, assignment, transfer or other
disposition by the Borrower or any of its Subsidiaries to any other Person
(other than to the Borrower or a Wholly Owned Subsidiary), whether in one
transaction or in a series of related transactions, of any of its assets,
business units or other properties (including any interests in property, whether
tangible or intangible, and including Capital Stock of Subsidiaries), excluding
sales of assets in the ordinary course of business.
"Assignee" shall have the meaning given to such term in Section 9.7(a).
"Assignment and Acceptance" shall mean an Assignment and Acceptance
entered into between a Lender and an Assignee and accepted by the Agent and the
Borrower, in substantially the form of Exhibit K.
"Authorized Officer" shall mean the president or chief financial officer
of the Borrower or any other officer of the Borrower authorized by resolution of
the board of directors of the Borrower to engage in the activity specified
herein with respect to such officer and whose signature and incumbency shall
have been certified to the Agent.
"Available Dividend Amount" shall mean, for any period of four consecutive
quarters, with respect to the Insurance Subsidiaries other than any Insurance
Subsidiary that itself is a Subsidiary of an Insurance Subsidiary, the aggregate
maximum amount of dividends permitted by the relevant Departments under
applicable Requirements of Law (without the necessity of any affirmative
approval or other action of such Departments involving the granting of
permission) to be paid by such Insurance Subsidiaries (whether or not any such
dividends are actually paid).
"Bankruptcy Code" shall mean 11 U.S.C. xx.xx. 101 et seq., as amended from
time to time, and any successor statute.
"Base Rate" shall mean the higher of (i) the per annum interest rate
publicly announced from time to time by First Union in Charlotte, North
Carolina, to be its prime rate (which may not necessarily be its best lending
rate), as adjusted to conform to changes as of the opening of business on the
date of any such change in such prime rate, or (ii) 0.5% per annum plus the
Federal Funds Rate, as adjusted to conform to changes as of the opening of
business on the date of any such change in the Federal Funds Rate.
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"Base Rate Loan" shall mean, at any time, any Loan that bears interest at
such time at the Adjusted Base Rate.
"Borrower Collateral Assignment of Agreements" shall mean the Collateral
Assignment of Agreements, dated as of the Closing Date, made by the Borrower in
favor of the Agent and Lenders, in substantially the form of Exhibit F-1, as
amended, modified or supplemented from time to time.
"Borrower Pledge and Security Agreement" shall mean the Borrower Pledge
and Security Agreement made by the Borrower in favor of the Agent and the
Lenders, in substantially the form of Exhibit D, as amended, modified or
supplemented from time to time.
"Business Day" shall mean (i) any day other than a Saturday or Sunday, a
legal holiday or a day on which commercial banks in Charlotte, North Carolina
are required by law to be closed and (ii) in respect of any determination
relevant to a LIBOR Loan, any such day that is also a day on which tradings are
conducted in the London interbank Eurodollar market.
"CMS" shall mean Colony Management Services, Inc., a Virginia corporation.
"Capital Expenditures" shall mean, with respect to the Borrower and its
Subsidiaries for any fiscal year, the aggregate expenditures (including payments
in respect of liabilities incurred) of the Borrower and its Subsidiaries during
such fiscal year (less the amount of any trade-in allowance included therein) to
acquire or construct equipment, fixed assets, real property or improvements and
other capital assets (including, without limitation, Capital Lease Obligations),
other than expenditures for replacements and substitutions therefor made with
the proceeds of insurance.
"Capital Lease" shall mean, with respect to the Borrower and its
Subsidiaries, any lease of any property by the Borrower or any of its
Subsidiaries as lessee that, in accordance with Generally Accepted Accounting
Principles, is required to be classified and accounted for as a capital lease on
its balance sheet.
"Capital Lease Obligation" shall mean, with respect to the Borrower and
its Subsidiaries for any fiscal year, the aggregate payments of the Borrower and
its Subsidiaries during such fiscal year in respect of Capital Leases.
"Capital Stock" shall mean (i) with respect to any Person that is a
corporation, any and all shares, interests or equivalents in corporate stock
(whether voting or nonvoting, and whether common or preferred) of such
corporation, and (ii) with respect to any Person that is not a corporation, any
and all partnership, membership, limited liability company or other equity
interests of such Person; and in each case, any and all warrants or options to
purchase any of the foregoing.
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"Capitalization Ratio" shall mean, as of any date of determination, the
ratio of (i) Consolidated Indebtedness as of such date to (ii) the sum of
Consolidated Indebtedness and Consolidated Net Worth, each as of such date.
"Cash Collateral Account" shall have the meaning given to such term in the
Escrow Agreement.
"Cash Equivalents" shall mean (i) securities issued or unconditionally
guaranteed by the United States of America or any agency or instrumentality
thereof, backed by the full faith and credit of the United States of America and
maturing within one year from the date of acquisition, (ii) securities issued by
any state of the United States of America or any political subdivision or public
instrumentality thereof, maturing within one year from the date of acquisition
and, at the time of acquisition, having the highest rating obtainable from
either Standard & Poor's Ratings Services ("Standard & Poor's"), or Xxxxx'x
Investors Service, Inc. ("Moody's"), (iii) commercial paper issued by any Person
organized under the laws of the United States of America, maturing no more than
one year from the date of acquisition and, at the time of acquisition, having a
rating of at least A-1 or the equivalent thereof by Standard & Poor's or at
least P-1 or the equivalent thereof by Moody's, (iv) time deposits and
certificates of deposit that are insured by the Federal Deposit Insurance
Corporation (the "FDIC") or any successor instrumentality of the government of
the United States of America up to the applicable limit on insurance granted by
the FDIC or such other instrumentality with respect to such instruments (it
being understood that the amount invested in such instrument may not exceed the
limit on such insurance), maturing within one year from the date of issuance and
issued by a bank or trust company organized under the laws of the United States
of America or any state thereof and having combined capital and surplus of at
least $250,000,000 and (v) money market funds substantially all of whose assets
are comprised of securities of the types described in clauses (i) through (iv)
above.
"Change of Control" shall mean the occurrence of either of the following:
(i) any Person or group of Persons acting in concert as a partnership or other
group shall, as a result of a tender or exchange offer, open market purchases,
privately negotiated purchases or otherwise, have become, after the date hereof,
the "beneficial owner" (within the meaning of such term under Rule 13d-3 under
the Exchange Act) of securities of the Borrower representing 20% (or, if such
Person is an Exempted Person, 35%) or more of the combined voting power of the
then outstanding securities of the Borrower ordinarily (and apart from rights
accruing under special circumstances) having the right to vote in the election
of directors; or (ii) the Board of Directors of the Borrower shall cease to
consist of a majority of the individuals who constituted the Board of Directors
as of the Closing Date or who shall have become a member thereof subsequent to
the Closing Date after having been nominated, or otherwise approved in writing,
by at least a majority of individuals who constituted the Board of Directors of
the Borrower as of the Closing Date (or their replacements approved as herein
required).
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"Class C Common Stock" shall mean the Class C Common Stock, no par value,
of the Borrower to be issued on the Closing Date pursuant to the Subscription
Agreement, the terms of which are set forth in the Amended Charter.
"Closing Date" shall mean the date upon which (i) the Borrower requests
that the Loans be made pursuant to this Agreement and (ii) all of the conditions
of Article III are satisfied.
"Collateral" shall mean all the assets, property and interests in property
that shall from time to time be pledged or be purported to be pledged as direct
or indirect security for the Obligations pursuant to the Borrower Pledge and
Security Agreement, the Borrower Collateral Assignment of Agreements, the
Subsidiaries Collateral Assignment of Agreements, the Escrow Agreement or any
one or more of the other Loan Documents.
"Colony" shall mean Colony Insurance Company, a Virginia corporation.
"Combined Net Cash Flow" shall mean, for any fiscal year, the aggregate
Net Income of the Non-Insurance Subsidiaries for such fiscal year, plus the sum
of the following items of the Non-Insurance Subsidiaries for such fiscal year to
the extent taken into account in the calculation of such Net Income for such
fiscal year: (i) depreciation expense, (ii) amortization (whether positive or
negative) of intangible assets and (iii) other non-cash expenses, losses and
charges reducing income, minus the sum of the following items of the
Non-Insurance Subsidiaries for such fiscal year: (i) Capital Expenditures
permitted to be made hereunder, (ii) scheduled principal payments on
Indebtedness permitted hereunder owed by any of the Non-Insurance Subsidiaries
(but excluding the Wachovia Indebtedness), and (iii) all non-cash gains and
other non-cash items taken into account in determining such Net Income for such
fiscal year, plus any increase during such fiscal year in deterred taxes, minus
any decrease during such fiscal year in deferred taxes.
"Commitment" shall mean, with respect to any Lender at any time, the
amount set forth opposite such Lender's name on its signature page hereto or, if
such Lender has entered into one or more Assignment and Acceptances, the amount
set forth for such Lender at such time in the Register maintained by the Agent
pursuant to Section 9.7(b) as such Lender's "Commitment."
"Compliance Certificate" shall mean a fully completed and duly executed
certificate in the form of Exhibit J-1 or Exhibit J-2, as applicable, together
with the attachments required thereby.
"Consolidated Gross Written Premiums" shall mean, at any time, the
aggregate (without duplication) of the Gross Written Premiums of the Insurance
Subsidiaries at such time.
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"Consolidated Indebtedness" shall mean, at any time, the aggregate
Indebtedness (without duplication) of the Borrower and its Subsidiaries at such
time, determined on a consolidated basis in accordance with Generally Accepted
Accounting Principles.
"Consolidated Net Income" shall mean, for any period, Net Income for the
Borrower and its Subsidiaries for such period, determined on a consolidated
basis in accordance with Generally Accepted Accounting Principles.
"Consolidated Net Worth" shall mean, at any time, the net worth of the
Borrower and its Subsidiaries at such time, determined on a consolidated basis
in accordance with Generally Accepted Accounting Principles but without regard
to the requirements of FAS 115.
"Consolidated Net Written Premiums" shall mean, at any time, the aggregate
(without duplication) of the Net Written Premiums of the Insurance Subsidiaries
at such time.
"Consolidated Statutory Surplus" shall mean, at any time, the aggregate
(without duplication) of the amounts shown on line 25, page 3, column 1 of the
Annual Statement of each Insurance Subsidiary, or the aggregate (without
duplication) of such amounts determined in a consistent manner for any date
other than a date as of which Annual Statements of the Insurance Subsidiaries
are prepared.
"Contingent Obligation" shall mean, with respect to any Person, any direct
or indirect liability of such Person with respect to any Indebtedness, lease,
dividend, guaranty, letter of credit or other obligation (the "primary
obligation") of another Person (the "primary obligor"), whether or not
contingent, (a) to purchase, repurchase or otherwise acquire such primary
obligation or any property constituting direct or indirect security therefor,
(b) to advance or provide funds (i) for the payment or discharge of any such
primary obligation or (ii) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency or any
balance sheet item, level of income or financial condition of the primary
obligor, (c) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the ability of
the primary obligor in respect thereof to make payment of such primary
obligation or (d) otherwise to assure or hold harmless the owner of any such
primary obligation against loss or failure or inability to perform in respect
thereof; provided, however, that neither (i) obligations entered into in the
ordinary course of an Insurance Subsidiary's business under insurance policies
or contracts issued by it or to which it is a party, including Reinsurance
Agreements (and security posted by any such Insurance Subsidiary in the ordinary
course of its business to secure obligations thereunder), nor (ii) endorsements
of instruments or items of payment for deposit or collection in the ordinary
course of business, shall be deemed to be Contingent Obligations of the Borrower
or any of its Subsidiaries for purposes of this Agreement. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
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Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof.
"Covenant Compliance Worksheet" shall mean a fully completed worksheet in
the form of Attachment A to Exhibit J-1 or Exhibit J-2, as the context may
require.
"Current Services Agreements" shall mean, collectively, (i) the Services
Agreements between CMS and the respective Insurance Subsidiaries, dated (a) with
respect to the Services Agreement between CMS and Colony, as of December 12,
1994, and (b) with respect to the Services Agreement between CMS and FRIC and
Xxxxxxxx, as of Xxxxxxxx 00, 0000, (xx) the Services Agreement between FRESI and
Front Royal Engineering, Inc., dated as of September 1, 1995, and the Services
Agreement between FRESI and FRIC, as of December 12, 1994, in each case without
regard to any amendments, modifications or supplements thereto or restatements
thereof other than those approved by the Lender pursuant to the terms hereof.
"Debt Service" shall mean, for any period, the aggregate (without
duplication) of all principal and interest paid by the Borrower and its
Subsidiaries during such period in respect of Indebtedness (including, without
limitation, the Loans).
"Default" shall mean any event or condition that, with the passage of time
or giving of notice, or both, would constitute an Event of Default.
"Department" shall mean, with respect to any Insurance Subsidiary, the
Department of Insurance or such other Governmental Authority of its state of
domicile charged with regulating insurance companies or insurance holding
companies.
"Dollars" or "$" shall mean dollars of the United States of America.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute, and all rules and
regulations from time to time promulgated thereunder.
"ERISA Affiliate" shall mean any Person (including any trade or business,
whether or not incorporated) that would be deemed to be under "common control"
with, or a member of the same "controlled group" as, the Borrower or any of its
Subsidiaries, within the meaning of Section 414(b), (c), (m) or (o) of the
Internal Revenue Code or Section 4001 of ERISA.
"ERISA Event" shall mean (i) a Reportable Event with respect to a
Qualified Plan or a Multiemployer Plan, (ii) a complete or partial withdrawal by
the Borrower, any of its Subsidiaries or any ERISA Affiliate from a
Multiemployer Plan, where such withdrawal would be reasonably likely to have a
Material Adverse Effect, (iii) the filing by the Borrower, any of its
Subsidiaries or any ERISA Affiliate of a notice of intent to terminate, the
treatment of a plan amendment as a termination under Section 4041 or 4041A of
ERISA,
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or the commencement of proceedings by the PBGC to terminate a Qualified Plan
(other than a standard termination) or Multiemployer Plan subject to Title IV of
ERISA, (iv) a failure to make required contributions to a Qualified Plan or
Multiemployer Plan, (v) the adoption of an amendment to a Qualified Plan
requiring the provision of security to such plan pursuant to Section 307 of
ERISA, (vi) the imposition upon the Borrower, any of its Subsidiaries or any
ERISA Affiliate of any liability under Title IV of ERISA, other than for PBGC
premiums due but not delinquent under Section 4007 of ERISA, (vii) an
application for a funding waiver or an extension of any amortization period
pursuant to Section 412 of the Code with respect to any Qualified Plan, (viii)
the engaging in or otherwise becoming liable for a nonexempt Prohibited
Transaction by the Borrower, any of its Subsidiaries or any ERISA Affiliate,
where such Prohibited Transaction would be reasonably likely to have a Material
Adverse Effect, or (ix) a violation of the applicable requirements of Section
404 or 405 of ERISA or the exclusive benefit rule under Section 401(a) of the
Code by any fiduciary of any Qualified Plan for which the Borrower or any of its
Subsidiaries may be directly or indirectly liable, where such violation would be
reasonably likely to have a Material Adverse Effect.
"Earnings Coverage Ratio" shall mean, as of the last day of any fiscal
quarter, for the period of four consecutive fiscal quarters then ending, the
ratio of (i) the sum of (A) the aggregate Statutory Net Income of the Insurance
Subsidiaries, other than any Insurance Subsidiary that is itself a Subsidiary of
an Insurance Subsidiary, and (B) the Net Income of each of the Non-Insurance
Subsidiaries (other than CMS) for the period to (ii) the sum of Debt Service and
Net Overhead for such period. The calculation of the Earnings Coverage Ratio (a)
as of the last day of the fiscal quarters ending March 31, 1997, June 30, 1997,
and September 30, 1997, shall be made with respect to the periods of one, two
and three fiscal quarters, respectively, ending on such dates, and (b) as of the
last day of any fiscal quarter ending at any time thereafter shall be made with
respect to the period of four fiscal quarters ending on such date.
"Eligible Assignee" shall mean (i) a commercial bank organized under the
laws of the United States or any state thereof and having total assets in excess
of $1,000,000,000, (ii) a commercial bank organized under the laws of any other
country that is a member of the Organization for Economic Cooperation and
Development or any successor thereto (the "OECD") or a political subdivision of
any such country and having total assets in excess of $1,000,000,000, provided
that such bank or other financial institution is acting through a branch or
agency located in the United States, in the country under the laws of which it
is organized or in another country that is also a member of the OECD, (iii) the
central bank of any country that is a member of the OECD, (iv) a finance company
or other financial institution or fund (other than an insurance company or an
insurance holding company) that is engaged in making, purchasing or otherwise
investing in loans in the ordinary course of its business and having total
assets in excess of $500,000,000, (v) any Affiliate of an existing Lender or
(vi) any other Person approved by the Required Lenders, which approval shall not
be unreasonably withheld.
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"Employee Plan" shall mean any "employee benefit plan" within the meaning
of Section 3(3) of ERISA that the Borrower, any of its Subsidiaries or any ERISA
Affiliate maintains, administers, contributes to or is required to contribute to
and that covers any employee or former employee of the Borrower, any of its
Subsidiaries or any ERISA Affiliate with respect to such employee's relationship
with any of the foregoing, in each case including, without limitation, all
profit-sharing plans, bonus plans, incentive compensation plans, deferred
compensation plans, retirement plans, stock option plans, stock purchase plans
and health, life and disability benefit plans. Notwithstanding the foregoing,
the term "Employee Plan" shall not include any such employee benefit plan
maintained, administered, or to which any Subsidiary or ERISA Affiliate
contributed, before (but not after) it became a Subsidiary or ERISA Affiliate.
"Employment Agreements" shall mean, collectively, (i) the Employment
Agreement, dated December 28, 1994, between the Borrower and J. Xxxx Xxxxx, (ii)
the Employment Agreement, dated December 28, 1994, between CMS and Xxxx Xxxxxx,
(iii) the Employment Agreement, dated on or about the Closing Date, between
Rockwood and Xxxx Xxxxxx, and (iv) the Employment Agreement, dated on or about
the Closing Date, between the Borrower and Xxxxx Xxxxx, in each case without
regard to any amendments, modifications or supplements thereto or restatements
thereof other than those approved by the Required Lenders pursuant to the terms
hereof.
"Environmental Claims" shall mean any and all administrative, regulatory
or judicial actions, suits, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigations (other than internal reports prepared
by the Borrower or any Subsidiary of the Borrower solely in the ordinary course
of its business and not in response to any third party action or request of any
kind) or proceedings relating in any way to any Environmental Law or any permit
issued, or any approval given, under any such Environmental Law (collectively,
"Claims"), including, without limitation, (i) any and all Claims by Governmental
Authorities for enforcement, cleanup, removal, response, remedial or other
actions or damages pursuant to any applicable Environmental Law and (ii) any and
all Claims by any third party seeking damages, contribution, indemnification,
cost recovery, compensation or injunctive relief resulting from Hazardous
Substances or arising from alleged injury or threat of injury to human health or
the environment.
"Environmental Laws" shall mean any and all federal, state and local laws,
statutes, ordinances, rules, regulations, permits, licenses, approvals,
interpretations, rules of common law and orders of courts or Governmental
Authorities, relating to the protection of human health or occupational safety
or the environment, now or hereafter in effect and in each case as amended from
time to time, including, without limitation, requirements pertaining to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transportation, handling, reporting, licensing, permitting, investigation or
remediation of Hazardous Substances.
-11-
"Equity Documents" shall mean the Subscription Agreement and the documents
and instruments required by the terms of the Subscription Agreement to be
executed and delivered by the parties in connection with the closing of the
transactions contemplated thereby, including, without limitation, the Amended
and Restated Registration Rights Agreement and Rights Agreement (each as defined
in the Subscription Agreement.
"Equity Issuance" shall mean (i) the issuance, sale or other disposition
by the Borrower or any of its Subsidiaries of its Capital Stock (including,
without limitation, pursuant to an initial registered public offering of the
Borrower's Capital Stock), any rights, warrants or options to purchase or
acquire any shares of its Capital Stock or any other security or instrument
representing, convertible into or exchangeable for an equity interest in the
Borrower or any of its Subsidiaries, and (ii) the receipt by the Borrower or any
of its Subsidiaries of any capital contribution (whether or not evidenced by any
security or instrument); provided, however, that the term Equity Issuance shall
not include (w) the issuance or sale of Capital Stock by any Subsidiary to the
Borrower or any other Subsidiary, provided that, to the extent not prohibited by
applicable Insurance Codes, such Capital Stock is pledged to the Agent pursuant
to the Borrower Pledge and Security Agreement or a similar pledge and security
agreement from the relevant Subsidiary, (x) any capital contribution to any
Subsidiary, to the extent made directly or indirectly by the Borrower, (y) any
Capital Stock of the Borrower issued or sold in connection with the Acquisition
and constituting a portion of the purchase price thereof, or (z) the issuance
and sale of securities of the Borrower, including Class C Common Stock, pursuant
to the Subscription Agreement on the Closing Date.
"Escrow Agent" shall mean First Union National Bank of North Carolina, in
its capacity as escrow agent under the Escrow Agreement.
"Escrow Agreement" shall mean the Escrow Agreement, dated as of the
Closing Date, between the Borrower, the Agent and the Escrow Agent, in
substantially the form of Exhibit G, as amended, modified or supplemented from
time to time.
"Event of Default" shall have the meaning given to such term in Section
7.1.
"Excess Cash Flow" shall mean, for any fiscal year (the "Subject Year"),
the excess of (i) the aggregate of the following items: (A) the Available
Dividend Amount of the Insurance Subsidiaries (calculated, for purposes of this
definition only, with respect to, and as of the last day of, the fiscal year
immediately preceding the Subject Year, and without taking into account any
unpaid amounts carried forward from prior years); (B) the Combined Net Cash Flow
(whether positive or negative, but only up to a negative amount of $250,000) of
the Non-Insurance Subsidiaries (other than CMS) for the Subject Year; (C) all
tax refunds received during the Subject Year by the Borrower or any of its
Subsidiaries from any Governmental Authority to the extent not already included
in item (A) or (B), and (D) all monies received by the Borrower during the
Subject Year from any source to the extent not already included in item (A), (B)
or (C) and other than any Excluded Items, including,
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without limitation, dividends from its Subsidiaries, guaranty fees, amounts
received or due (whether or not already paid) under the Tax Allocation
Agreements and any other agreement with any of its Subsidiaries, and income
earned on funds held in the Cash Collateral Account or on hand, over (ii) the
sum of the following items for such fiscal year: (A) Debt Service, (B) Net
Overhead (whether a positive or negative number) and (C) Tax Payments.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time, and any successor statute, and all rules and regulations from
time to time promulgated thereunder.
"Excluded Items" shall mean, for any fiscal year, (i) Net Cash Proceeds,
(ii) proceeds from the repayment of advances previously made by the Borrower to
any of its Subsidiaries in the ordinary course of business and (iii) proceeds
from the sale of Investments (other than Investments in any of its Subsidiaries
and other than Investments made or held by the Non-Insurance Subsidiaries) held
by the Borrower in the ordinary course of its business to the extent reinvested
in similar assets or assets of similar or better investment quality.
"Exempted Person" shall mean any of the Persons listed on Schedule 1.1(a).
"Existing Senior Debt" shall mean all Indebtedness and other obligations
of the Borrower under the Credit Agreement, dated as of December 28, 1994,
between First Union and the Borrower, as amended.
"Existing Subordinated Debt" shall mean all Indebtedness and other
obligations of the Borrower under the Loan Agreement, dated as of September 22,
1994, between Sirrom Capital, L.P., as agent, certain lenders party thereto, and
the Borrower, as amended.
"Extraordinary Dividend Amount" shall mean, as of any fiscal quarter end,
with respect to each Insurance Subsidiary other than any Insurance Subsidiary
that itself is a Subsidiary of an Insurance Subsidiary, the aggregate amount of
dividends (other than dividends described in the definition of Available
Dividend Amount) that have been affirmatively approved in writing by the
relevant Department under applicable Requirements of Law to be paid by such
Insurance Subsidiary at any time during the next four fiscal quarters, except to
the extent such dividends have actually been paid to the Borrower on or prior to
such fiscal quarter end.
"FREIM" shall mean Front Royal Environmental Insurance Management, Inc., a
Virginia corporation.
"FRETS" shall mean Front Royal ETS, Inc., a Virginia corporation.
"FRESI" shall mean Front Royal Environmental Services, Inc., a North
Carolina corporation. For purposes of this Agreement, all assets, liabilities,
equity, items of income, loss, revenue and expense and other financial items of
FRESI shall be deemed to include the
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corresponding financial items of Triangle for so long as Triangle is a Wholly
Owned Subsidiary of FRESI.
"FRIC" shall mean Front Royal Insurance Company, an Ohio corporation,
formerly known as Cardinal Casualty Company.
"Federal Funds Rate" shall mean, for any period, a fluctuating per annum
interest rate (rounded upwards, if necessary, to the nearest 1/100 of one
percentage point) equal for each day during such period to the weighted average
of the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or if such rate is not so published for any
day that is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three federal funds brokers of
recognized standing selected by the Agent.
"Federal Reserve Board" shall mean the Board of Governors of the Federal
Reserve System or any successor thereto.
"Fee Letter" shall mean the letter from First Union to the Borrower, dated
November 13, 1996, relating to certain fees payable by the Borrower in respect
of the transactions contemplated by this Agreement, as amended, modified or
supplemented from time to time.
"Financial Condition Certificate" shall mean a financial condition
certificate, substantially in the form of Exhibit I, duly executed by the chief
financial officer of the Borrower.
"Fixed Charge Coverage Ratio" shall mean, as of the last day of any fiscal
quarter, for the period of four consecutive fiscal quarters then ending (the
"Measurement Period"), the ratio of (i) the aggregate of (A) the Available
Dividend Amount of the Insurance Subsidiaries determined with respect to, and as
of the last day of, the Measurement Period (calculated, for the purposes of this
definition only, as if such Measurement Period were an actual fiscal year), plus
(B) the Extraordinary Dividend Amount as of the end of such fiscal quarter, plus
(C) the Net Tax Payments (whether a positive or negative number) of the Borrower
during the Measurement Period, minus (D) the Projected Net Overhead (whether a
positive or negative number) for the period of four fiscal quarters following
the Measurement Period, plus (E) the Combined Net Cash Flow (whether a positive
or negative number) of the Non-Insurance Subsidiaries (other than CMS) for the
Measurement Period (to the extent not already included in item (A), (B), (C), or
(D) above), minus, only with respect to Measurement Periods ending on December
31, (F) the amount of the prepayment required under Section 2.6(f) in respect of
Excess Cash Flow for the Measurement Period, except to the extent the Borrower
had cash on hand at the end of such Measurement Period sufficient to make such
required prepayment, to (ii) the sum of (y) Projected Debt Service for the
period of four fiscal quarters following the Measurement Period, and (z) cash
dividends or
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similar cash payments projected to be paid in respect of the Series A Preferred
Stock, the Class C Common Stock or the Rights for the period of four fiscal
quarters following the Measurement Period (it being understood that such cash
dividends or cash payments are restricted by Section 6.13(a)(ii)).
"Fort Washington" shall mean Fort Washington Holdings, Inc., a
Pennsylvania corporation, all of the outstanding Capital Stock of which, to the
knowledge of the Borrower, is owned by Xxxxxxx X. Xxxxxxxx and Xxxxxxx X.
XxXxxxxx, Xx.
"Generally Accepted Accounting Principles" shall mean generally accepted
accounting principles, as set forth in the statements, opinions and
pronouncements of the Accounting Principles Board, the American Institute of
Certified Public Accountants and the Financial Accounting Standards Board (or,
to the extent not so set forth in such statements, opinions and pronouncements,
as generally followed by entities similar in size to the Borrower and engaged in
generally similar lines of business), consistently applied and maintained and in
conformity with those used in the preparation of the most recent financial
statements of the Borrower referred to in Section 4.10(a).
"Governmental Authority" shall mean any nation or government, any state or
other political subdivision thereof and any central bank thereof, any municipal,
local, city or county government, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Gross Written Premiums" shall mean, with respect to any Insurance
Subsidiary at any time, the amount of premiums written (after deducting or
adding premiums on business ceded to or assumed from others) as shown on line
32, page 9, Part 2B, sum of columns 1, 2a and 2b, of the Annual Statement of
such Insurance Subsidiary, or the amount determined in a consistent manner for
any date other than a date as of which an Annual Statement of such Insurance
Subsidiary is prepared.
"Xxxxxxxx" shall mean Xxxxxxxx Insurance Company, a Virginia corporation.
"Hazardous Substances" shall mean any substances or materials (i) that are
or become defined as hazardous wastes, hazardous substances, pollutants,
contaminants or toxic substances under any Environmental Law, (ii) that are
defined or classified by any Environmental Law as toxic, explosive, corrosive,
ignitable, infectious, radioactive, mutagenic or otherwise hazardous and are or
become regulated by any Governmental Authority, (iii) the presence of which
require investigation, response or remediation under any Environmental Law, (iv)
that constitute a nuisance or a trespass or pose a health or safety hazard to
Persons or neighboring properties, (v) that consist of underground or
aboveground storage tanks, whether empty, filled or partially filled with any
substance or (vi) that contain, without limitation, asbestos, polychlorinated
biphenyls, urea formaldehyde
-15-
foam insulation, petroleum hydrocarbons, petroleum derived substances or wastes,
crude oil, nuclear fuel, natural gas or synthetic gas.
"Hedge Agreement" shall mean any interest or foreign currency rate swap,
cap, collar, option, hedge, forward rate or other similar agreement or
arrangement designed to protect against fluctuations in interest rates or
currency exchange rates.
"Historical Financial Statements" shall have the meaning given to such
term in Section 4.10(a).
"Historical Statutory Statements" shall have the meaning given to such
term in Section 4.10(d).
"Hunter Note" shall mean the Front Royal, Inc. 9.00% Note Due December 31,
1996, dated as of May 19, 1993, from the Borrower to F.R. Group, Inc., in the
original principal amount of $500,000.
"IPO" shall mean the first public offering of common stock of the
Borrower, by the Borrower or through underwriters, whether on a "firm
commitment" or "best efforts" basis, for the account of the Borrower pursuant to
an offering registered with the Securities and Exchange Commission.
"IRIS Tests" shall mean the ratios and other financial measurements
developed by the NAIC under its Insurance Regulatory Information System or, in
lieu thereof, any successor or other substantially similar guidelines intended
to measure the financial performance of companies in the property and casualty
insurance industry, as the same shall be in effect from time to time.
"Indebtedness" shall mean, with respect to any Person, without
duplication, (i) all indebtedness of such Person for borrowed money, (ii) all
reimbursement obligations of such Person with respect to surety bonds, letters
of credit and bankers' acceptances (in each case, whether or not matured and in
the stated amount thereof), (iii) all obligations of such Person evidenced by
notes, bonds, debentures or similar instruments, (iv) all obligations of such
Person to pay the deferred purchase price of property or services that, in
accordance with Generally Accepted Accounting Principles, would be required to
be shown on a balance sheet of such Person as a liability, (v) all indebtedness
created or arising under any conditional sale or other title retention agreement
with respect to property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event of a default
are limited to repossession or sale of such property), (vi) all obligations of
such Person under Capital Leases to the extent such obligations are required, in
accordance with Generally Accepted Accounting Principles, to be included on such
Person's balance sheet at the time of determination, (vii) all obligations of
such Person to purchase, redeem, retire, defease or otherwise make any payment
in respect of any capital stock or other equity securities that, by their stated
terms (or by the terms of any equity securities issuable upon
-16-
conversion thereof or in exchange therefor), or upon the occurrence of any
event, mature or are mandatorily redeemable, or are redeemable at the option of
the holder thereof, in whole or in part, prior to the Maturity Date, (viii) the
net termination obligations of such Person under Hedge Agreements, calculated as
of any date as if such Hedge Agreements were terminated as of such date, (ix)
any Contingent Obligation of such Person, and (x) all indebtedness referred to
in clauses (i) through (ix) above that is nonrecourse to the credit of such
Person but is secured by any property or asset owned or held by such Person, but
in any case only to the extent of the fair market value of the property of such
Person securing such indebtedness; provided, however, that Indebtedness shall
not include (y) amounts payable in the ordinary course of business under the
terms of insurance policies issued, assumed or reinsured by an Insurance
Subsidiary or (z) the Rights (subject to the limitations of Section 6.9(x)).
"Insurance Code" shall mean, with respect to any Insurance Subsidiary, the
insurance code of any state where such Insurance Subsidiary is domiciled or
conducting business, as amended from time to time, and any successor statute,
together with all rules and regulations from time to time promulgated
thereunder.
"Insurance Companies" shall mean each of Colony, FRIC, Xxxxxxxx and
Xxxxxxxx.
"Insurance Holding Company System Regulatory Act" shall mean the Insurance
Holding Company System Regulatory Act, Section 58-19-1 et seq. of the General
Statutes of North Carolina, as amended from time to time, and any successor
statute, together with all rules and regulations from time to time promulgated
thereunder.
"Insurance Subsidiary" shall mean any Subsidiary of the Borrower the
ability of which to pay dividends is regulated by a Department or other
Governmental Authority or that is otherwise required to be regulated thereby in
accordance with the applicable Requirements of Law of its state of domicile,
including, without limitation, each of FRIC, Colony and Xxxxxxxx and, as of the
Closing Date and after giving effect to the Acquisition, Rockwood.
"Interest Period" shall have the meaning given to such term in Section
2.10.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and any successor statute, and all rules and
regulations from time to time promulgated thereunder.
"Investment Grade Securities" shall mean non-equity securities that are
rated "BBB-" (or the then equivalent grade) or better by Standard & Poor's,
Fitch Investor Services, Inc. or Duff & Xxxxxx Credit Rating Company, "Baa3" (or
the then equivalent grade) or better by Xxxxx'x, "2" or better by the NAIC, or
an equivalent rating by an equivalent rating agency selected by the Agent.
"Investments" shall have the meaning given to such term in Section 6.11.
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"Issuer Group" shall mean any Person and each of the Persons that directly
or indirectly, through one or more intermediaries, owns or controls, is
controlled by or under common control with, such Person. For the purpose of this
definition, with respect to any Person that is controlled through the voting of
securities, "control" means the possession, direct or indirect, of the power to
vote 50% or more of the securities having ordinary voting power for the election
of directors or other managers of such person. Such term shall not include a
Person that is a federal governmental unit, political subdivision thereof or any
federal government agency.
"LIBOR Rate" shall mean, with respect to each LIBOR Loan comprising part
of the same Tranche for any Interest Period, an interest rate per annum obtained
by dividing (i) (y) the rate of interest appearing on Telerate Page 3750 (or any
successor page) or (z) if no such rate is available, or at the option of the
Agent in any event, the rate of interest determined by the Agent to be the rate
or the arithmetic mean of rates at which Dollar deposits in immediately
available funds are offered by First Union to first-tier banks in the London
interbank Eurodollar market, in each case under (y) and (z) above at
approximately 11:00 a.m., London time, two (2) Business Days prior to the first
day of such Interest Period for a period substantially equal to such Interest
Period and in an amount substantially equal to the amount of First Union's Loan
comprising part of such Tranche, by (ii) the amount equal to 1.00 minus the
Reserve Requirement for such Interest Period. The LIBOR Rate shall be rounded to
the next higher 1/100 of one percentage point.
"Lender" shall mean each financial institution signatory hereto and each
other financial institution that becomes a "Lender" hereunder pursuant to
Section 9.7, and their respective successors and assigns.
"Lending Office" shall mean, with respect to any Lender, the office of
such Lender designated as its "Lending Office" on its signature page hereto or
in an Assignment and Acceptance, or such other office as may be otherwise
designated in writing from time to time by such Lender to the Borrower and the
Agent.
"Licenses" shall have the meaning given to such term in Section 4.4(c).
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
security interest, lien (statutory or otherwise), preference, priority, charge
or other encumbrance of any nature, whether voluntary or involuntary, including,
without limitation, the interest of any vendor or lessor under any conditional
sale agreement, title retention agreement, capital lease or any other lease or
arrangement having substantially the same effect as any of the foregoing, and
the filing of any financing statement or similar statement or notice under the
applicable Uniform Commercial Code or comparable recording statute of any
jurisdiction securing or purporting to secure any Indebtedness.
"Loans" shall have the meaning given to such term in Section 2.1.
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"Loan Documents" shall mean and collectively refer to this Agreement, the
Term Notes, the Borrower Pledge and Security Agreement, the Borrower Collateral
Assignment of Agreements, the Subsidiaries Collateral Assignment of Agreements,
the Escrow Agreement, the Subsidiaries Guaranty, any Hedge Agreement entered
into by the Borrower in respect of the Obligations (but only so long as such
Hedge Agreement is entered into with a Lender as counterparty) and any and all
other agreements, certificates, instruments and documents, heretofore, now or
hereafter executed by or in behalf of the Borrower or any of its Subsidiaries
and delivered to the Agent or any Lender with respect to any of the foregoing or
with respect to the transactions contemplated hereby or thereby (other than the
Transaction Documents), and in each case, together with any amendments,
modifications and supplements thereto and restatements thereof, in whole or in
part.
"Margin Stock" shall have the meaning given to such term in Regulation U.
"Material Adverse Change" shall mean (i) with reference to any time or
period prior to the Closing Date, a material adverse change in the condition
(financial or otherwise), operations, business, properties or prospects of (a)
the Borrower or the Borrower and its Subsidiaries, taken as a whole, or (b)
Rockwood or Rockwood and its Subsidiaries, taken as a whole, and (ii) with
reference to any time or period from and after the Closing Date, a material
adverse change in the condition (financial or otherwise), operations, business,
properties or prospects of the Borrower or the Borrower and its Subsidiaries,
taken as a whole.
"Material Adverse Effect" shall mean (i) with reference to any time or
period prior to the Closing Date, a material adverse effect upon the condition
(financial or otherwise), operations, business, properties or prospects of (a)
the Borrower or the Borrower and its Subsidiaries, taken as a whole, or (b)
Rockwood or Rockwood and its Subsidiaries, taken as a whole, and (ii) with
reference to any time or period from and after the Closing Date, a material
adverse effect upon (a) the condition (financial or otherwise), operations,
business, properties or prospects of the Borrower or the Borrower and its
Subsidiaries, taken as a whole, (b) the ability of the Borrower or any of its
Subsidiaries to perform its obligations under any Loan Document or Transaction
Document to which it is a party, (c) the legality, validity or enforceability of
any Loan Document or Transaction Document, in each case as to the obligations of
the Borrower or any of its Subsidiaries thereunder, or (d) the perfection or
priority of the Liens granted to the Agent for the benefit of the Lenders under
the Loan Documents or the rights and remedies of the Agent and Lenders under the
Loan Documents; except, in the case of clauses (c) and (d) above, to the extent
any such effect is caused by any act or omission on the part of the Agent or
Lenders.
"Material Asset" shall have the meaning given to such term in Section 6.8.
"Maturity Date" shall mean the thirtieth (30th) day prior to the seventh
anniversary of the Closing Date.
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"Multiemployer Plan" shall mean any "employee pension benefit plan" within
the meaning of Section 3(2) of ERISA that is a "multiemployer plan" within the
meaning of Section 4001(a)(3) of ERISA to which the Borrower, any of its
Subsidiaries or any ERISA Affiliate makes, is making or is obligated to make
contributions or has made or been obligated to make contributions.
Notwithstanding the foregoing, the term "Multiemployer Plan" shall not include
any such multiemployer plan to which any Subsidiary or ERISA Affiliate
contributed or was obligated to make contributions before (but not after) it
became a Subsidiary or ERISA Affiliate.
"NAIC" shall mean the National Association of Insurance Commissioners and
any successor thereto.
"Net Cash Proceeds" shall mean, with respect to any Asset Disposition or
Equity Issuance, cash payments received net of reasonable accounting, legal and
recording expenses, selling and brokerage commissions and discounts and
underwriting fees and other reasonable fees and expenses incurred in connection
with such disposition, issuance or sale (but only to the extent that the amounts
so deducted are paid to a Person not an Affiliate of the Borrower); provided,
that Net Cash Proceeds from an Asset Disposition shall be further reduced (i) in
the amount of any income or transfer taxes paid or reasonably estimated by the
Borrower to be payable by the Borrower and its Subsidiaries as a result of such
Asset Disposition and (ii) to the extent the proceeds are used to pay principal
of, and premium and interest on, any Indebtedness that is secured by a Permitted
Lien on the property that is the subject of such Asset Disposition and to the
extent that such Indebtedness is required by the transferee of such Asset
Disposition to be paid as a condition thereto.
"Net Income" shall mean, with respect to any Person for any period, the
net income (or loss) of such Person for such period, determined in accordance
with Generally Accepted Accounting Principles.
"Net Overhead" shall mean, for any period, the difference of (i) the
aggregate of all operating costs and expenses of the Borrower and CMS
(including, without limitation, for rent, utilities, taxes and payroll) incurred
or paid by the Borrower or CMS during such period on behalf of the Insurance
Subsidiaries, other than payments of interest in respect of Indebtedness, minus
(ii) the aggregate of all management, servicing and other administrative fees
paid by the Insurance Subsidiaries to the Borrower or CMS during such period,
including, without limitation, all amounts paid under the Services Agreements.
"Net Tax Payments" shall mean (i) the aggregate amounts paid or reasonably
estimated to be paid to the Borrower by its Subsidiaries pursuant to the Tax
Allocation Agreements, or other tax sharing or allocation agreements or
arrangements in effect, in respect of taxable income realized during a
Measurement Period, less (ii) Tax Payments paid or reasonably estimated to be
paid by the Borrower in respect of taxable income realized during such
Measurement Period.
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"Net Written Premiums" shall mean, with respect to any Insurance
Subsidiary at any time, the amount of premiums written (after deducting or
adding premiums on business ceded to or assumed from others) as shown on line
32, page 8, Part 2B, column 4 of the Annual Statement of such Insurance
Subsidiary, or the amount determined in a consistent manner for any date other
than a date as of which an Annual Statement of such Insurance Subsidiary is
prepared.
"Non-Insurance Subsidiary" shall mean any Subsidiary of the Borrower other
than an Insurance Subsidiary.
"Non-Investment Grade Securities" shall mean non-equity securities that
are rated lower than "BBB-" (or the then equivalent grade), but no lower than
"B-" (or the then equivalent grade), by Standard & Poor's, Fitch Investor
Services, Inc. or Duff & Xxxxxx Credit Rating Company, lower than "Baa3" (or the
then equivalent grade), but no lower than "B3" (or the then equivalent grade),
by Moody's, "3" or "4" by the NAIC, or an equivalent rating by an equivalent
rating agency selected by the Agent.
"Notice of Conversion/Continuation" shall have the meaning given to such
term in Section 2.11(b).
"Obligations" shall mean all indebtedness, liabilities and obligations
owing, due or payable from the Borrower to the Agent, any Lender or any other
Person entitled thereto, of any kind or nature, under this Agreement or any of
the other Loan Documents, direct or indirect, absolute or contingent, primary or
secondary, now existing or hereafter arising and however acquired (including
those acquired by assignment), including, without limitation, all principal of
and interest (including, to the greatest extent permitted by law, post-petition
interest) on the Loans and all fees, expenses and other amounts payable by the
Borrower under this Agreement or any of the other Loan Documents.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any
successor thereto.
"PIC" shall have the meaning given to such term in the recitals hereof.
"Participant" shall have the meaning given to such term in Section 9.7(d).
"Pension Plan" shall mean any "employee pension benefit plan" within the
meaning of Section 3(2) of ERISA (other than a Multiemployer Plan subject to the
provisions of Title IV of ERISA) and to which the Borrower, any of its
Subsidiaries or any ERISA Affiliate may have any liability. Notwithstanding the
foregoing, the term "Pension Plan" shall not include any such employee pension
benefit plan with respect to which any Subsidiary or ERISA Affiliate may have
any liability attributable to periods before (but not after) it became a
Subsidiary or ERISA Affiliate.
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"Permitted Liens" shall mean any of the following types of Liens:
(a) Liens created by the Loan Documents;
(b) Liens set forth on Schedule 1.1(b);
(c) Liens securing letters of credit issued for the benefit of the
Insurance Subsidiaries in the ordinary course of their business to secure
reinsurance obligations;
(d) Liens imposed by law, such as Liens of carriers, warehousemen,
mechanics and materialmen, and other similar Liens in respect of property
of the Borrower or any of its Subsidiaries, incurred in the ordinary
course of business for sums not constituting borrowed money, that do not
materially detract from the value of such property and that are being
contested in good faith by appropriate proceedings (which proceedings have
the effect of preventing the forfeiture or sale of the property subject to
such Lien) and for which adequate reserves have been established in
accordance with Generally Accepted Accounting Principles or other
appropriate provision made therefor;
(e) Liens (other than any Lien imposed by ERISA) incurred in the
ordinary course of business in connection with worker's compensation,
unemployment insurance or other forms of governmental insurance or
benefits;
(f) Liens for current taxes, assessments or other governmental
charges that are not delinquent or remain payable without any penalty, or
to the extent that the nonpayment thereof is permitted by Section 5.8;
(g) Purchase money Liens upon property used by the Borrower or any
Subsidiary of the Borrower in the ordinary course of its business,
securing Indebtedness incurred solely to pay all or a portion of the
purchase price thereof to the extent such Indebtedness is permitted under
Section 6.9(ix), provided that any such Lien (i) shall attach to such
property concurrently or within ten (10) days after the acquisition
thereof by the Borrower or such Subsidiary, (ii) shall not exceed the
lesser of (y) the fair market value of such property (as determined in
good faith by the board of directors of the Borrower or such Subsidiary)
as of the time of acquisition of such property or (z) the cost thereof to
the Borrower or such Subsidiary and (iii) shall not encumber any other
property of the Borrower or any Subsidiary of the Borrower;
(h) Liens securing Capital Lease Obligations to the extent such
Capital Lease Obligations are permitted under Section 6.9(ix), provided
that any such Lien (i) shall secure only the payment of the Indebtedness
under the respective Capital Lease and (ii) shall not encumber any other
property of the Borrower or any Subsidiary of the Borrower;
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(i) With respect to any real property, all easements, rights of way,
restrictions (including zoning restrictions), minor defects and similar
encumbrances on title that do not materially impair the use of such
property for its intended purposes;
(j) Any attachment or judgment Lien not constituting an Event of
Default under Section 7.1(1) and that is being contested in good faith by
appropriate proceedings and for which adequate reserves have been
established in accordance with Generally Accepted Accounting Principles or
other appropriate provision made therefor;
(k) Any other Liens that the Required Lenders may approve in writing
from time to time; and
(l) Liens securing the Existing Senior Debt, provided that such
Liens shall be terminated promptly following the Closing Date.
"Person" shall mean any corporation, association, joint venture,
partnership, limited liability company, organization, business, individual,
trust, government or agency or political subdivision thereof or any other legal
entity.
"Premier" shall mean Premier Auto Insurance Company, a Pennsylvania stock
insurance company, formerly known as Somerset Casualty Insurance Company.
"Prepayment Event" shall have the meaning given to such term in Section
2.6(h).
"Pro Forma Balance Sheet" shall mean the pro forma consolidated balance
sheet of the Borrower and its Subsidiaries required to be attached to the
Financial Condition Certificate.
"Prohibited Transaction" shall mean any transaction described in (i)
Section 406 of ERISA that is not exempt by reason of Section 408 of ERISA or by
reason of a Department of Labor prohibited transaction individual or class
exemption or (ii) Section 4975(c) of the Internal Revenue Code that is not
exempt by reason of Section 4975(c)(2) or 4975(d) of the Internal Revenue Code.
"Projected Debt Service" shall mean, as of the last day of any fiscal
quarter, for the period of four consecutive fiscal quarters following such date,
an amount equal to the aggregate (without duplication) of all scheduled
principal and interest reasonably estimated by the Borrower (and as set forth in
the relevant Covenant Compliance Worksheet) to be required to be paid by the
Borrower and its Subsidiaries during such four-quarter period in respect of
Indebtedness (including, without limitation, the Loans), based on interest rates
in effect and being paid as of the date of determination.
"Projected Net Overhead" shall mean, as of the last day of any fiscal
quarter, for the period of four consecutive fiscal quarters following such date,
an amount equal to the
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difference of (i) the aggregate of all operating costs and expenses of the
Borrower and CMS (including, without limitation, for rent, utilities, taxes and
payroll) reasonably estimated by the Borrower (and as set forth in the relevant
Covenant Compliance Worksheet) to be required to be incurred or paid by the
Borrower or CMS during such four-quarter period on behalf of the Insurance
Subsidiaries, other than payments of interest in respect of Indebtedness, minus
(ii) the aggregate of all management, servicing and other administrative fees
reasonably estimated by the Borrower (and as set forth in the relevant Covenant
Compliance Worksheet) to be required to be paid by the Insurance Subsidiaries to
the Borrower or CMS during such four-quarter period, including, without
limitation, all amounts required to be paid during such four-quarter period
under the Services Agreements.
"Projections" shall have the meaning given to such term in Section
4.10(c).
"Qualified Plan" shall mean any Pension Plan that is intended to be
tax-qualified under Section 401(a) of the Internal Revenue Code, and the trust
created thereunder that is intended to be tax-exempt under Section 501(a) of the
Internal Revenue Code, and that the Borrower, any of its Subsidiaries or any
ERISA Affiliate sponsors or maintains or to which it makes or is obligated to
make contributions, or, in the case of a "multiple employer plan" within the
meaning of Section 4064(a) of ERISA, has made contributions at any time during
the immediately preceding five-plan year period, but excluding any Multiemployer
Plan.
"Quarterly Statement" shall mean, with respect to any Insurance Company
for any fiscal quarter, the quarterly financial statements of such Insurance
Company as required to be filed with the Department of its state of domicile,
together with all exhibits, schedules, certificates and actuarial opinions
required to be filed or delivered therewith.
"Register" shall have the meaning given to such term in Section 9.7(b).
"Regulations D, G, T, U and X" shall mean Regulations D, G, T, U and X of
the Federal Reserve Board or any successor or other regulation relating to
reserve requirements applicable to member banks of the Federal Reserve System.
"Reinsurance Agreement" shall mean any agreement, contract, treaty,
certificate or other arrangement whereby an Insurance Subsidiary agrees to
transfer, cede or retrocede to another insurer or reinsurer all or part of the
liability assumed by such an Insurance Subsidiary under a policy or policies of
insurance issued by such an Insurance Subsidiary.
"Reportable Event" shall mean (i) any "reportable event" within the
meaning of Section 4043(c) of ERISA for which the 30-day notice under Section
4043(a) of ERISA has not been waived by the PBGC (including any failure to meet
the minimum funding standard of, or timely make any required installment under,
Section 412 of the Internal Revenue Code or Section 302 of ERISA, regardless of
the issuance of any waivers in accordance with Section 412(d) of the Internal
Revenue Code), (ii) any such "reportable event" subject to advance notice to the
PBGC under Section 4043(b)(3) of ERISA, (iii) any application for a
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funding waiver or an extension of any amortization period pursuant to Section
412 of the Internal Revenue Code, and (iv) a cessation of operations described
in Section 4062(e) of ERISA.
"Required Lenders" shall mean the Lenders holding outstanding Loans or,
prior to the Closing Date, Commitments, representing more than sixty-six and
two-thirds percent (66-2/3%) of the aggregate at such time of all outstanding
Loans or Commitments.
"Requirement of Law" shall mean, with respect to any Person, the charter,
articles or certificate of organization or incorporation and bylaws or other
organizational or governing documents of such Person, and any statute, law,
treaty, rule, regulation, order, decree, writ, injunction or determination of
any arbitrator or court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject or otherwise pertaining to any or all of the
transactions contemplated by this Agreement and the other Loan Documents.
"Reserve Requirement" shall mean, with respect to any Interest Period, the
reserve percentage (expressed as a decimal rounded to the next higher 1/100 of
1%) in effect for any day during such Interest Period, as provided by the
Federal Reserve Board, applied for determining the maximum reserve requirements
(including, without limitation, basic, supplemental, marginal and emergency
reserves) applicable to First Union under Regulation D with respect to
"Eurocurrency liabilities" within the meaning of Regulation D, or under any
similar or successor regulation with respect to Eurocurrency liabilities or
Eurocurrency funding.
"Responsible Officer" shall mean, when used herein or in any other Loan
Document to specify individuals having knowledge of the subject matter of any
representation, warranty, obligation or other matter, the president, chief
financial officer, or any vice president responsible for either claims or human
resources of the Borrower or any of its Subsidiaries who has actual knowledge,
or who, in the course of the normal performance of his operational
responsibilities, would have knowledge, of such subject matter and the
requirements with respect thereto.
"Rights" shall mean the rights issued in connection with the Class C
Common Stock as set forth in a rights agreement or similar document.
"Rockwood" shall have the meaning given to such term in the recitals
hereof.
"Sellers" shall mean PIC and Trirock.
"Series A Preferred Stock" shall mean the Series A Convertible Preferred
Stock, par value $100 per share, of the Borrower issued to PIC on the Closing
Date, the terms of which are set forth in the Amended Charter.
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"Services Agreements" shall mean the Current Services Agreements and any
similar service, management or other agreement or arrangement entered into after
the date hereof between CMS or the Borrower and any of their Subsidiaries and
approved by each relevant Department or other Governmental Authority having
jurisdiction, in each case without regard to any amendments, modifications or
supplements thereto or restatements thereof other than those approved by the
Required Lenders pursuant to the terms hereof.
"Solvent" shall mean, with respect to any Person at any time, that such
Person (i) has capital sufficient to carry on its business as presently
conducted and as then proposed to be conducted, (ii) has assets with a fair
saleable value at such time (A) not less than the amount required to pay the
probable liability on its then existing debts as they become absolute and
matured and (B) greater than the total amount of its liabilities (including
identified contingent liabilities) at such time, and (iii) does not then intend
to, and does not then believe that it will, incur debts or liabilities beyond
its ability to pay such debts and liabilities as they mature; and, in the case
of an Insurance Subsidiary, shall mean in addition that such Insurance
Subsidiary, at such time, satisfies the minimum capital requirements of each
relevant Department.
"Special Dividend" shall mean the distribution by Rockwood of $8,500,000
contemporaneously with the Acquisition pursuant to Section 2.3(b) of the Stock
Purchase Agreement.
"Statutory Accounting Principles" shall mean, with respect to any
Insurance Subsidiary, the statutory accounting practices prescribed or permitted
by the relevant Department, consistently applied and maintained and as
applicable to the facts and circumstances on the date of determination.
"Statutory Liabilities" shall mean, with respect to any Insurance
Subsidiary at any time, the amount shown on line 21, page 3, column 1 of the
Annual Statement of such Insurance Subsidiary, or the amount determined in a
consistent manner for any date other than a date as of which an Annual Statement
of such Insurance Subsidiary is prepared.
"Statutory Net Income" shall mean, with respect to any Insurance
Subsidiary for any period, the amount shown on line 16, page 4, column 1 of the
Annual Statement of such Insurance Subsidiary for such period, or the amount
determined in a consistent manner for any period other than a period for which
an Annual Statement of such Insurance Subsidiary is prepared.
"Stock Purchase Agreement" shall have the meaning given to such term in
the recitals hereof.
"Subscription Agreement" shall mean the agreement pursuant to which the
Class C Common Stock, Rights and Warrants are issued.
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"Subsidiaries Collateral Assignment of Agreements" shall mean the
Collateral Assignment of Agreements, dated as of the Closing Date, made by the
Non-Insurance Subsidiaries in favor of the Agent and Lenders, in substantially
the form of Exhibit F-2, as amended, modified or supplemented from time to time.
"Subsidiaries Guaranty" shall mean the Subsidiaries Guaranty, dated as of
the Closing Date, made by the Non-Insurance Subsidiaries in favor of the Agent
and Lenders, in substantially the form of Exhibit E, as amended, modified or
supplemented from time to time.
"Subsidiary" shall mean, with respect to any Person, any corporation or
other Person of which more than fifty percent (50%) of the outstanding capital
stock having ordinary voting power to elect a majority of the board of
directors, in the case of a corporation, or of the ownership or beneficial
interests, in the case of a Person not a corporation, is at the time, directly
or indirectly, owned or controlled by such Person and one or more of its other
Subsidiaries or a combination thereof (irrespective of whether, at the time,
securities of any other class or classes of any such corporation or other Person
shall or might have voting power by reason of the happening of any contingency).
When used without reference to a parent entity, the term "Subsidiary" shall be
deemed to refer to a Subsidiary of the Borrower.
"Surviving Indebtedness" shall have the meaning given to such term in
Section 3.11(j).
"Tax Allocation Agreements" shall mean, collectively, (i) the Tax
Allocation Agreement, dated as of December 12, 1994, between the Borrower and
Colony, (ii) the Tax Allocation Agreement, dated as of December 12, 1994,
between the Borrower and Xxxxxxxx, (iii) the Tax Allocation Agreement, dated as
of November 22, 1994, between the Borrower and FRIC, and (iv) Tax Allocation
Agreement, in form and substance reasonably satisfactory to the Required Lenders
to be executed on or promptly following the Closing Date, between the Borrower
and Rockwood, in each case without regard to any amendments, modifications or
supplements thereto or restatements thereof other than those approved by the
Required Lenders pursuant to the terms hereof.
"Tax Payments" shall mean, for any period, the aggregate (without
duplication) of all federal, state and local income, franchise and other taxes
required to be deducted from consolidated revenue of the Borrower and its
Subsidiaries in determining Consolidated Net Income for such period.
"Term Notes" shall mean the promissory notes of the Borrower in
substantially the form of Exhibit A, executed and delivered to the Lenders
pursuant to Section 2.4(a), together with any amendments, modifications and
supplements thereto and restatements thereof, in whole or in part.
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"Tranche" shall mean any part or all of the Loans of a single Type and, in
the case of LIBOR Loans, as to which a single Interest Period is in effect.
"Transaction Documents" shall mean, collectively, (i) this Agreement and
the other Loan Documents, (ii) the Stock Purchase Agreement and the documents
and instruments required by the terms of the Stock Purchase Agreement to be
executed and delivered by the parties in connection with the closing of the
transactions contemplated thereby, including, without limitation, the
Shareholders and Registration Rights Agreement, Lease and Non-Competition and
Non-Solicitation Agreements (each as defined in the Stock Purchase Agreement),
(iii) the Tax Allocation Agreements, the Current Services Agreements, and the
Employment Agreements, (iv) the Equity Documents and (v) any and all other
agreements, certificates, instruments and documents, heretofore, now or
hereafter executed by or in behalf of the Borrower or any of its Subsidiaries
with respect to any of the foregoing or with respect to the transactions
contemplated thereby or any of the other Transactions, in each case without
regard to any amendments, modifications or supplements thereto or restatements
thereof other than those approved by the Required Lenders pursuant to the terms
hereof.
"Transactions" shall mean, collectively, the transactions contemplated by
the Transaction Documents, including (i) the making of the Loans, (ii) the
Acquisition, (iii) the prepayment of the Existing Senior Debt, the Existing
Subordinated Debt, and the Hunter Note, (iv) the issuance of securities
including Class C Common Stock, Rights and Warrants pursuant to the Equity
Documents, and (v) the payment of permitted fees and expenses in connection with
the foregoing.
"Triangle" shall mean Triangle Engineering, Inc., a North Carolina
corporation.
"Trirock" shall have the meaning given to such term in the recitals
hereof.
"Type" shall have the meaning given to such term in Section 2.2(a).
"Unfunded Pension Liabilities" shall mean the excess of a Pension Plan's
accrued benefits, within the meaning of Section 3(23) of ERISA, over the current
value of its assets, within the meaning of Section 3(26) of ERISA.
"Uniform Commercial Code" shall mean the Uniform Commercial Code of the
State of North Carolina, as amended from time to time, unless in any particular
instance the Uniform Commercial Code of another state is applicable, in which
case such term shall mean the Uniform Commercial Code of such state.
"Wachovia Indebtedness" shall mean the Indebtedness, in the maximum
aggregate principal amount of $650,000, owed by FRESI to Wachovia Bank of North
Carolina, N.A. pursuant to the Wachovia Notes and secured by accounts receivable
and other assets of FRESI and guaranteed by the Borrower and FREIM.
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"Wachovia Notes" shall mean (i) the Note and Security Agreement, dated as
of April 9, 1996, from FRESI to Wachovia Bank of North Carolina, N.A., providing
for a line of credit in favor of FRESI in the original maximum principal amount
of $425,000, and (ii) the Note and Security Agreement, dated as of April 9,
1996, from FRESI to Wachovia Bank of North Carolina, N.A., providing for a term
loan to FRESI in the original principal amount of $225,000, in each case without
regard to any amendments, modifications or supplements thereto or restatements
thereof other than those approved by the Required Lenders pursuant to the terms
hereof.
"Warrants" shall mean the Warrants of the Borrower issued pursuant to the
terms of the Equity Documents.
"Wholly Owned" shall mean, with respect to any Subsidiary of any Person,
that 100% of the outstanding Capital Stock of such Subsidiary is owned, directly
or indirectly, by such Person.
"Withdrawal Liabilities" shall mean, as of any determination date, the
aggregate amount of the liabilities, if any, pursuant to Section 4021 of ERISA,
if the Borrower, each of its Subsidiaries and each ERISA Affiliate made a
complete withdrawal from all Multiemployer Plans, and any increase in
contributions pursuant to Section 4243 of ERISA.
1.2. Accounting Terms. Except as specifically provided otherwise in this
Agreement, all accounting terms used herein that are not specifically defined
shall have the meanings customarily given them in accordance with Generally
Accepted Accounting Principles (or, to the extent that such terms apply solely
to any Insurance Subsidiary or if otherwise expressly required, Statutory
Accounting Principles) as then in effect. Notwithstanding the foregoing, in the
event that any changes in Generally Accepted Accounting Principles or Statutory
Accounting Principles after the date hereof are required to be applied to the
transactions described herein and would materially affect the computation of the
financial covenants contained in Sections 6.1 through 6.7, as applicable, such
changes shall be followed only from and after the date this Agreement shall have
been amended to take into account any such changes. References to amounts on
particular exhibits, schedules, lines, pages and columns of any Annual Statement
or Quarterly Statement are based on the format promulgated by the NAIC for the
1995 Annual Statements and Quarterly Statements. In the event such format is
changed in future years so that different information is contained in such items
or they no longer exist, or if the Annual Statement or Quarterly Statement is
replaced by the NAIC or by any Department after the date hereof such that
different forms of financial statements are required to be furnished by the
Insurance Subsidiaries in lieu thereof, such references shall be to information
consistent with that reported in the referenced item in the 1995 Annual
Statements or Quarterly Statements, as the case may be.
1.3. Other Terms: Construction. Unless otherwise specified or unless the
context otherwise requires, all references herein to sections, annexes,
schedules and exhibits are references to sections, annexes, schedules and
exhibits in and to this Agreement, and all
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terms defined in this Agreement shall have the defined meanings when used in any
other Loan Document or any certificate or other document made or delivered
pursuant hereto.
ARTICLE II
AMOUNT AND TERMS OF THE LOANS
2.1. Loans. Each Lender severally agrees, subject to and on the terms and
conditions of this Agreement, to make a term loan (each, a "Loan," and
collectively, the "Loans") to the Borrower on the Closing Date in a principal
amount not to exceed its Commitment. No Loans shall be made at any time after
the Closing Date. To the extent repaid, the Loans may not be reborrowed.
2.2. Borrowing. (a) The Loans shall, at the option of the Borrower and
subject to the terms and conditions of this Agreement, be either Base Rate Loans
or LIBOR Loans (each, a "Type" of Loan) or a combination thereof, provided that,
notwithstanding any other provision of this Agreement, the Loans shall be made
initially as Base Rate Loans.
(b) The Borrower hereby requests a borrowing of the Loans on the Closing
Date in an amount equal to the aggregate Commitments. Not later than 2:00 p.m.,
Charlotte time, on the Closing Date, each Lender will make available to the
Agent at its office referred to in Section 9.5 (or at such other location as the
Agent may designate) an amount, in Dollars and in immediately available funds,
equal to the Commitment of such Lender. To the extent the Lenders have made such
amounts available to the Agent as provided hereinabove, the Agent will make the
aggregate of such amounts available to the Borrower in accordance with Section
2.3(a) and in like funds as received by the Agent.
2.3. Disbursements: Funding Reliance: Domicile of Loans. (a) The Borrower
hereby authorizes the Agent to disburse the proceeds of the Loans in accordance
with the terms of any written instructions from any of the Authorized Officers,
provided that the Agent shall not be obligated under any circumstances to
forward amounts to any account not listed in the Account Designation Leher.
(b) Unless the Agent has received, prior to 2:00 p.m., Charlotte time, on
the Closing Date, written notice from a Lender that such Lender will not make
available to the Agent such Lender's ratable portion of the borrowing to be made
on the Closing Date, the Agent may assume that such Lender has made such portion
available to the Agent in immediately available funds on the Closing Date in
accordance with the provisions of Section 2.2(b), and the Agent may, in reliance
upon such assumption, but shall not be obligated to, make a corresponding amount
available to the Borrower on the Closing Date. If and to the extent that such
Lender shall not have made such portion available to the Agent, and the Agent
shall have made such corresponding amount available to the Borrower, such
Lender, on the one hand, and the Borrower, on the other, severally agree to pay
to the Agent forthwith on demand such corresponding amount, together with
interest thereon for each day
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from the date such amount is made available to the Borrower until the date such
amount is repaid to the Agent, (i) in the case of such Lender, at the Federal
Funds Rate, and (ii) in the case of the Borrower, at the Adjusted Base Rate. If
such Lender shall repay to the Agent such corresponding amount, such amount
shall constitute such Lender's Loan as part of such borrowing for purposes of
this Agreement. The failure of any Lender to make any Loan required to be made
by it as part of such borrowing shall not relieve any other Lender of its
obligation, if any, hereunder to make its Loan as part of such borrowing, but no
Lender shall be responsible for the failure of any other Lender to make the Loan
to be made by such other Lender as part of such borrowing.
(c) Subject to Section 2.19, each Lender may, at its option, make and
maintain its Loan or any portion thereof at, to or for the account of any of its
Lending Offices, provided that any exercise of such option shall not affect the
obligation of the Borrower to repay such Loan to or for the account of such
Lender in accordance with the terms of this Agreement.
2.4. Term Notes. (a) The Loan made by each Lender shall be evidenced by a
Term Note appropriately completed in substantially the form of Exhibit A. Each
Term Note issued to a Lender shall (i) be executed by the Borrower, (ii) be
payable to the order of such Lender, (iii) be dated as of the Closing Date, (iv)
be in a stated principal amount equal to such Lender's Commitment (or, in the
case of a Term Note issued after the Closing Date, in an amount equal to the
unpaid principal amount of such Lender's Loan), (v) bear interest in accordance
with the provisions of Section 2.8, and (vi) be entitled to all of the benefits
of this Agreement and the other Loan Documents and subject to the provisions
hereof and thereof.
(b) Each Lender will record on its internal records each payment received
by it in respect thereof and will, in the event of any transfer of part or all
of its Term Note, either endorse on the reverse side thereof or on a schedule
attached thereto (or any continuation thereof) the outstanding principal amount
of the Loan evidenced thereby as of the date of transfer or provide such
information on a schedule to the Assignment and Acceptance relating to such
transfer; provided, however, that the failure of any Lender to make any such
recordation or provide any such information, or any error therein, shall not
affect the Borrower's obligations under this Agreement or the Term Notes.
2.5. Termination of Commitments. The Commitments shall be automatically
and permanently terminated at 5:00 p.m., Charlotte time, on the earlier of (i)
January 31, 1997, (ii) the tenth Business Day following receipt of the
approvals, permits and consents required pursuant to Section 3.1(f), and (iii)
the Closing Date.
2.6. Mandatory Repayments and Prepayments. (a) Except to the extent due or
made sooner pursuant to the provisions of this Agreement, the Borrower will
repay the aggregate outstanding principal of the Loans in the amounts and on the
dates set forth below:
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Date Payment Amount
---- --------------
July 1, 1997 $1,250,000
January 2, 1998 $1,250,000
July 1, 1998 $2,125,000
January 2, 1999 $2,125,000
July 1, 1999 $2,500,000
January 2, 2000 $2,500,000
July 1, 2000 $3,000,000
January 2, 2001 $3,000,000
July 1, 2001 $3,125,000
January 2, 2002 $3,125,000
July 1, 2002 $3,500,000
January 2, 2003 $3,500,000
July 1, 2003 $3,500,000
Maturity Date $3,500,000
(b) To the extent not previously paid, and except to the extent due or
made sooner pursuant to the provisions of this Agreement, the aggregate
outstanding principal of the Loans shall be due and payable on the Maturity
Date.
(c) Promptly upon (and in any event not later than two (2) Business Days
after) its receipt thereof, the Borrower will prepay the outstanding principal
amount of the Loans in an amount equal to 50% of the Net Cash Proceeds from any
Equity Issuance (other than an IPO) and will deliver to the Agent, concurrently
with such prepayment, a certificate signed by its chief financial officer in
form and substance satisfactory to the Agent and setting forth the calculation
of such Net Cash Proceeds; provided, however, that no prepayment pursuant to
this Section 2.6(c) shall be required from the first $250,000 of Net Cash
Proceeds from any such Equity Issuance in each fiscal year, up to an aggregate
limit of $750,000 of Net Cash Proceeds excluded pursuant to this proviso;
provided, further, that no prepayment pursuant to this Section 2.6(c) must be
made prior to the last Business Day of the fiscal quarter in which the Equity
Issuance takes place, unless the aggregate amount of the required prepayments
pursuant to this Section 2.6(c) shall be greater than $50,000.
(d) Promptly upon (and in any event not later than two (2) Business Days
after) its receipt thereof, the Borrower will prepay the outstanding principal
amount of the Loans with the Net Cash Proceeds from an IPO in an amount equal to
the lesser of (i) 75% of such Net Cash Proceeds or (ii) an amount such that the
Capitalization Ratio, determined as of the last day of the fiscal quarter most
recently ended and after giving pro forma effect to the consummation of the
offering and such prepayment of the Loans as if such transactions were effected
on such date, would equal 0.20 to 1.0; provided, however, that no such
prepayment shall be required in the event that the Capitalization Ratio as of
the last day of the fiscal quarter most recently ended, determined on a pro
forma basis after giving effect to the consummation of the IPO (but without
giving pro forma effect to any prepayment of the
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Loans out of such Net Cash Proceeds), would equal not more than 0.20 to 1.0.
Concurrently with such prepayment, the Borrower will deliver to the Agent a
certificate signed by its chief financial officer in form and substance
satisfactory to the Agent and setting forth the calculation of such Net Cash
Proceeds.
(e) Promptly upon (and in any event not later than two (2) Business Days
after) its receipt thereof, the Borrower will prepay the outstanding principal
amount of the Loans in an amount equal to 100% of the Net Cash Proceeds from any
Asset Disposition and will deliver to the Agent, concurrently with such
prepayment, a certificate signed by its chief financial officer in form and
substance satisfactory to the Agent and setting forth the calculation of such
Net Cash Proceeds; provided, however, that no prepayment pursuant to this
Section 2.6(e) shall be required from (i) the sale of the Capital Stock of
Premier to Fort Washington as permitted by Section 6.8(i), (ii) any sale of the
Capital Stock of Xxxxxxxx as permitted by Section 6.8(ii) or (iii) the first
$2,000,000 of Net Cash Proceeds from other Asset Dispositions in each fiscal
year. Notwithstanding the foregoing, nothing in this subsection shall be deemed
to permit any Asset Disposition not expressly permitted under Section 6.8
(f) Concurrently with the delivery of its annual financial statements
after the end of each fiscal year, beginning with the fiscal year ending
December 31, 1997, and in any event not later than one hundred twenty (120) days
after the last day of each such fiscal year, the Borrower will prepay the
outstanding principal amount of the Loans in an amount equal to 35% of Excess
Cash Flow, if any, for such fiscal year and will deliver to the Agent,
concurrently with such prepayment, a certificate, substantially in the form of
Exhibit B, signed by its chief financial officer and setting forth the
calculation of such Excess Cash Flow; provided, however, that no such prepayment
shall be required under this subsection with respect to the fiscal year ending
December 31, 1997 if the Earnings Coverage Ratio is greater than or equal to
1.55 to 1.0 as of the last day of such fiscal year.
(g) Promptly upon (and in any event not later than two (2) Business Days
after) its receipt thereof, the Borrower will prepay the outstanding principal
amount of the Loans in an amount equal to 100% of all amounts (including
interest), if any, received by the Borrower pursuant to Section 2.2(b) of the
Stock Purchase Agreement as a return of the escrowed portion of the purchase
price for the Acquisition.
(h) Each prepayment of the Loans made pursuant to subsections (c) through
(g) above (each, a "Prepayment Event") shall be applied to reduce the
outstanding principal amount of the Loans, with each such reduction to be
applied to the scheduled principal payments on the Loans (as set forth in
subsection (a) above) in the inverse order of maturity. Each such prepayment
shall be applied ratably among the Lenders in proportion to the principal amount
of the Loans held by each, and shall be applied first to prepay all Base Rate
Loans before any LIBOR Loans are prepaid. In the event and on each occasion that
a Prepayment Event occurs, the Borrower shall give to the Agent and the Lenders
at least five
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Business Days' prior written notice of such event (to the extent practicable)
and the amount of the Loans anticipated to be prepaid.
(i) Amounts to be applied to the prepayment of LIBOR Loans as provided in
Section 2.6(h) on a day other than the last day of the Interest Period
applicable thereto shall, at the option of the Borrower, be applied to prepay
such LIBOR Loans immediately, together with all amounts required under Section
2.18 to be paid as a consequence thereof, or shall be deposited in a separate
Prepayment Account (as defined below) for the LIBOR Loans to be prepaid. The
Agent shall apply any cash deposited in the Prepayment Account to prepay
Tranches of LIBOR Loans chronologically on the last day of their respective
Interest Periods until all outstanding LIBOR Loans have been prepaid or until
all the allocable cash on deposit in the Prepayment Account has been exhausted.
The term "Prepayment Account" shall mean an account established by the Borrower
with the Agent and over which the Agent shall have exclusive dominion and
control, including the exclusive right of withdrawal for application in
accordance with this subsection. The Agent will, at the request of the Borrower,
invest amounts on deposit in the Prepayment Account in Cash Equivalents that
mature prior to the last day of the Interest Periods of the Tranches of LIBOR
Loans to be prepaid; provided, however, that (i) the Agent shall not be required
to make any investment that, in its sole judgment, would require or cause the
Agent to be in, or would result in any, violation of any Requirement of Law and
(ii) the Agent shall have no obligation to invest amounts on deposit in the
Prepayment Account if an Event of Default shall have occurred and be continuing.
The Borrower shall indemnify the Agent for any losses relating to the
investments so that the amount available to prepay the LIBOR Loans on the last
day of the applicable Interest Periods is not less than the amount that would
have been available had no investments been made pursuant hereto. Other than any
interest earned on such investments, the Prepayment Account shall not bear
interest. Interest, if any, on such investments shall be deposited in the
Prepayment Account and invested and disbursed as specified above. If the
maturity of the Loans has been accelerated pursuant to Section 7.2, the Agent
may, in its sole discretion, immediately apply all amounts on deposit in the
Prepayment Account to satisfy any of the Obligations. The Borrower hereby
pledges and assigns to the Agent, for the benefit of the Lenders, each
Prepayment Account established hereunder to secure the Obligations. Amounts
remaining in Prepayment Accounts after the Loans are fully paid and all other
outstanding Obligations are satisfied shall be returned to the Borrower or as
otherwise required by law.
2.7. Voluntary Prepayments. (a) At any time and from time to time, the
Borrower shall have the right to prepay the Loans, in whole or in part, without
premium or penalty (except as provided in clause (iii) below), upon written
notice to the Agent given not later than 11:00 a.m., Charlotte time, five (5)
Business Days prior to each intended prepayment, provided that (i) each partial
prepayment shall be in an aggregate principal amount of not less than $1,000,000
or, if greater, an integral multiple of $125,000 in excess thereof, (ii) no
partial prepayment of LIBOR Loans within any single Tranche shall reduce the
aggregate outstanding principal amount of LIBOR Loans within such Tranche to
less than $2,000,000 or to any greater amount not an integral multiple of
$125,000 in excess thereof, and (iii)
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unless made together with all amounts required under Section 2.18 to be paid as
a consequence of such prepayment, a prepayment of a LIBOR Loan may be made only
on the last day of the Interest Period applicable thereto. Each such notice
shall specify the proposed date of such prepayment and the aggregate principal
amount and Type of the Loans to be prepaid (and, in the case of LIBOR Loans, the
applicable Interest Period) and shall be irrevocable and shall bind the Borrower
to make such prepayment on the terms specified therein.
(b) Each prepayment of the Loans made pursuant to subsection (a) above
shall be applied to the scheduled principal payments on the Loans (as set forth
in Section 2.6(a)) in the inverse order of maturity. Each such prepayment shall
be applied ratably among the Lenders in proportion to the principal amount of
the Loans held by each.
2.8. Interest. (a) The Borrower will pay interest in respect of the unpaid
principal amount of each Loan, from the Closing Date until such principal amount
shall be paid in full, (i) at the Adjusted Base Rate, as in effect from time to
time during such periods as such Loan is a Base Rate Loan, and (ii) at the
Adjusted LIBOR Rate, as in effect from time to time during such periods as such
Loan is a LIBOR Loan.
(b) Upon the occurrence and during the continuance of an Event of Default
as the result of failure by the Borrower to pay any principal of or interest on
any Loan, any fees or other amount hereunder when due (whether at maturity,
pursuant to acceleration or otherwise), and (at the election of the Required
Lenders) upon the occurrence and during the continuance of any other Event of
Default, all outstanding principal amounts of the Loans and, to the greatest
extent permitted by law, all interest accrued on the Loans and all other accrued
and outstanding fees and other amounts hereunder, shall bear interest at a rate
per annum equal to the interest rate applicable from time to time thereafter to
such Loans (whether the Adjusted Base Rate or the Adjusted LIBOR Rate) plus 2%
(or, in the case of fees and other amounts, at the Adjusted Base Rate plus 2%),
and, in each case, such default interest shall be payable on demand. To the
greatest extent permitted by law, interest shall continue to accrue after the
filing by or against the Borrower of any petition seeking any relief in
bankruptcy or under any law pertaining to insolvency or debtor relief.
(c) Accrued (and theretofore unpaid) interest shall be payable as follows:
(i) in respect of each Base Rate Loan (including any Base Rate Loan
or portion thereof paid or prepaid pursuant to the provisions of Section
2.6, except as provided hereinbelow), in arrears on the first Business Day
of each calendar quarter, beginning with April 1, 1997; provided, that in
the event all of the Loans are repaid or prepaid in full, then accrued
interest in respect of all Base Rate Loans shall be payable together with
such repayment or prepayment on the date thereof;
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(ii) in respect of each LIBOR Loan (including any LIBOR Loan or
portion thereof paid or prepaid pursuant to the provisions of Section 2.6,
except as provided hereinbelow), in arrears (y) on the last Business Day
of the Interest Period applicable thereto (subject to the provisions of
clause (iv) in Section 2.10) and (z) in addition, in the case of a LIBOR
Loan with an Interest Period having a duration of six months, on the date
three months after the first day of such Interest Period; provided, that
in the event all of the Loans are repaid or prepaid in full, then accrued
interest in respect of all LIBOR Loans shall be payable together with such
repayment or prepayment on the date thereof; and
(iii) at maturity (whether pursuant to acceleration or otherwise)
and, after maturity, on demand.
(d) Nothing contained in this Agreement or in any other Loan Document
shall be deemed to establish or require the payment of interest to any Lender at
a rate in excess of the maximum rate permitted by applicable law. If the amount
of interest payable for the account of any Lender on any interest payment date
would exceed the maximum amount permitted by applicable law to be charged by
such Lender, the amount of interest payable for its account on such interest
payment date shall be automatically reduced to such maximum permissible amount.
In the event of any such reduction affecting any Lender, if from time to time
thereafter the amount of interest payable for the account of such Lender on any
interest payment date would be less than the maximum amount permitted by
applicable law to be charged by such Lender, then the amount of interest payable
for its account on such subsequent interest payment date shall be automatically
increased to such maximum permissible amount, provided that at no time shall the
aggregate amount by which interest paid for the account of any Lender has been
increased pursuant to this sentence exceed the aggregate amount by which
interest paid for its account has theretofore been reduced pursuant to the
previous sentence.
(e) The Agent shall promptly notify the Borrower and the Lenders upon
determining the interest rate for each Tranche of LIBOR Loans after its receipt
of the relevant Notice of Conversion/Continuation, and upon each change in the
Base Rate; provided, however, that the failure of the Agent to provide the
Borrower or the Lenders with any such notice shall neither affect any
obligations of the Borrower or the Lenders hereunder nor result in any liability
on the part of the Agent to the Borrower or any Lender. Each such determination
(including each determination of the Reserve Requirement) shall, absent manifest
error, be conclusive and binding on all parties hereto.
2.9. Fees. The Borrower agrees to pay:
(a) To First Union, for its own account, on the Closing Date, the
fees described in paragraphs (i) and (ii) of the Fee Letter, in the
amounts set forth therein as due and payable on such date; and
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(b) To the Agent, for its own account, the annual administrative fee
described in paragraph (iii) of the Fee Letter, on the terms, in the
amount and at the times set forth therein.
2.10. Interest Periods. Concurrently with the giving of a Notice of
Conversion/ Continuation in respect of any Base Rate Loans to be converted into,
or LIBOR Loans to be continued as, LIBOR Loans within a single Tranche, the
Borrower shall have the right to elect, pursuant to such notice, the interest
period (each, an "Interest Period") to be applicable to each such LIBOR Loan,
which Interest Period shall, at the option of the Borrower, be a one, two, three
or six month period; provided, however, that:
(i) all LIBOR Loans within a single Tranche shall at all times have
the same Interest Period;
(ii) the initial Interest Period for any LIBOR Loan shall commence
on the date of the continuation of, or conversion into, such LIBOR Loan,
and each successive Interest Period applicable to such LIBOR Loan shall
commence on the day on which the next preceding Interest Period applicable
thereto expires;
(iii) LIBOR Loans may not be outstanding under more than five (5)
separate Interest Periods at any one time (for which purpose Interest
Periods shall be deemed to be separate even if they are coterminous);
(iv) if any Interest Period otherwise would expire on a day that is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day unless such next succeeding Business Day falls in
another calendar month, in which case such Interest Period shall expire on
the next preceding Business Day;
(v) the Borrower may not select any Interest Period that begins
prior to the third (3rd) Business Day after the Closing Date or that
expires after the Maturity Date;
(vi) no Interest Period may be selected that would end after a
scheduled date for repayment of principal of the Loans occurring on or
after the first day of such Interest Period unless, immediately after
giving effect to such selection, the aggregate principal amount of Loans
that are Base Rate Loans or that have Interest Periods expiring on or
before such principal repayment date equals or exceeds the principal
amount required to be paid on such principal repayment date;
(vii) if any Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month during which such
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Interest Period would otherwise expire, such Interest Period shall expire
on the last Business Day of such calendar month;
(viii) if, upon the expiration of any Interest Period applicable to
any Tranche of LIBOR Loans, the Borrower shall have failed to elect a new
Interest Period to be applicable to such LIBOR Loans, then the Borrower
shall be deemed to have elected to convert such LIBOR Loans into Base Rate
Loans as of the expiration of the then current Interest Period applicable
thereto; and
(ix) LIBOR Loans of six-month Interest Periods shall be available to
the Borrower only if corresponding Dollar deposits in the London interbank
Eurodollar market are available to each Lender as of the date of the
proposed conversion or continuation.
2.11. Conversions and Continuations. (a) The Borrower shall have the
right, on any Business Day occurring on or after the Closing Date, to elect (i)
to convert a Tranche of any Base Rate Loans into an equivalent Tranche of LIBOR
Loans, or to convert a Tranche of any LIBOR Loans into an equivalent Tranche of
Base Rate Loans, or (ii) to continue a Tranche of any LIBOR Loans for an
additional Interest Period, provided that (x) any such conversion of LIBOR Loans
into Base Rate Loans shall involve an aggregate principal amount of not less
than $1,000,000 or, if greater, an integral multiple of $125,000 in excess
thereof; any such conversion of Base Rate Loans into, or continuation of, LIBOR
Loans shall involve an aggregate principal amount of not less than $2,000,000
or, if greater, an integral multiple of $125,000 in excess thereof; and no
partial conversion of LIBOR Loans within any single Tranche shall reduce the
outstanding principal amount of LIBOR Loans remaining within such Tranche to
less than $2,000,000 or to any greater amount not an integral multiple of
$125,000 in excess thereof, (y) except as otherwise provided in Section 2.16(d),
LIBOR Loans may be converted into Base Rate Loans only on the last day of the
Interest Period applicable thereto (and, in any event, if a LIBOR Loan is
converted into a Base Rate Loan on any day other than the last day of the
Interest Period applicable thereto, the Borrower will pay, upon such conversion,
all amounts required under Section 2.18 to be paid as a consequence thereof),
and (z) no conversion of Base Rate Loans into LIBOR Loans or continuation of
LIBOR Loans shall be permitted during the continuance of a Default or Event of
Default.
(b) The Borrower shall make each such election by giving the Agent written
notice not later than 11:00 a.m., Charlotte time, three (3) Business Days prior
to the intended effective date of any conversion of Base Rate Loans into, or
continuation of, LIBOR Loans and one (1) Business Day prior to the intended
effective date of any conversion of LIBOR Loans into Base Rate Loans. Each such
notice (each, a "Notice of Conversion/Continuation") shall be irrevocable, shall
be given in the form of Exhibit C and shall specify (x) the date of such
conversion or continuation (which shall be a Business Day), (y) in the case of a
conversion into, or a continuation of, LIBOR Loans, the Interest Period to be
applicable thereto, and (z) the aggregate amount and Type of the Loans being
converted
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or continued. Upon the receipt of a Notice of Conversion/Continuation, the Agent
will promptly notify each Lender of the proposed conversion or continuation. In
the event that the Borrower shall fail to deliver a Notice of
Conversion/Continuation as provided herein with respect to any outstanding LIBOR
Loans, such LIBOR Loans shall automatically be converted to Base Rate Loans upon
the expiration of the then current Interest Period applicable thereto (unless
repaid pursuant to the terms hereof).
2.12. Method of Payments: Computations. (a) All payments by the Borrower
hereunder or under any Term Note shall be made without setoff, counterclaim or
other defense, in Dollars and in immediately available funds to the Agent, for
the account of the Lenders (except as otherwise expressly provided herein as to
payments required to be made directly to the Lenders), at the Agent's office
referred to in Section 9.5, prior to 12:00 noon, Charlotte time, on the date
payment is due. Any payment made as required hereinabove, but after 12:00 noon,
Charlotte time, shall be deemed to have been made on the next succeeding
Business Day. If any payment falls due on a day that is not a Business Day, then
such due date shall be extended to the next succeeding Business Day (except that
in the case of LIBOR Loans to which the proviso of clause (iv) in Section 2.10
is applicable, such due date shall be the next preceding Business Day), and such
extension of time shall then be included in the computation of payment of
interest, fees or other applicable amounts.
(b) The Agent will distribute to the Lenders like amounts relating to
payments made to the Agent for the account of the Lenders as follows: (i) if the
payment is received by 12:00 noon, Charlotte time, in immediately available
funds, the Agent will make available to each Lender on the same date, by wire
transfer of immediately available funds, such Lender's ratable share of such
payment (based on the percentage that the amount of the payment owing to such
Lender bears to the total amount of such payment owing to all of the Lenders),
and (ii) if such payment is received after 12:00 noon, Charlotte time, or in
other than immediately available funds, the Agent will make available to each
Lender its ratable share of such payment by wire transfer of immediately
available funds on the next succeeding Business Day (or in the case of
uncollected funds, as soon as practicable after collected). If the Agent shall
not have made a required distribution to the Lenders as required hereinabove
after receiving a payment for the account of the Lenders, the Agent will pay to
each Lender, on demand, its ratable share of such payment with interest thereon
at the Federal Funds Rate for each day from the date such amount was required to
be disbursed by the Agent until the date repaid to such Lender.
(c) Unless the Agent shall have received written notice from the Borrower
prior to the date on which any payment is due to the Lenders hereunder that such
payment will not be made in full, the Agent may assume that the Borrower has
made such payment in full to the Agent on such date, and the Agent may, in
reliance on such assumption, but shall not be obligated to, cause to be
distributed to each Lender on such due date an amount equal to the amount then
due to such Lender. If and to the extent the Borrower shall not have so made
such payment in full to the Agent, and without limiting the obligation of the
Borrower to make such payment in accordance with the terms hereof, each Lender
shall repay to the
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Agent forthwith on demand such amount so distributed to such Lender, together
with interest thereon for each day from the date such amount is so distributed
to such Lender until the date repaid to the Agent, at the Federal Funds Rate.
(d) Each Lender for whose account any payment is to be made hereunder may,
but shall not be obligated to, debit the amount of any such payment not made as
and when required hereunder to any ordinary deposit account of the Borrower with
such Lender (with prompt notice to the Agent and the Borrower); provided,
however, that the failure to give such notice shall not affect the validity of
such debit by such Lender.
(e) All computations of interest and fees hereunder (including
computations of the Reserve Requirement) shall be made on the basis of a year
consisting of 360 days, with regard to the actual number of days (including the
first day, but excluding the last day) elapsed.
(f) Any prepayment of the Loans, whether mandatory or voluntary, will not
affect the Borrower's obligations, including its obligation to continue making
payments, in connection with any Hedge Agreement, which Hedge Agreement will
remain in effect pursuant to its terms and notwithstanding the occurrence of any
prepayment.
2.13. Recovery of Payments. (a) The Borrower agrees that to the extent the
Borrower makes a payment or payments to or for the account of the Agent or any
Lender, which payment or payments or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, receiver or any other party under any bankruptcy,
insolvency or similar state or federal law, common law or equitable cause, then,
to the extent of such payment or repayment, the Obligation intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been received.
(b) If any amounts distributed by the Agent to any Lender are subsequently
returned or repaid by the Agent to the Borrower or its representative or
successor in interest, whether by court order or by settlement approved by the
Lender in question, such Lender will, promptly upon receipt of notice thereof
from the Agent, pay the Agent such amount. If any such amounts are recovered by
the Agent from the Borrower or its representative or successor in interest, the
Agent will redistribute such amounts to the Lenders on the same basis as such
amounts were originally distributed.
2.14. Use of Proceeds. The proceeds of the Loans shall be used solely (i)
to finance a portion of the purchase price of the Acquisition, (ii) to prepay in
full the Existing Senior Debt, (iii) to prepay in full the Existing Subordinated
Debt and the Hunter Note, and (iv) to pay or reimburse reasonable fees and
expenses in connection with the consummation of the Acquisition, the
consummation of the transactions contemplated hereby and the consummation of the
other Transactions.
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2.15. Pro Rata Treatment: Sharing of Payments. (a) All continuations and
conversions of Loans shall be made by the Lenders pro rata on the basis of their
respective outstanding Loans. All payments on account of principal of or
interest on the Loans, fees or any other Obligations owing to or for the account
of any one or more Lenders shall be apportioned ratably among such Lenders in
proportion to the amounts of such principal, interest, fees or other Obligations
owed to them respectively.
(b) Each Lender agrees that if it shall receive any amount hereunder
(whether by voluntary payment, realization upon security, exercise of the right
of setoff or banker's lien, counterclaim or cross action, or otherwise, other
than pursuant to Section 9.7) applicable to the payment of any of the
Obligations that exceeds its ratable share (according to the proportion of (i)
the amount of such Obligations due and payable to such Lender at such time to
(ii) the aggregate amount of such Obligations due and payable to all Lenders at
such time) of payments on account of such Obligations then or therewith obtained
by all the Lenders to which such payments are required to have been made, such
Lender shall forthwith purchase from the other Lenders such participations in
such Obligations as shall be necessary to cause such purchasing Lender to share
the excess payment or other recovery ratably with each of them; provided,
however, that if all or any portion of such excess payment is thereafter
recovered from such purchasing Lender, such purchase from each such other Lender
shall be rescinded and each such other Lender shall repay to the purchasing
Lender the purchase price to the extent of such recovery, together with an
amount equal to such other Lender's ratable share (according to the proportion
of (i) the amount of such other Lender's required repayment to (ii) the total
amount so recovered from the purchasing Lender) of any interest or other amount
paid or payable by the purchasing Lender in respect of the total amount so
recovered. The Borrower agrees that any Lender so purchasing a participation
from another Lender pursuant to the provisions of this subsection may, to the
fullest extent permitted by law, exercise any and all rights of payment
(including, without limitation, setoff, banker's lien or counterclaim) with
respect to such participation as fully as if such participant were a direct
creditor of the Borrower in the amount of such participation. If under any
applicable bankruptcy, insolvency or similar law, any Lender receives a secured
claim in lieu of a setoff to which this subsection applies, such Lender shall,
to the extent practicable, exercise its rights in respect of such secured claim
in a manner consistent with the rights of the Lenders entitled under this
subsection to share in the benefits of any recovery on such secured claim.
2.16. Increased Costs; Change in Circumstances; Illegality; etc. (a) If,
at any time after the date hereof and from time to time, the introduction of or
any change in any applicable law, rule or regulation or in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof, or compliance by any Lender with any
guideline or request from any such Governmental Authority (whether or not having
the force of law), shall (i) subject such Lender to any tax or other charge, or
change the basis of taxation of payments to such Lender, in respect of any of
LIBOR Loans or any other amounts payable hereunder or its obligation to make,
fund or maintain any LIBOR Loans (other than any change in the rate or basis of
tax on the
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overall net income of such Lender or its applicable Lending Office), (ii)
impose, modify or deem applicable any reserve, special deposit or similar
requirement (other than as a result of any change in the Reserve Requirement)
against assets of, deposits with or for the account of, or credit extended by,
such Lender or its applicable Lending Office, or (iii) impose on such Lender or
its applicable Lending Office any other condition, and the result of any of the
foregoing shall be to increase the cost to such Lender of making or maintaining
any LIBOR Loans or to reduce the amount of any sum received or receivable by
such Lender hereunder, the Borrower will, promptly upon demand therefor by such
Lender, pay to such Lender such additional amounts as shall compensate such
Lender for such increase in costs or reduction in return.
(b) If, at any time after the date hereof and from time to time, any
Lender shall have reasonably determined that the introduction of or any change
in any applicable law, rule or regulation regarding capital adequacy or in the
interpretation or administration thereof by any Governmental Authority charged
with the interpretation or administration thereof, or compliance by such Lender
with any guideline or request from any such Governmental Authority (whether or
not having the force of law), has or would have the effect, as a consequence of
such Lender's Commitment or Loan, of reducing the rate of return on the capital
of such Lender or any Person controlling such Lender to a level below that which
such Lender or controlling Person could have achieved but for such introduction,
change or compliance (taking into account such Lender's or controlling Person's
policies with respect to capital adequacy), the Borrower will, promptly upon
demand therefor by such Lender therefor, pay to such Lender such additional
amounts as will compensate such Lender or controlling Person for such reduction
in return.
(c) If, on or prior to the first day of any Interest Period, (y) the Agent
shall have determined that adequate and reasonable means do not exist for
ascertaining the applicable LIBOR Rate for such Interest Period or (z) the Agent
shall have received written notice from the Required Lenders of their
determination that the rate of interest referred to in the definition of "LIBOR
Rate" upon the basis of which the Adjusted LIBOR Rate for LIBOR Loans for such
Interest Period is to be determined will not adequately and fairly reflect the
cost to such Lenders of making or maintaining LIBOR Loans during such Interest
Period, the Agent will forthwith so notify the Borrower and the Lenders. Upon
such notice, (i) all then outstanding LIBOR Loans shall automatically, on the
expiration date of the respective Interest Periods applicable thereto (unless
then repaid in full), be converted into Base Rate Loans, (ii) the obligation of
the Lenders to convert Base Rate Loans into, or to continue, LIBOR Loans shall
be suspended, and (iii) any Notice of Conversion/Continuation given at any time
thereafter with respect to LIBOR Loans shall be deemed to be a request for Base
Rate Loans, in each case until the Agent or the Required Lenders, as the case
may be, shall have determined that the circumstances giving rise to such
suspension no longer exist (and the Required Lenders, if making such
determination, shall have so notified the Agent), and the Agent shall have so
notified the Borrower and the Lenders.
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(d) Notwithstanding any other provision in this Agreement, if, at any time
after the date hereof and from time to time, any Lender shall have determined in
good faith that the introduction of or any change in any applicable law, rule or
regulation or in the interpretation or administration thereof by any
Governmental Authority charged with the interpretation or administration
thereof, or compliance with any guideline or request from any such Governmental
Authority (whether or not having the force of law), has or would have the effect
of making it unlawful for such Lender to continue to make or maintain LIBOR
Loans, such Lender will forthwith so notify the Agent and the Borrower. Upon
such notice, (i) each of such Lender's then outstanding LIBOR Loans shall
automatically, on the expiration date of the respective Interest Period
applicable thereto (or, to the extent any such LIBOR Loan may not lawfully be
maintained as a LIBOR Loan until such expiration date, upon such notice), be
converted into a Base Rate Loan, (ii) the obligation of such Lender to convert
Base Rate Loans into, or to continue, LIBOR Loans shall be suspended, and (iii)
any Notice of Conversion/Continuation given at any time thereafter with respect
to LIBOR Loans shall, as to such Lender, be deemed to be a request for a Base
Rate Loan, in each case until such Lender shall have determined that the
circumstances giving rise to such suspension no longer exist and shall have so
notified the Agent, and the Agent shall have so notified the Borrower.
Determinations by the Agent or any Lender for purposes of this Section
2.16 of any increased costs, reduction in return, market contingencies,
illegality or any other matter shall, absent manifest error, be conclusive,
provided that such determinations are made in good faith. Except as set forth in
Section 2.19, no failure by the Agent or any Lender at any time to demand
payment of any amounts payable under this Section 2.16 shall constitute a waiver
of its right to demand payment of any additional amounts arising at any
subsequent time. Nothing in this Section 2.16 shall require or be construed to
require the Borrower to pay any interest, fees, costs or other amounts in excess
of that permitted by applicable law.
2.17. Taxes. (a) Any and all payments by the Borrower hereunder or under
any Term Note shall be made, in accordance with the terms hereof and thereof,
free and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, other than income and franchise taxes (including United States
withholding taxes imposed on any Non-U.S. Lender (as defined in subsection (d)
below) with respect to its income tax liability to the United States), imposed
on the Agent or any Lender by the United States or by the jurisdiction under the
laws of which the Agent or such Lender, as the case may be, is organized or in
which its principal office or (in the case of a Lender) its applicable Lending
Office is located, or any political subdivision or taxing authority thereof (all
such nonexcluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder or under any Term Note to the Agent or any Lender, (i) the sum payable
shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 2.17), the Agent or such Lender, as the case may be, receives an
amount equal to the sum it
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would have received had no such deductions been made, (ii) the Borrower will
make such deductions, (iii) the Borrower will pay the full amount deducted to
the relevant taxation authority or other authority in accordance with applicable
law and (iv) the Borrower will deliver to the Agent or such Lender, as the case
may be, evidence of such payment.
(b) The Borrower will indemnify the Agent and each Lender for the full
amount of Taxes (including, without limitation, any Taxes imposed by any
jurisdiction on amounts payable under this Section 2.17) paid by the Agent or
such Lender, as the case may be, and any liability (including penalties,
interest and expenses) arising therefrom or with respect thereto, whether or not
such Taxes were correctly or legally asserted. This indemnification shall be
made within 30 days from the date the Agent or such Lender, as the case may be,
makes written demand therefor.
(c) Each of the Agent and the Lenders agrees that if it subsequently
recovers, or receives a permanent net tax benefit with respect to, any amount of
Taxes (i) previously paid by it and as to which it has been indemnified by or on
behalf of the Borrower or (ii) previously deducted by the Borrower (including,
without limitation, any Taxes deducted from any additional sums payable under
clause (i) of subsection (a) above), the Agent or such Lender, as the case may
be, shall reimburse the Borrower to the extent of the amount of any such
recovery or permanent net tax benefit (but only to the extent of indemnity
payments made, or additional amounts paid, by or on behalf of the Borrower under
this Section 2.17 with respect to the Taxes giving rise to such recovery or tax
benefit); provided, however, that the Borrower, upon the request of the Agent or
such Lender, agrees to repay to the Agent or such Lender, as the case may be,
the amount paid over to the Borrower (together with any penalties, interest or
other charges), in the event the Agent or such Lender is required to repay such
amount to the relevant taxing authority or other Governmental Authority. The
determination by the Agent or any Lender of the amount of any such recovery or
permanent net tax benefit shall, in the absence of manifest error, be conclusive
and binding.
(d) If any Lender is incorporated or organized under the laws of a
jurisdiction other than the United States of America or any state thereof (a
"Non-U.S. Lender") and claims exemption from United States withholding tax
pursuant to the Internal Revenue Code, such Non-U.S. Lender will deliver to each
of the Agent and the Borrower, on or prior to the Closing Date (or, in the case
of a Non-U.S. Lender that becomes a party to this Agreement as a result of an
assignment after the Closing Date, on the effective date of such assignment),
(i) in the case of a Non-U.S. Lender that is a "bank" for purposes of Section
881(c)(3)(A) of the Internal Revenue Code, a properly completed Internal Revenue
Service Form 4224 or 1001, as applicable (or successor forms), certifying that
such Non-U.S. Lender is entitled to an exemption from or a reduction of
withholding or deduction for or on account of United States federal income taxes
in connection with payments under this Agreement or any of the Term Notes,
together with a properly completed Internal Revenue Service Form W-8 or W-9, as
applicable (or successor forms), and (ii) in the case of a Non-U.S. Lender that
is not a "bank" for purposes of Section 881(c)(3)(A) of the Internal Revenue
Code, a certificate in
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form and substance reasonably satisfactory to the Agent and the Borrower and to
the effect that (x) such Non-U.S. Lender is not a "bank" for purposes of Section
881(c)(3)(A) of the Internal Revenue Code, is not subject to regulatory or other
legal requirements as a bank in any jurisdiction, and has not been treated as a
bank for purposes of any tax, securities law or other filing or submission made
to any governmental authority, any application made to a rating agency or
qualification for any exemption from any tax, securities law or other legal
requirements, (y) is not a 10-percent shareholder for purposes of Section
881(c)(3)(B) of the Internal Revenue Code and (z) is not a controlled foreign
corporation receiving interest from a related person for purposes of Section
881(c)(3)(C) of the Internal Revenue Code, together with a properly completed
Internal Revenue Service Form W-8 or W-9, as applicable (or successor forms).
Each such Non-U.S. Lender further agrees to deliver to each of the Agent and the
Borrower an additional copy of each such relevant form on or before the date
that such form expires or becomes obsolete or after the occurrence of any event
(including a change in its applicable Lending Office) requiring a change in the
most recent forms so delivered by it, in each case certifying that such Non-U.S.
Lender is entitled to an exemption from or a reduction of withholding or
deduction for or on account of United States federal income taxes in connection
with payments under this Agreement or any of the Term Notes, unless an event
(including, without limitation, any change in treaty, law or regulation) has
occurred prior to the date on which any such delivery would otherwise be
required, which event renders all such forms inapplicable or the exemption to
which such forms relate unavailable and such Non-U.S. Lender notifies the Agent
and the Borrower that it is not entitled to receive payments without deduction
or withholding of United States federal income taxes. Each such Non-U.S. Lender
will promptly notify the Agent and the Borrower of any changes in circumstances
that would modify or render invalid any claimed exemption or reduction.
(e) If any Lender is entitled to a reduction in (and not a complete
exemption from) the applicable withholding tax, the Borrower and the Agent may
withhold from any interest payment to such Lender an amount equivalent to the
applicable withholding tax after taking into account such reduction. If any of
the forms or other documentation required under subsection (d) above are not
delivered to the Agent as therein required, then the Borrower and the Agent may
withhold from any interest payment to such Lender not providing such forms or
other documentation an amount equivalent to the applicable withholding tax.
2.18. Compensation. The Borrower will compensate each Lender upon demand
for all losses, expenses and liabilities (including, without limitation, any
loss, expense or liability incurred by reason of the liquidation or reemployment
of deposits or other funds required by such Lender to fund or maintain LIBOR
Loans) that such Lender may incur or sustain (i) if for any reason (other than a
default by such Lender) a continuation of, or conversion into, a LIBOR Loan does
not occur on a date specified therefor in a Notice of Conversion/ Continuation,
(ii) if any repayment, prepayment or conversion of any LIBOR Loan occurs on a
date other than the last day of an Interest Period applicable thereto (including
as a consequence of acceleration of the maturity of the Loans pursuant to
Section 7.2), (iii) if any
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prepayment of any LIBOR Loan is not made on any date specified in a notice of
prepayment given by the Borrower or (iv) as a consequence of any other failure
by the Borrower to make any payments with respect to any LIBOR Loan when due
hereunder. Calculation of all amounts payable to a Lender under this Section
2.18 shall be made as though such Lender had actually funded its relevant LIBOR
Loan through the purchase of a Eurodollar deposit bearing interest at the LIBOR
Rate in an amount equal to the amount of such LIBOR Loan, having a maturity
comparable to the relevant Interest Period; provided, however, that each Lender
may fund its LIBOR Loans in any manner it sees fit and the foregoing assumption
shall be utilized only for the calculation of amounts payable under this Section
2.18. Determinations by any Lender for purposes of this Section 2.18 of any such
losses, expenses or liabilities shall, absent manifest error, be conclusive,
provided that such determinations are made in good faith.
2.19. Replacement of Lenders: Mitigation. The Borrower may, at any time
and so long as no Default or Event of Default has then occurred and is
continuing, replace any Lender that (i) has requested compensation from the
Borrower under Section 2.16(a), 2.16(b), or 2.17 or (ii) the obligation of which
to make or maintain LIBOR Loans has been suspended under Section 2.16(d), by
written notice to such Lender and the Agent given not more than thirty (30) days
after any such event and identifying one or more Persons each of which shall be
reasonably acceptable to the Agent (each, a "Replacement Lender," and
collectively, the "Replacement Lenders") to replace such Lender (the "Replaced
Lender"); provided that (i) the notice from the Borrower to the Replaced Lender
and the Agent provided for hereinabove shall specify an effective date for such
replacement (the "Replacement Effective Date"), which shall be at least five (5)
Business Days after such notice is given, (ii) as of the relevant Replacement
Effective Date, each Replacement Lender shall enter into an Assignment and
Acceptance with the Replaced Lender pursuant to Section 9.7(a), pursuant to
which such Replacement Lenders collectively shall acquire, in such proportion
among them as they may agree with the Borrower and the Agent, all (but not less
than all) of the outstanding Loans of the Replaced Lender, and, in connection
therewith, shall pay to the Replaced Lender, as the purchase price in respect
thereof, an amount equal to the sum as of the Replacement Effective Date
(without duplication) of the unpaid principal amount of, and all accrued but
unpaid interest on, all outstanding Loans of the Replaced Lender, and (iii) all
other obligations of the Borrower owing to the Replaced Lender (other than those
specifically described in clause (ii) above in respect of which the assignment
purchase price has been, or is concurrently being, paid), including amounts
payable under Section 2.16(a), 2.16(b) or 2.17 or under Section 2.18 (to the
extent actually incurred by the Replaced Lender as of the Replacement Effective
Date) whether as a result of the actions required to be taken under this Section
2.19 or otherwise, shall be paid in full by the Borrower to the Replaced Lender
on or prior to the Replacement Effective Date. Each Lender agrees that as
promptly as practicable after it becomes aware of the occurrence of an event
that would entitle it to request compensation under Sections 2.16(a), 2.16(b) or
2.17, or give notice under Section 2.16(d) and in any event if so requested by
the Borrower, each Lender shall use reasonable efforts to make, fund or maintain
its affected Loans through another Lending Office if, as a result thereof, the
reserves, increased costs or any other
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amount payable by the Borrower to such Lender would be avoided or materially
reduced or the illegality would thereby cease to exist and if, in the reasonable
opinion of such Lender, the making, funding or maintaining of such Loans through
such other Lending Office would not in any material respect be disadvantageous
to such Lender or contrary to such Lender's normal banking practices.
ARTICLE III
CONDITIONS OF BORROWING
3.1. Conditions of Closing. The obligation of each Lender to make its Loan
on the Closing Date is subject to the satisfaction of the following conditions
precedent:
(a) The Agent shall have received the following, each dated as of
the Closing Date (unless otherwise specified) and, except for the Notes
and the certificates required to be delivered under the Borrower Pledge
and Security Agreement, in sufficient executed originals for each Lender:
(i) a Term Note for each Lender that is a party hereto as of
the Closing Date, in the amount of such Lender's Commitment, duly
completed in accordance with the provisions of Section 2.4(a) and
executed by the Borrower;
(ii) the Borrower Pledge and Security Agreement, duly
completed and executed by the Borrower, together with the
certificates evidencing the capital stock being pledged thereunder
as of the Closing Date and undated stock powers for each such
certificate, duly executed in blank;
(iii) the Borrower Collateral Assignment of Agreements, duly
completed and executed by the Borrower;
(iv) the Escrow Agreement, duly completed and executed by the
Borrower;
(v) the Subsidiaries Guaranty, duly completed and executed by
each Non-Insurance Subsidiary of the Borrower;
(vi) the Subsidiaries Collateral Assignment of Agreements,
duly completed and executed by each Non-Insurance Subsidiary of the
Borrower;
(vii) the favorable opinion of (A) Xxxxxxxx Xxxxxxxxx Xxxxxx
Aronsohn & Xxxxxx LLP, counsel to the Borrower, Brooks, Pierce,
XxXxxxxx, Xxxxxxxx & Xxxxxxx, special North Carolina counsel to the
Borrower, Hunton & Xxxxxxxx, special Virginia counsel to the
Borrower, and
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Saul, Ewing, Xxxxxx & Xxxx, special Pennsylvania regulatory counsel
to the Borrower, each in form reasonably satisfactory to the Agent
and substantially covering the opinion matters set forth in Exhibit
H, and (B) the favorable North Carolina enforceability opinion of
Xxxxxxxx, Xxxxxxxx & Xxxxxx, P.A., in each case addressed to the
Agent and the Lenders, and addressing such other matters as the
Agent or any Lender may reasonably request; and
(viii) a letter from each of Dilworth, Paxon, Xxxxxx & Xxxxxxx
LLP, counsel to PIC, Xxxxxxxxxxx & Xxxxxxxx LLP, counsel to Trirock,
and Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP, counsel to the
Borrower, each addressed to the Agent and the Lenders, and each to
the effect that the Agent and the Lenders are entitled to rely on
its opinion delivered in connection with the Acquisition as if such
opinion were addressed to them and attaching a copy thereof.
(b) The Agent shall have received a certificate, signed by the
president or chief financial officer of the Borrower, in form and
substance satisfactory to the Agent, certifying that (i) all
representations and warranties of the Borrower contained in this Agreement
and the other Loan Documents are true and correct as of the Closing Date,
both immediately before and after giving effect to the consummation of the
Transactions, the making of the Loans and the application of the proceeds
thereof, (ii) no Default or Event of Default has occurred and is
continuing, both immediately before and after giving effect to the
consummation of the Transactions, the making of the Loans and the
application of the proceeds thereof, (iii) both immediately before and
after giving effect to the consummation of the Transactions, the making of
the Loans and the application of the proceeds thereof, no Material Adverse
Change has occurred since December 31, 1995, and there exists no event,
condition or state of facts that could reasonably be expected to result in
a Material Adverse Change, and (iv) all conditions to the consummation of
the Acquisition have been satisfied and have not been waived or amended
without the prior written consent of the Agent.
(c) The Agent shall have received a certificate of the secretary or
an assistant secretary of each of the Borrower and each of its
Subsidiaries party to the Subsidiaries Guaranty, in form and substance
satisfactory to the Agent, certifying (i) that attached thereto is a true
and complete copy of its articles or certificate of incorporation and all
amendments thereto, certified as of a recent date by the Secretary of
State of its state of incorporation, and that the same has not been
amended since the date of such certification (and also, as to the
Borrower, that attached thereto is a true and complete copy of the Amended
Charter, in the form presented for filing with the Secretary of State of
North Carolina on or prior to the Closing Date), (ii) that attached
thereto is a true and complete copy of its bylaws and all amendments
thereto, as then in effect and as in effect at all times from the date on
which the resolutions referred to in clause (iii) below were adopted to
and including the date of such certificate, and (iii) that attached
thereto is a true and complete copy of resolutions adopted by its board of
directors authorizing the execution, delivery and performance by the
Borrower or such Subsidiary, as the case may be, of the Loan Documents to
which it is a
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party, and as to the incumbency and genuineness of the signature of each
of its officers executing any of such Loan Documents on its behalf, and
attaching all such copies of the documents described above.
(d) The Agent shall have received (i) a certificate as of a recent
date as to the corporate existence or good standing of each of the
Borrower and each of its Subsidiaries under the laws of its state of
incorporation, from the Secretary of State or other applicable
Governmental Authority of such state, (ii) to the extent generally
provided, a certificate or letter as of a recent date as to the tax status
of each of the Borrower and each of its Subsidiaries from the department
of revenue or equivalent taxing authority of its state of incorporation,
certifying that the Borrower or such Subsidiary, as the case may be, has
filed all required tax returns and does not owe any delinquent taxes, and
(iii) a certificate of compliance as of a recent date for each Insurance
Subsidiary, issued by the Department of the jurisdiction in which such
Insurance Subsidiary is domiciled.
(e) The terms of the Series A Preferred Stock and Class C Common
Stock as set forth in the Amended Charter shall be satisfactory to the
Lenders (and shall provide, without limitation, that no cash dividends or
other cash payments may be paid in respect of the Series A Preferred Stock
or the Class C Common Stock and that any Indebtedness arising from the
Series A Preferred Stock or the Class C Common Stock shall be subordinated
to the satisfaction of the Lenders); and all other aspects of the
structure and documentation of the Transactions, all legal, tax,
accounting and other matters relating to the Transactions, and all
corporate or other proceedings incident to the Transactions, shall be
reasonably satisfactory in form and substance to the Lenders, and the
Agent shall have received copies of the executed Transaction Documents in
such number as it shall have reasonably requested.
(f) All approvals, permits and consents of any Governmental
Authorities or other Persons required in connection with the execution and
delivery of this Agreement and the other Transaction Documents and the
consummation of the Transactions (including without limitation the
Department's consent to the Special Dividend and to the disclaimer of
affiliate relationship between the Borrower and any of its Subsidiaries,
on the one hand, and either PIC or Fort Washington, on the other) shall
have been obtained (without the imposition of conditions that are not
acceptable to the Lenders), and all related filings, if any, shall have
been made, and all such approvals, permits, consents and filings shall be
in full force and effect and the Agent shall have received such copies
thereof as it shall have requested; all applicable waiting periods shall
have expired without any adverse action being taken by any Governmental
Authority having jurisdiction; and no action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or
proposed before, and no order, injunction or decree shall have been
entered by, any court or other Governmental Authority, in each case to
enjoin, restrain or prohibit, to obtain substantial damages in respect of,
or that is otherwise related to or arises out of, this Agreement, any of
the other Transaction Documents or the consummation of the Transactions,
or that, in the opinion of the Lenders, could reasonably be expected to
have a Material Adverse Effect.
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(g) The Stock Purchase Agreement shall not have been amended,
modified or supplemented, nor any provision thereof waived, in any
material respect since the date thereof, except as shall have been
approved in writing by the Lenders; the parties to the Stock Purchase
Agreement shall have duly complied with and performed in all material
respects all of its agreements and conditions set forth in the Stock
Purchase Agreement required to be complied with or performed by it on or
prior to the closing date thereunder; the Stock Purchase Agreement shall
be in full force and elect; the Agent shall have received evidence
satisfactory to it that, concurrently with the making of the Loans
hereunder, all material conditions to closing the Acquisition set forth in
the Stock Purchase Agreement shall have been met or waived with the
consent of the Lenders and the Acquisition shall be consummated in
accordance with the terms of the Stock Purchase Agreement and in
compliance with all applicable Requirements of Law, including any
necessary stockholder approvals.
(h) The Agent shall have received evidence in form and substance
satisfactory to it that the Borrower shall have received gross cash
proceeds of not less than $12,700,000 from the issuance of its Class C
Common Stock, Rights and Warrants on terms and conditions set forth in the
Equity Documents.
(i) The Agent shall have received evidence satisfactory to it that
the Amended Charter has been duly filed with the Secretary of State of
North Carolina.
(j) The Agent shall have received evidence satisfactory to it that
all Indebtedness of the Borrower and its Subsidiaries, other than
Indebtedness listed with the consent of the Lenders on Schedule 4.28 as
outstanding as of the Closing Date (collectively, "Surviving
Indebtedness"), including, without limitation, (i) the Existing Senior
Debt, (ii) the Existing Subordinated Debt and (iii) the Hunter Note, has
been paid, satisfied or extinguished in full and that all Liens and
guarantees securing such Indebtedness have been released and terminated.
(k) The Agent shall have received from the Borrower cash, in the
amount of $6,000,000 and in immediately available funds, for deposit into
the Cash Collateral Account created under the Escrow Agreement.
(l) All transaction fees and expenses payable by or on behalf of the
Borrower in connection with the Transactions shall be in an aggregate
amount acceptable to the Agent, and the Agent shall have received such
evidence thereof in form and substance satisfactory to it (including
itemizations thereof) as it shall have reasonably requested.
(m) The Agent and each Lender shall have received copies of the
Historical Financial Statements and the Historical Statutory Statements.
(n) The Agent shall have received certified reports from an
independent search service satisfactory to it listing (i) any judgment or
tax lien filing that names the Borrower or
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any of its Subsidiaries as debtor in any of such jurisdictions as shall
have been selected by the Agent and (ii) any Uniform Commercial Code
financing statement that names the Borrower or any of its Subsidiaries as
debtor in any of such jurisdictions as shall have been selected by the
Agent, and the results thereof shall be satisfactory to the Agent.
(o) The Agent shall have received evidence in form and substance
satisfactory to it that all filings, recordings, registrations and other
actions necessary or, in the reasonable opinion of the Agent, desirable to
perfect the Liens created by the Borrower Pledge and Security Agreement,
the Borrower Collateral Assignment of Agreements, the Subsidiaries
Collateral Assignment of Agreements shall have been completed, or
arrangements satisfactory to the Agent for the completion thereof shall
have been made.
(p) Since December 30, 1995, both immediately before and after
giving effect to the consummation of the transactions contemplated by this
Agreement, there shall not have occurred any Material Adverse Change or
any event, condition or state of facts that could reasonably be expected
to result in a Material Adverse Change (it being understood that the
Acquisition and the other Transactions do not, as such, constitute a
Material Adverse Change).
(q) The Borrower shall have paid (i) to First Union, the unpaid
balance of the fees described in paragraphs (i) and (ii) of the Fee
Letter, (ii) to the Agent, the initial payment of the annual
administrative fee described in paragraph (iii) of the Fee Letter, and
(iii) all other fees and expenses of the Agent and the Lenders required
hereunder or under any other Loan Document to be paid on or prior to the
Closing Date (including the reasonable fees and expenses of counsel to the
Agent) in connection with this Agreement and the transactions contemplated
hereby.
(r) The Agent and Lenders shall have received a Financial Condition
Certificate, together with the Pro Forma Balance Sheet and the Projections
as described in Sections 4.10(b) and 4.10(c), all of which shall be in
form and substance satisfactory to the Agent and the Lenders.
(s) The Agent shall have received evidence in form and substance
satisfactory to it that all of the requirements of Section 5.6 have been
satisfied, including receipt of copies of the declarations pages from the
policies affording the insurance coverages described on Schedule 4.25.
(t) The Agent and Lenders shall have received a schedule of the
investment portfolio of Rockwood as of the calendar month-end immediately
preceding the Closing Date, together with a listing of all securities
transactions in each investment portfolio from the date of such
information through the Closing Date, all of which shall be in form and
substance reasonably satisfactory to the Agent and the Lenders, and no
material adverse change shall have occurred with respect to such
investment portfolio since the date of such disclosure.
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(u) The Agent and Lenders shall have received copies of the most
recent actuarial reports of each of Colony, FRIC, Xxxxxxxx and Xxxxxxxx,
all of which shall be in form and substance reasonably satisfactory to the
Agent and the Lenders.
(v) The Agent shall have received evidence that, contemporaneously
with the Acquisition and the making of the Loans, the Special Dividend
shall have been made by Rockwood.
(w) Each of the representations and warranties contained in Article
V and in the other Loan Documents shall be true and correct on and as of
the Closing Date with the same effect as if made on and as of such date,
both immediately before and after giving effect to the consummation of the
Transactions, the making of the Loans and the application of the proceeds
thereof (except to the extent any such representation or warranty is
expressly stated to have been made as of a specific date, in which case
such representation or warranty shall be true and correct as of such
date).
(x) No Default or Event of Default shall have occurred and be
continuing, both immediately before and after giving effect to the
consummation of the Transactions, the making of the Loans and the
application of the proceeds thereof.
(y) The Agent shall have received an Account Designation Letter,
together with written instructions from an Authorized Officer, including
wire transfer information, directing the payment of the proceeds of the
Loans.
(z) The Agent and each Lender shall have received such other
documents, certificates, opinions and instruments in connection with the
Transactions as it shall have reasonably requested.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
In order to induce the Agent and Lenders to enter into this Agreement and
to make the Loans, the Borrower represents and warrants to the Agent and each
Lender, on the date hereof and on the Closing Date, both before and after giving
effect to the Acquisition, as follows; provided, that, on the date hereof and on
the Closing Date, to the extent such representations and warranties relate to
Rockwood and its Subsidiaries, they are made to the best knowledge of the
Borrower:
4.1. Corporate Existence and Power. Each of the Borrower and its
Subsidiaries (i) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, (ii) has the
full corporate power and authority to execute, deliver and perform the Loan
Documents and the Transaction Documents to which it is or will be a party, to
own and hold its property and to engage in its business as presently
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conducted and (iii) is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction where the nature of its business or
the ownership of its properties requires it to be so qualified, and all such
jurisdictions are listed in Schedule 4.1.
4.2. Authorization; Enforceability. Each of the Borrower and its
Subsidiaries (i) has taken, or on the Closing Date will have taken, all
necessary corporate action to execute, deliver and perform each of the Loan
Documents and Transaction Documents to which it is or will be a party, and (ii)
has, or on the Closing Date (or any later date of execution and delivery) will
have, validly executed and delivered each of the Loan Documents and Transaction
Documents to which it is or will be a party. This Agreement constitutes, and
each of the other Loan Documents and Transaction Documents upon execution and
delivery will constitute, the legal, valid and binding obligation of each of the
Borrower and its Subsidiaries to the extent a party hereto or thereto,
enforceable against it in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally or by general equitable
principles.
4.3. No Violation. The execution, delivery and performance by each of the
Borrower and its Subsidiaries of the Loan Documents and the Transaction
Documents to which it is a party, and compliance by it therewith, do not and
will not (i) violate any provision of its articles or certificate of
incorporation or bylaws, (ii) contravene any applicable Requirement of Law,
(iii) conflict with, result in a breach of or constitute (with notice, lapse of
time or both) a default under any indenture, loan agreement, mortgage, deed of
trust, lease or other agreement or instrument to which it is a party, by which
it or any of its properties is bound or to which it may be subject, (iv) result
in or require the creation or imposition of any Lien upon any of its properties,
other than Liens created pursuant to the Loan Documents, or (v) require the
approval or consent of any Person not a Governmental Authority, other than such
approvals and consents as have been obtained as required.
4.4. Governmental Authorization; Permits. (a) No consent, approval,
authorization, exemption or other action by, notice to, or filing with, any
Governmental Authority is required in connection with (i) the due execution,
delivery and performance by each of the Borrower and its Subsidiaries of the
Loan Documents and Transaction Documents to which it is a party, the
consummation of the Transactions or the legality, validity or enforceability
hereof or thereof or (ii) the perfection and maintenance (including maintenance
of priority) of the Liens created pursuant to the Loan Documents, in each case
other than filings specifically contemplated by the Loan Documents and other
than such filings and approvals as have been made or obtained and are set forth
in Schedule 4.4(a).
(b) Each of the Borrower and its Subsidiaries has, and is in good standing
with respect to, all governmental approvals, licenses, permits and
authorizations necessary to conduct its business as presently conducted and to
own or lease and operate its properties, the failure to obtain which would be
reasonably likely, individually or in the aggregate, to have a Material Adverse
Effect. None of such approvals, licenses, permits or authorizations
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contains any term, condition or limitation more burdensome than such as are
generally applicable to Persons engaged in the same or similar business.
(c) Without limitation of the provisions of subsection (b) above, Schedule
4.4(c) lists, both (i) as of the date hereof and (ii) as of the Closing Date and
immediately after giving effect to the Acquisition, all of the jurisdictions in
which each of the Insurance Subsidiaries holds licenses (including, without
limitation, licenses or certificates of authority from relevant Departments),
permits or authorizations to transact insurance and reinsurance business
(collectively, the "Licenses"), and indicates the line or lines of insurance in
which each of the Insurance Subsidiaries is permitted to be engaged with respect
to each License therein listed. To the knowledge of any Responsible Officer,
except as set forth on Schedule 4.4(c) (x) no such License is the subject of a
proceeding for suspension, revocation or limitation or any similar proceedings,
(y) there is no sustainable basis for such a suspension, revocation or
limitation, and (z) no such suspension, revocation or limitation is threatened
in writing by any relevant Department. No Insurance Subsidiary transacts any
insurance business, directly or indirectly, in any jurisdiction other than those
listed on Schedule 4.4(c), where such business requires any license, permit or
other authorization of a Department or other Governmental Authority of such
jurisdiction.
4.5. Litigation. There are no actions. investigations, suits or
proceedings pending or, to the knowledge of any Responsible Officer, threatened
in writing, at law, in equity or in arbitration, before any court, other
Governmental Authority or other Person, (i) against or affecting the Borrower
and its Subsidiaries or any of their respective properties seeking damages in
the aggregate in excess of $250,000 (other than normal claims made in the
ordinary course of business pursuant to written policies and except as set forth
on Schedule 4.5) or that would otherwise, if adversely determined, be reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect, or
(ii) with respect to this Agreement, any of the other Loan Documents, any of the
Transaction Documents or any of the Transactions.
4.6. Taxes. Each of the Borrower and its Subsidiaries has timely filed all
tax returns and reports required to be filed by it and has paid all taxes,
assessments, fees and other charges levied upon it or upon its properties that
are shown thereon as due and payable (including, without limitation, all
required withholding taxes, social security taxes and other similar payroll
taxes), other than those that are being contested in good faith and by proper
proceedings and for which adequate reserves have been established in accordance
with Generally Accepted Accounting Principles. Such returns accurately reflect
in all material respects all liability for taxes of the Borrower and its
Subsidiaries for the periods covered thereby. There is no action, suit, audit,
investigation, assessment, claim or proceeding pending or, to the knowledge of
any Responsible Officer, threatened in writing, regarding any taxes relating to
the Borrower or any of its Subsidiaries, other than those matters described on
Schedule 4.6.
4.7. Subsidiaries. Schedule 4.7 sets forth a list, both (i) as of the date
hereof and (ii) as of the Closing Date and immediately after giving effect to
the Acquisition, of all of the
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Subsidiaries of the Borrower and, as to each such Subsidiary, the jurisdiction
of its incorporation, the percentage ownership (direct and indirect) of the
Borrower in each class of its capital stock, and each direct owner thereof.
Except for the shares of capital stock expressly indicated on Schedule 4.7,
there are no shares of capital stock or warrants, rights, options or other
equity securities of any Subsidiary of the Borrower outstanding or reserved for
any purpose. All outstanding shares of capital stock of each Subsidiary of the
Borrower are duly and validly issued, fully paid and nonassessable and not
subject to any preemptive rights, warrants, options or similar rights or
restrictions in favor of third parties or any contractual or other restrictions
upon transfer. Each Person indicated on Schedule 4.7 as the direct owner of the
outstanding shares of capital stock of any Subsidiary of the Borrower is, or as
of the Closing Date will be, the sole legal, record and beneficial owner of, and
has, or as of the Closing Date will have, good and valid title to, all such
capital stock, free and clear of all Liens other than the security interest
created in favor of the Agent for the benefit of the Lenders under the Borrower
Pledge and Security Agreement. Neither the Borrower nor any of its Subsidiaries
is a partner or joint venturer in any partnership or joint venture.
4.8. Full Disclosure. All factual information concerning the Borrower and
its Subsidiaries (including, without limitation, Rockwood) heretofore or
contemporaneously furnished to the Agent or Lenders in writing and prepared by
or on behalf of the Borrower or any of its Subsidiaries (including, without
limitation, all information contained in the Loan Documents and the Transaction
Documents) for purposes of or in connection with this Agreement and the other
Loan Documents and the transactions contemplated hereby and thereby is, and all
other such factual information hereafter furnished to the Agent or Lenders in
writing by or on behalf of the Borrower or any of its Subsidiaries will be, true
and accurate in all material respects on the date as of which such information
is dated or certified (or, if such information has been amended or supplemented,
on the date as of which any such amendment or supplement is dated or certified)
and not made incomplete by omitting to state a material fact necessary to make
the statements contained therein, taken as a whole together with all other such
information in light of the circumstances under which such information was
provided, not misleading.
4.9. Margin Regulations. Neither the Borrower nor any of its Subsidiaries
is engaged in the business of extending credit for the purpose of purchasing or
carrying Margin Stock. No proceeds of the Loans will be used, directly or
indirectly, to purchase or carry any Margin Stock, to extend credit for such
purpose or for any other purpose that would violate Regulations G, U, T or X of
the Federal Reserve Board, as in effect from time to time, and any successor
regulations thereto, or for any purpose that would violate any provision of the
Exchange Act.
4.10. Financial Matters. (a) The Borrower has heretofore furnished to the
Agent and Lenders copies of (i) the audited consolidated balance sheets of the
Borrower and its Subsidiaries, and the unaudited consolidated balance sheets of
Rockwood and its Subsidiaries, as of calendar years ended 1993, 1994, and 1995,
and the related statements of income and cash flows for the fiscal years then
ended, and (ii) the unaudited consolidated balance sheet
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of the Borrower and its Subsidiaries, and of Rockwood and its Subsidiaries, as
of September 30, 1996, and the related statements of income for the nine-month
period then ended (collectively, the "Historical Financial Statements"). The
Historical Financial Statements have been prepared in accordance with Generally
Accepted Accounting Principles (subject, with respect to the unaudited
Historical Financial Statements, to the absence of notes required by Generally
Accepted Accounting Principles and to normal year-end audit adjustments) and
present fairly the financial position of the Borrower and its Subsidiaries and
of Rockwood and its Subsidiaries on a consolidated basis as of the respective
dates thereof and the consolidated results of operations of the Borrower and its
Subsidiaries and Rockwood and its Subsidiaries, respectively, for the respective
periods then ended. Except as fully reflected in the most recent Historical
Financial Statements and the notes thereto or in the Pro Forma Balance Sheet, as
of the Closing Date, and after giving effect to the Transactions, there will be
no material liabilities or obligations with respect to the Borrower or any of
its Subsidiaries of any nature whatsoever (whether absolute, contingent or
otherwise and whether or not due). Since the date of the most recent audited
Historical Financial Statements, there has been no Material Adverse Change, and,
to the knowledge of any Responsible Officer, no Material Adverse Change is
threatened or reasonably likely to occur (it being understood that the
Acquisition and the other transactions contemplated by the Transaction Documents
do not, as such, constitute a Material Adverse Change). Neither the Borrower nor
any of its Subsidiaries has directly or indirectly declared, ordered, paid, made
or set apart any amounts or property for any dividend, share acquisition or
other distribution, or agreed to do so.
(b) The Pro Forma Balance Sheet, a copy of which has heretofore been
furnished to the Agent and Lenders, has been prepared in accordance with
Generally Accepted Accounting Principles (subject to the absence of footnotes
required by Generally Accepted Accounting Principles and subject to normal
year-end audit adjustments) and, subject to stated assumptions having a
reasonable basis set forth therein, presents fairly the financial condition of
the Borrower and its Subsidiaries on an unaudited pro forma consolidated basis
as of the date set forth therein after giving effect to the Transactions.
(c) The Borrower has prepared, and has heretofore furnished to the Agent
and Lenders copies of, annual projected balance sheets and statements of income
and cash flows of the Borrower and its Subsidiaries for the period from January
1, 1997 through December 31, 2003, giving effect to the Transactions (the
"Projections"). In the opinion of the Borrower's management, the assumptions
used in preparation of the Projections were reasonable when made and continue to
be reasonable. The Projections have been prepared in good faith by the executive
and financial personnel of the Borrower in light of the historical financial
performance of the Borrower and the financial and operating condition of the
Borrower at the time prepared and represent a reasonable estimate of the future
performance and financial condition of the Borrower and its Subsidiaries,
subject to the uncertainties and approximations inherent in any projections.
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(d) The Borrower has heretofore furnished to the Agent and Lenders copies
of (i) the Annual Statement of each of Colony, FRIC, Xxxxxxxx and Xxxxxxxx as of
December 31, 1995, and for the fiscal year then ended, each as filed with the
relevant Department, and (ii) the Quarterly Statement of each of such Insurance
Companies as of June 30, 1996, and September 30, 1996, and for the six-month and
nine-month periods then ended, each as filed with the relevant Department
(collectively, the "Historical Statutory Statements"). The Historical Statutory
Statements (including, without limitation, the provisions made therein for
investments and the valuation thereof, reserves, policy and contract claims and
Statutory Liabilities) have been prepared in accordance with Statutory
Accounting Principles (except as may be reflected in the notes thereto and
subject, with respect to the Quarterly Statements, to the absence of notes
required by Statutory Accounting Principles and to normal year-end audit
adjustments), were in compliance with applicable Requirements of Law when filed
and present fairly the financial position of the respective Insurance Companies
covered thereby as of the respective dates thereof and the results of
operations, changes in capital and surplus and cash flow of the respective
Insurance Companies covered thereby for the respective periods then ended.
Except for liabilities and obligations disclosed or provided for in the
Historical Statutory Statements (including, without limitation, reserves, policy
and contract claims and Statutory Liabilities), no Insurance Company had, as of
the date of its respective Historical Statutory Statements, any liabilities or
obligations of any nature whatsoever (whether absolute, contingent or otherwise
and whether or not due) that, in accordance with Statutory Accounting
Principles, would have been required to have been disclosed or provided for in
such Historical Statutory Statements. All books of account of each Insurance
Company fully and fairly disclose all of its transactions, properties, assets,
investments, liabilities and obligations, are in its possession and are true,
correct and complete in all material respects.
(e) The investments of each of the Insurance Companies reflected in its
most recently filed Annual Statement and Quarterly Statement comply in all
material respects with all applicable requirements of the relevant Department
and of any other Governmental Authority having jurisdiction over the investment
of its funds. The amounts shown in the most recently filed Annual Statement and
Quarterly Statement for each of the Insurance Companies for reserves, policy and
contract claims, agents' balances and uncollected premiums and Statutory
Liabilities were computed in accordance with commonly accepted actuarial
standards consistently applied (other than changes disclosed to the Lenders and
in compliance with applicable Requirements of Law), were fairly stated in
accordance with sound actuarial principles, were based on actuarial assumptions
that were in accordance with or more stringent than those called for in the
insurance policies and contracts and in the related reinsurance, co-insurance or
similar contracts of such Insurance Companies, were computed on the basis of
assumptions consistent with those of the preceding fiscal year (other than
changes disclosed to the Lenders and in compliance with applicable Requirements
of Law), and meet the requirements of each relevant Department and of any other
Governmental Authority having jurisdiction. Such reserves as established by each
Insurance Company were, in the judgment of the Borrower, adequate as of such
date for the payment by such Insurance Company of all of its insurance benefits,
losses, claims and investigative
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expenses. Marketable securities and short-term investments reflected in each
Insurance Company's most recently filed Annual Statement and Quarterly Statement
are valued at cost, amortized cost or market value, as required by applicable
Requirements of Law.
4.11. Ownership of Properties. (a) Each of the Borrower and its
Subsidiaries has good and marketable title to all real property owned by it,
holds interests as lessee under valid leases in full force and effect with
respect to all leased real and material personal property used in connection
with its business, and has good title to all of its other properties and assets,
including, without limitation, the assets reflected in the Pro Forma Balance
Sheet (except as sold or otherwise disposed of since the date thereof in the
ordinary course of business), in each case free and clear of all Liens other
than Permitted Liens.
(b) Other than (i) financing statements in favor of Wachovia Bank of North
Carolina, N.A. with respect to the Wachovia Indebtedness and naming FRESI as
debtor, (ii) financing statements in favor of First Union National Bank of North
Carolina with respect to the Existing Senior Debt, (iii) financing statements
evidencing true leases of equipment that have been filed solely for notice
purposes, (iv) other financing statements not included in (i), (ii) or (iii)
above that are listed on the first page of Schedule 1.1(b), which financing
statements (A) are in respect of obligations that are satisfied and (B) Borrower
will promptly use its best efforts to have terminated, and (v) financing
statements in favor of the Agent for the benefit of the Lenders, no financing
statement that names the Borrower or any of its Subsidiaries as debtor has been
filed and is still in effect, and neither the Borrower nor any of its
Subsidiaries has signed any other financing statement or any security agreement
authorizing any secured party thereunder to file any such financing statement.
4.12. Employee Plans. (a) Schedule 4.12 lists all Employee Plans in effect
and separately identifies Employee Plans intended to be Qualified Plans and
Multiemployer Plans. The Borrower has heretofore made available true and
complete copies of all such Employee Plans to the Agent.
(b) Each Employee Plan is in compliance in all material respects with all
applicable Requirements of Law, including, without limitation, the applicable
provisions of ERISA and the Internal Revenue Code (including provisions therein
relating to the filing of reports in respect of such Employee Plan, which
reports are true and correct in all material respects as of the date filed).
(c) Each Qualified Plan either has an Internal Revenue Service favorable
determination letter or the remedial amendment period under Section 401(b) of
the Internal Revenue Code within which such a determination may be applied for
has not yet expired, and the trusts created thereunder are exempt from tax under
the provisions of Section 501 of the Internal Revenue Code, and, to the
knowledge of any Responsible Officer, nothing has occurred that would cause the
loss of such qualification or tax-exempt status.
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(d) There is no outstanding liability under Title IV of ERISA with respect
to any Pension Plan or Multiemployer Plan, and none of the Qualified Plans
subject to Title IV of ERISA has any Unfunded Pension Liability.
(e) No Employee Plan provides medical or other welfare benefits or extends
coverage relating to such benefits beyond the last day of the month in which a
participant's employment terminates, except to the extent required by Section
4980B of the Internal Revenue Code and at the sole expense of the participant or
the beneficiary of the participant to the fullest extent permissible under
Section 4980B of the Internal Revenue Code. Each of the Borrower, its
Subsidiaries and each ERISA Affiliate has complied in all material respects with
the notice and continuation coverage requirements of Section 4980B of the
Internal Revenue Code.
(f) No ERISA Event has occurred or, to the knowledge of any Responsible
Officer, is reasonably expected to occur with respect to any Pension Plan.
(g) There are no pending or, to the knowledge of any Responsible Officer,
written threats of claims, actions or proceedings against or with respect to any
Employee Plan by the Internal Revenue Service, Department of Labor, Equal
Opportunity Employment Commission or any participant, beneficiary or other
Person involving any aspect of any Employee Plan or its assets or any fiduciary
with respect to any Employee Plan (other than routine benefit claims), nor are
there any facts or circumstances that could reasonably be expected to form the
basis for any such claim, action or proceeding.
(h) Neither the Borrower nor any of its Subsidiaries, nor any ERISA
Affiliate, has incurred or, to the knowledge of any Responsible Officer,
reasonably expects to incur (i) any liability (and no event has occurred that,
with the giving of notice under Section 4219 of ERISA, would result in such
liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer
Plan or (ii) any liability under Title IV of ERISA (other than premiums due and
not delinquent under Section 4007 of ERISA) with respect to a Pension Plan.
(i) Neither the Borrower nor any of its Subsidiaries, nor any ERISA
Affiliate, has engaged, directly or indirectly, in a Prohibited Transaction in
connection with any Employee Plan, which Prohibited Transaction would be
reasonably likely to have a Material Adverse Effect.
(j) There is no outstanding penalty, interest or excise tax under the
Internal Revenue Code or ERISA with respect to any Employee Plan, which penalty,
interest or excise tax would be reasonably likely to have a Material Adverse
Effect.
(k) With respect to each Pension Plan, (i) all required contributions and
payments have been made (including any employee election contributions described
in
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Section 401(k) of the Internal Revenue Code) and (ii) all benefits reasonably
determined by the administrator of such Pension Plan to be payable thereunder
have been paid.
4.13. Solvency. On the date hereof and on the Closing Date, both before
and after giving effect to the consummation of the Transactions, the Borrower
and each of its Subsidiaries is and will be Solvent.
4.14. Environmental Matters. (a) Except for the items disclosed on
Schedule 4.14, each of which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect, (i) no Hazardous
Substances are or have been generated, used, released, treated, disposed of or
(except for analytical samples stored in the ordinary course of the consulting
business of FRESI in compliance with all applicable Environmental Laws) stored,
or otherwise located, in, on or under any portion of any real property, leased
or owned, of the Borrower or any of its Subsidiaries, except in compliance with
all applicable Environmental Laws, and no portion of any such real property or
any other real property at any time leased, owned or operated by the Borrower or
any of its Subsidiaries, including, without limitation, the soil and groundwater
located thereon and thereunder, has been contaminated by any Hazardous
Substance, (ii) no improvements on any portion of any real property, leased or
owned, of the Borrower or any of its Subsidiaries contain any asbestos or
substances containing asbestos, except to the extent the same would not be
reasonably likely to have a Material Adverse Effect, and (iii) no portion of any
real property, leased or owned, of the Borrower or any of its Subsidiaries has
been the subject of an environmental audit, assessment or remedial action. The
representations and warranties in this subsection (a) are made, with respect to
Colony, FRIC and Xxxxxxxx, solely as to the knowledge of any Responsible
Officer.
(b) To the knowledge of any Responsible Officer and except for the items
disclosed on Schedule 4.14, each of which, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect, (i) no
portion of any real property, leased or owned, of the Borrower or any of its
Subsidiaries has been used as or for a mine, a landfill, a dump or other
disposal facility, a gasoline service station, or (other than for petroleum
substances stored in the ordinary course of business) a petroleum products
storage facility, and (ii) no portion of such real property or any other real
property at any time leased, owned or operated by the Borrower or any of its
Subsidiaries has, pursuant to any Environmental Law, been placed on the
"National Priorities List" or "CERCLIS List" (or any similar federal, state or
local list) of sites subject to possible environmental problems.
(c) To the knowledge of any Responsible Officer and except for the items
disclosed on Schedule 4.14, each of which, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect, (i) there
are no underground storage tanks situated on any real property, leased or owned,
of the Borrower or any of its Subsidiaries, and (ii) no underground storage
tanks have ever been situated thereon.
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(d) All activities and operations of the Borrower and its Subsidiaries are
in material compliance with the requirements of all applicable Environmental
Laws, and each of the Borrower and its Subsidiaries has timely filed all reports
required to be filed, has acquired all necessary certificates, approvals and
permits, and has generated and maintained in all material respects all required
data, documentation and records required under all Environmental Laws. The
representations and warranties in this subsection (d) are made, with respect to
Colony, FRIC and Xxxxxxxx, solely as to the knowledge of any Responsible
Officer.
(e) To the knowledge of any Responsible Officer, neither the Borrower nor
any of its Subsidiaries has ever sent any Hazardous Substance to a site that,
pursuant to any Environmental Law, (i) has been placed on the "National
Priorities List" or "CERCLIS List" (or any similar federal, state or local list)
of sites subject to possible environmental problems, or (2) is subject to any
claim, administrative order or other request to take "response," "removal,"
"corrective" or "remedial" action, within the meaning of applicable
Environmental Laws, or to pay for or contribute to the costs of cleaning up the
site.
(f) Neither the Borrower nor any of its Subsidiaries is involved in any
suit, action or proceeding, or has received any notice, complaint or other
request for information from any Governmental Authority or other Person with
respect to, any actual or alleged Environmental Claims; and, to the knowledge of
any Responsible Officer, there are no written threats of actions, suits,
proceedings or investigations with respect to Environmental Claims.
4.15. Trade Relations. There exists (i) no actual or, to the knowledge of
any Responsible Officer, threatened termination, cancellation or limitation of,
or any adverse modification of or change in, the business relationship of the
Borrower or any of its Subsidiaries with any of its customers or any group of
its customers whose purchases, individually or in the aggregate, are material to
its business, or with any insurance agent or insurance agency or group of
insurance agents or insurance agencies whose business relationship is,
individually or in the aggregate, material to its business, and (ii) no
condition or state of facts or circumstances that would be reasonably likely to
have a Material Adverse Effect or prevent the Borrower or any of its
Subsidiaries from conducting its business after the consummation of the
Transactions in substantially the same manner in which it has heretofore been
conducted.
4.16. Labor Relations. To the knowledge of any Responsible Officer,
neither the Borrower nor any of its Subsidiaries is engaged in any unfair labor
practice within the meaning of the National Labor Relations Act of 1947, as
amended. There is (i) no unfair labor practice complaint before the National
Labor Relations Board, or grievance or arbitration proceeding arising out of or
under any collective bargaining agreement, pending or, to the knowledge of any
Responsible Officer, threatened against the Borrower or any of its Subsidiaries,
(ii) no strike, lock-out, slowdown, stoppage, walkout or other labor dispute
pending or, to the knowledge of any Responsible Officer, threatened against the
Borrower or
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any of its Subsidiaries and (iii) to the knowledge of any Responsible Officer,
no petition for certification or union election or union organizing activities
with respect to the Borrower or any of its Subsidiaries.
4.17. Proprietary Rights. (a) Each of the Borrower and its Subsidiaries
owns, or has the legal right to use pursuant to a valid license in full force
and effect or otherwise, all patents, patent applications, copyrights, copyright
applications, trademarks, trademark applications, service marks, trade names,
processes and formulae, whether not registered or qualified (collectively,
"Proprietary Rights"), necessary for the conduct of its business as presently
conducted and as presently proposed to be conducted, without any known conflict
with any Proprietary Right held by any other Person that, or the failure to
obtain which, as the case may be, would (i) preclude the Borrower or any of its
Subsidiaries from offering or selling any service or product currently offered
or sold by it, or from using any Proprietary Right currently used by it in the
geographic area and in the manner in which it currently offers or sells such
product or service or (ii) otherwise materially interfere with the ability of
the Borrower or any of its Subsidiaries to conduct its business as presently
conducted and as presently proposed to be conducted.
(b) No claim has been made or, to the knowledge of any Responsible
Officer, has been threatened or is reasonably likely to be made, that the use by
the Borrower or any of its Subsidiaries of any Proprietary Right presently used
in the conduct of its business does or may violate or infringe the rights of any
other Person, or otherwise contesting the validity, enforceability, use or
ownership of any such Proprietary Right. The consummation of the Transactions
will not impair the ownership by the Borrower or any of its Subsidiaries of, or
the license or other right of the Borrower or any of its Subsidiaries to use,
any such Proprietary Right.
4.18. Compliance With Laws. Each of the Borrower and its Subsidiaries has
timely filed all reports, documents and other materials required to be filed by
it with any Governmental Authority, has retained all records and documents
required to be retained by it and is otherwise in compliance with all applicable
Requirements of Law in respect of the conduct of its business and the ownership
and operation of its properties, except for such Requirements of Law the failure
to comply with which, individually or in the aggregate, would not be reasonably
likely to have a Material Adverse Effect.
4.19. Regulated Industries. Neither the Borrower nor any of its
Subsidiaries is (i) an "investment company," a company "controlled" by an
"investment company," or an "investment advisor," within the meaning of the
Investment Company Act of 1940, as amended, or (ii) a "holding company," a
"subsidiary company" of a "holding company," or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company," within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
4.20. Collateral. The provisions of the Borrower Pledge and Security
Agreement, the Borrower Collateral Assignment of Agreements, the Subsidiaries
Collateral Assignment of
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Agreements, and the Escrow Agreement are effective to create in favor of the
Agent for the benefit of the Lenders, upon the making of the Loans hereunder,
and, as to the Collateral, (i) the possession by the Escrow Agent, for the
benefit of the Lender, of the funds and investments maintained and held from
time to time in the Cash Collateral Account, (ii) the possession by the Lender
of certificates and instruments evidencing the Pledged Investments (as defined
in the Borrower Pledge and Security Agreement), and (iii) the proper filing of
appropriately completed financing statements in the offices of the North
Carolina Secretary of State and the Wake County, North Carolina Register of
Deeds and in the locations listed on Schedule 2 to the Borrower Pledge and
Security Agreement, a valid and enforceable first priority perfected security
interest in and Lien upon all right, title and interest of the Borrower in the
Collateral described therein, subject only to Permitted Liens.
4.21. Certain Contracts. Schedule 4.21 lists, both (a) as of the date
hereof and (b) as of the Closing Date and immediately after giving effect to the
Acquisition, each contract, agreement or commitment, written or oral, to which
the Borrower or any of its Subsidiaries is a party, by which any of them or
their respective properties is bound or to which any of them is subject (other
than as may be disclosed on another schedule to this Agreement or elsewhere
herein and other than insurance policies written by the Insurance Companies in
the ordinary course of business) and that (i) relates to employment or labor
matters, (ii) involves aggregate consideration payable to or by any party
thereto of $100,000 or more, or (iii) is otherwise material to the business,
condition (financial or otherwise), operations, performance or properties of the
Borrower or any of its Subsidiaries (including, without limitation, the Current
Services Agreements and the Tax Allocation Agreements), and also indicates the
parties, subject matter and term thereof. Each such contract is in full force
and effect; neither the Borrower nor any of its Subsidiaries or, to the
knowledge of any Responsible Officer, any other party thereto, is in default
under any such contract; and no Responsible Officer has any reason to believe
that the financial condition of any other party to any such contract is impaired
such that a default thereunder by such party could reasonably be anticipated.
4.22. Reinsurance Agreements. Schedule 4.22 lists, both (a) as of the date
hereof and (b) as of the Closing Date and immediately after giving effect to the
Acquisition, each Reinsurance Agreement to which any of the Insurance
Subsidiaries is a party, indicates the other parties thereto and the term
thereof and also designates those Reinsurance Agreements containing any
provision requiring or permitting any increase in premiums thereunder as a
result of losses incurred with respect to policies ceded (a "Premium Adjustment
Provision"). Each such Reinsurance Agreement is in full force and effect;
neither the Borrower nor any of its Insurance Subsidiaries or, to the knowledge
of any Responsible Officer, any other party thereto, is in default under any
such contract; and the Borrower has no reason to believe that the financial
condition of any other party to any such contract is impaired such that a
default thereunder by such party could reasonably be anticipated. Each such
Reinsurance Agreement is qualified under all applicable Requirements of Law to
receive the statutory credit assigned to such Reinsurance Agreement in the
relevant Annual Statement or Quarterly Statement at the time prepared. Except as
expressly shown to the contrary on Schedule 4.22, each
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Person to whom the Borrower or any of its Subsidiaries has ceded any liability
pursuant to any Reinsurance Agreement has a rating of "A" or better by A.M. Best
& Company. Schedule 4.22 also lists separately, both (a) as of the date hereof
and (b) as of the Closing Date and immediately after giving effect to the
Acquisition, each Reinsurance Agreement no longer in force to which any of the
Insurance Subsidiaries was a party and under which, to the knowledge of any
Responsible Officer, any material benefits or liabilities remain outstanding.
4.23. No Burdensome Restrictions. There exists no restriction or
encumbrance on (i) the ability of the Borrower and its Subsidiaries to perform
and comply with their respective obligations under the Loan Documents, (ii) the
creation or assumption of any Lien upon the assets or properties of the Borrower
or any of its Subsidiaries as security, directly or indirectly, for the
Obligations, or (iii) the ability of any Subsidiary of the Borrower to make any
dividend payments or other distributions in respect of its capital stock or any
other interest or participation in its profits owned by the Borrower or any
other Subsidiary of the Borrower, or to make loans or advances thereto, in each
case other than such restrictions or encumbrances in effect on the Closing Date
or existing under or by reason of (x) applicable law, (y) this Agreement and the
other Loan Documents and (z) customary provisions restricting subletting or
assignment of any lease governing a leasehold interest of the Borrower or any of
its Subsidiaries; and neither the Borrower nor any of its Subsidiaries is a
party to or bound by any other restriction, encumbrance or obligation, whether
pursuant to its articles or certificate of incorporation, bylaws, contract or
any applicable Requirement of Law, that could reasonably be expected to have a
Material Adverse Effect.
4.24. Business Locations: Trade Names. Schedule 4.24 lists each of the
locations where the Borrower or any of its Subsidiaries maintains an office, a
place of business or any records, together with each trade, previous corporate
or other fictitious name under or by which the Borrower or any of its
Subsidiaries has conducted its business.
4.25. Carried Insurance. Schedule 4.25 sets forth a true and complete
summary of all insurance policies or arrangements carried by the Borrower and
its Subsidiaries, and indicates the insurer's name, policy number, expiration
date, amount of coverage, type of coverage, annual premiums, exclusions and
deductibles, and also indicates any self-insurance programs that are in effect.
The assets, properties and business of the Borrower and its Subsidiaries are
insured against such hazards and liabilities, under such coverages and in such
amounts, as are customarily maintained by prudent companies similarly situated
and under policies issued by insurers of recognized responsibility. No notice of
any pending or threatened cancellation or premium increase has been received by
the Borrower or any of its Subsidiaries with respect to any such policies. The
Borrower and each of its Subsidiaries are in substantial compliance with all
conditions contained in such policies.
4.26. Issued Policies. Except with respect to any terms specifically
negotiated with policyholders, all policies of insurance issued by the Insurance
Subsidiaries as now in force are, to the extent required under applicable law,
on forms approved by the relevant
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Governmental Authorities in the jurisdictions where issued, or have been filed
with, and not objected to by, such Governmental Authorities within the period
provided for objection. None of the terms embraced by the exception set forth in
the preceding sentence adversely affects, or could reasonably be expected to
adversely affect, the enforceability of any such policies or jeopardizes, or
could reasonably be expected to jeopardize, the License of an Insurance
Subsidiary in any jurisdiction. Any rates for premiums required to be filed with
or approved by any Governmental Authority have been so filed or approved, and
such premiums charged by each Insurance Subsidiary conform thereto in all
respects.
4.27. Certain Relationships. Except as set forth on Schedule 4.27, (i) no
officer or director of the Borrower or any of its Subsidiaries owns, directly or
indirectly, any interest in (other than less than 1% stock holdings for
investment purposes in securities of publicly held and traded companies), or is
an officer, director or employee of, any Person that is, or is engaged in
business as, a competitor, lessor, lessee, supplier, agent or customer of, or
lender to or borrower from, the Borrower or any of its Subsidiaries, and (ii) no
officer, director, shareholder or Affiliate of the Borrower or any of its
Subsidiaries (y) owns, directly or indirectly, in whole or in part, any real or
personal property, tangible or intangible, that the Borrower or any of its
Subsidiaries uses in the conduct of its business, or (z) is a party to any
contract or agreement, written or oral, with the Borrower or any of its
Subsidiaries, or has any cause of action or other claim (including claims for
the repayment of indebtedness) against, or owes any amount to, the Borrower or
any of its Subsidiaries, except under the Employment Agreements and except for
ordinary claims for accrued benefits under Employee Plans and similar matters.
4.28. Indebtedness. Schedule 4.28 sets forth, both (i) as of the date
hereof and (ii) as of the Closing Date and immediately after giving effect to
the Acquisition, a complete and accurate list of all Indebtedness of the
Borrower or any of its Subsidiaries (other than the Indebtedness incurred
pursuant to this Agreement and the other Loan Documents), describes the
agreement, note or other instrument evidencing such Indebtedness and lists the
parties thereto, and indicates the principal amount outstanding thereunder, the
scheduled maturity thereof and the existence of any Liens in respect thereof.
All letters of credit described on Schedule 4.28 have been issued in support of
liabilities that are reflected on the most recent Historical Financial
Statements of the Insurance Subsidiaries. The Borrower has heretofore delivered,
or on or prior to the Closing Date will deliver, true and complete copies of all
such agreements, notes and other instruments to the Agent.
4.29. Representations and Warranties in Transaction Documents. Each of the
representations and warranties of the Borrower and its Subsidiaries set forth in
the Transaction Documents (other than the Loan Documents) is true and correct as
of the date made and as of the Closing Date.
4.30. Transaction Documents. The Borrower has heretofore delivered, or
will on or prior to the Closing Date deliver, to the Agent a true, complete and
correct copy of each of the Stock Purchase Agreement and the other Transaction
Documents executed and delivered
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in connection therewith, together with all amendments and modifications thereto.
Each such Transaction Document (together with all schedules and exhibits
thereto) comprises, or upon execution and delivery on or prior to the Closing
Date will comprise, a full and complete copy of all agreements between the
parties thereto with respect to the subject matter thereof, and there are no,
and will not then be any, other agreements or understandings, written or oral,
or side agreements not contained therein that relate to or modify the substance
thereof. Each such Transaction Document is, or upon execution and delivery on or
prior to the Closing Date will be, in full force and effect and, except with the
prior approval of the Agent, no provision thereof has been, or will then have
been, amended, modified or waived by any party thereto.
4.31. Consummation of Transactions. As of the Closing Date, the
Acquisition will have been consummated in accordance with the terms of the Stock
Purchase Agreement and all applicable Requirements of Law, and the Borrower will
be the legal owner of all of the outstanding Capital Stock of Rockwood, free and
clear of any Liens other than the Liens created by the Loan Documents.
ARTICLE V
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that, so long as any of the Obligations
shall remain unpaid, unless the Required Lenders shall have consented in
writing:
5.1. GAAP Financial Statements. The Borrower will deliver to each Lender:
(a) As soon as practicable and in any event within forty-five (45)
days after the end of each of the first three fiscal quarters of each
fiscal year, beginning with the fiscal quarter ending March 31, 1997,
unaudited consolidated and consolidating balance sheets of the Borrower
and its Subsidiaries as of the end of such fiscal quarter and unaudited
consolidated and consolidating statements of income, retained earnings for
the Borrower and its Subsidiaries for the fiscal quarter then ended and
for that portion of the fiscal year then ended, in each case setting forth
comparative figures for the corresponding period in the preceding fiscal
year, all prepared in accordance with Generally Accepted Accounting
Principles (subject to the absence of notes required by Generally Accepted
Accounting Principles and subject to normal year-end audit adjustments)
applied on a basis consistent with that of the preceding quarter or
containing disclosure of the effect on the financial position or results
of operations of any change in the application of accounting principles
and practices during the quarter; and
(b) As soon as practicable and in any event within 120 days after
the end of each fiscal year, beginning with the current fiscal year, (i)
an audited consolidated balance sheet of the Borrower and its Subsidiaries
as of the end of such fiscal year and audited consolidated statements of
income, retained earnings and cash flows for the Borrower and its
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Subsidiaries for the fiscal year then ended, including the notes thereto,
in each case setting forth comparative figures for the preceding fiscal
year, certified by Ernst & Young or another independent certified public
accounting firm reasonably acceptable to the Agent, together with (y) a
report thereon by such accountants that is not qualified as to going
concern or scope of audit and to the effect that such financial statements
present fairly the consolidated financial position and results of
operations of the Borrower and its Subsidiaries as of the dates and for
the periods indicated in accordance with Generally Accepted Accounting
Principles applied on a basis consistent with that of the preceding year
or containing disclosure of the effect on the financial position or
results of operations of any change in the application of accounting
principles and practices during the year and (z) a report by such
accountants to the effect that, based on and in connection with their
examination of the financial statements of the Borrower and its
Subsidiaries, they obtained no knowledge of the occurrence or existence of
any Event of Default arising under any of Section 6.1 through 6.9, 6.11
through 6.13 or 6.19, or a statement specifying the nature and period of
existence of any such Event of Default disclosed by their audit; provided,
however that such accountants shall not be liable by reason of the failure
to obtain knowledge of any Event of Default that would not be disclosed or
revealed in the course of their audit examination, and (ii) an unaudited
consolidating balance sheet of the Borrower and its Subsidiaries as of the
end of such fiscal year and unaudited consolidating statements of income,
retained earnings and cash flows for the Borrower and its Subsidiaries for
the fiscal year then ended, all in reasonable detail.
5.2. Statutory Financial Statements. The Borrower will deliver to each
Lender:
(a) As soon as practicable and in any event within forty-five (45)
days after the end of each of the first three fiscal quarters of each
fiscal year, beginning with the fiscal quarter ending March 31, 1997, a
Quarterly Statement of each Insurance Subsidiary as of the end of such
fiscal quarter and for that portion of the fiscal year then ended, in the
form filed with the relevant Department, prepared in accordance with
Statutory Accounting Principles applied on a basis consistent with that of
the preceding quarter or containing disclosure of the effect on the
financial position or results of operations of any change in the
application of accounting principles and practices during the quarter; and
(b) As soon as practicable and in any event within sixty (60) days
after the end of each fiscal year, beginning with the current fiscal year,
an Annual Statement of each Insurance Subsidiary as of the end of such
fiscal year and for the fiscal year then ended, in the form filed with the
relevant Department, prepared in accordance with Statutory Accounting
Principles applied on a basis consistent with that of the preceding year
or containing disclosure of the effect on the financial position or
results of operations of any change in the application of accounting
principles and practices during the year; and concurrently with the filing
thereof with the NAIC, the consolidated Annual Statements of all of the
Insurance Subsidiaries as of the end of such fiscal year and for the
fiscal year then ended, prepared in accordance with Statutory Accounting
Principles applied on a basis consistent with that of the preceding year
or containing disclosure of the effect on the
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financial position or results of operations of any change in the
application of accounting principles and practices during the year; and
(c) As soon as practicable and in any event (i) promptly after
filing with the relevant Department, or (ii) within 120 days after request
therefor by the Required Lenders, a certification as to the most recent
Annual Statement of any Insurance Subsidiary by the Borrower's independent
certified public accounting firm referred to in Section 5.1(b), together
with a report thereon by such accountants that is not qualified as to
going concern or scope of audit and to the effect that such Annual
Statement presents fairly the financial position and results of operations
of such Insurance Subsidiary as of the date and for the period indicated
in accordance with Statutory Accounting Principles applied on a basis
consistent with that of the preceding year or containing disclosure of the
effect on the financial position or results of operations of any change in
the application of accounting principles and practices during the year.
5.3. Other Business and Financial Information. The Borrower will deliver
to each Lender:
(a) Concurrently with each delivery of the financial statements
described in Sections 5.1, 5.2(a) and 5.2(b), a Compliance Certificate
with respect to the period covered by the financial statements then being
delivered and in the form of Exhibit J-1 or Exhibit J-2, as applicable,
executed by the chief financial officer of the Borrower (together, in the
case of the financial statements described in Section 5.1, with a Covenant
Compliance Worksheet reflecting the computation of the financial covenants
set forth in Sections 6.2, 6.4, 6.5 and 6.7 as of the last day of the
period covered by such financial statements, and in the case of the
financial statements described in Section 5.2(a) and 5.2(b), with a
Covenant Compliance Worksheet reflecting the computation of the financial
covenants set forth in Sections 6.1, 6.3 and 6.6 as of the last day of the
period covered by such financial statements);
(b) Promptly upon filing with the relevant Department and in any
event within ninety (90) days after the end of each fiscal year, beginning
with the current fiscal year, a copy of each Insurance Subsidiary's
"Statement of Actuarial Opinion" (or equivalent information should the
relevant Department not require such a statement) as to the adequacy of
such Insurance Subsidiary's loss reserves for such fiscal year, together
with a copy of its management discussion and analysis in connection
therewith, each in the format prescribed by the applicable Insurance Code;
(c) As soon as practicable and in any event within 120 days after
the end of each fiscal year, beginning with the current fiscal year, an
Actuarial Report with respect to each Insurance Subsidiary as of the end
of such fiscal year;
(d) As soon as practicable and in any event (i) prior to the end of
each fiscal year, beginning with the fiscal year ending December 31, 1997,
new business plans
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and a consolidated and consolidating operating budget for the Borrower and
its Subsidiaries for the succeeding fiscal year and (ii) within 90 days
after the start of each fiscal year, beginning with the fiscal year
beginning January 1, 1998, projected financial statements for the Borrower
and its Subsidiaries for a five-year period from the first day of such
fiscal year, consisting of consolidated and consolidating balance sheets,
statements of income and cash flows, together with a certificate of the
president or chief financial officer of the Borrower to the effect that
such budgets and financial projections have been prepared in good faith
and are reasonable estimates of the financial position and results of
operations of the Borrower and its Subsidiaries for the period covered
thereby, all in form and substance satisfactory to the Lenders;
(e) Promptly upon (and in any event within three (3) Business Days
after) receipt thereof, a copy of each final report to each Insurance
Subsidiary from the NAIC as to such Insurance Subsidiary's status under
the relevant IRIS Tests;
(f) Promptly upon (and in any event within three (3) Business Days
after) receipt thereof, copies of any "management letter" or other
significant report or other communication submitted to the Borrower or any
of its Subsidiaries by its certified public accountants, and any response
reports from the Borrower or any such Subsidiary in respect thereof, in
connection with each annual, interim or special audit;
(g) Promptly upon (and in any event within three (3) Business Days
after) the sending, filing or receipt thereof, copies of (i) all financial
statements, reports, notices and proxy statements that the Borrower or any
of its Subsidiaries shall send or make available generally to its
shareholders, (ii) all regular, periodic and special reports, registration
statements and prospectuses that the Borrower or any of its Subsidiaries
shall render to or file with the Securities and Exchange Commission, the
National Association of Securities Dealers or any national securities
exchange, (iii) all reports on examination or similar reports, financial
examination reports or market conduct examination reports by the NAIC or
any Department or other Governmental Authority with respect to any
Insurance Subsidiary's insurance business, (iv) all Insurance Holding
Company Systems Act filings with Governmental Authorities made by the
Borrower or any of its Subsidiaries, including, without limitation,
filings seeking approval of transactions with Affiliates, and (v) all
press releases and other statements that the Borrower or any of its
Subsidiaries shall make available generally to the public concerning
developments in the business of the Borrower or any of its Subsidiaries,
other than press releases or statements issued in the ordinary course of
business;
(h) Within thirty (30) days after the filing thereof with the
Internal Revenue Service, copies of each annual report on Form 5500
required to be filed under ERISA in connection with each Employee Plan;
and
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(i) As promptly as reasonably possible, such other information about
the business, condition (financial or otherwise), operations or properties
of the Borrower or any of its Subsidiaries as the Agent or any Lender may
from time to time reasonably request.
5.4 Notice of Certain Events. The Borrower will promptly, but in no event
later than five (5) Business Days after any Responsible Officer obtains
knowledge thereof, give written notice to the Agent and each Lender of:
(a) The occurrence of any Default or Event of Default, together with
a written statement of the president or chief financial officer of the
Borrower specifying the nature of such Default or Event of Default, the
period of existence thereof and the action that each of the Borrower and
its Subsidiaries has taken and proposes to take with respect thereto;
(b) The occurrence of any material development in any action, suit,
investigation or proceeding described in Schedule 4.5 or the institution
or threat in writing of the institution of any action, suit, investigation
or proceeding of the type described in Section 4.5, including, in each
instance, any such investigation or proceeding by any Department or other
Governmental Authority (other than routine periodic inquiries,
investigations or reviews), together with copies of any filings,
communications, reports or other information relating thereto made
available to the Borrower or any of its Subsidiaries;
(c) The receipt by the Borrower or any of its Subsidiaries from any
Governmental Authority of a notice of violation or noncompliance by the
Borrower or any of its Subsidiaries that, if established, would be
reasonably likely to have a Material Adverse Effect, or a notice of any
actual or written threat of suspension, termination, limitation or
revocation of any material license, permit or authorization (including,
without limitation, any License) of the Borrower or any of its
Subsidiaries, together with a copy of such notice and any other
information relating thereto made available to the Borrower or any of its
Subsidiaries;
(d) The occurrence of any actual or (to the knowledge of any
Executive Officer) proposed changes in any Insurance Code governing the
investment or dividend practices of any of the Insurance Subsidiaries that
would be reasonably likely to have a Material Adverse Effect (for purposes
of this subsection, "Executive Officer" shall mean (i) any Responsible
Officer of the Borrower and (ii) any president, chief executive officer,
chief financial officer, chief operating officer, executive vice president
or senior vice president of any Subsidiary of the Borrower);
(e) The occurrence of any proposed or actual amendment or
modification to any Reinsurance Agreement (whether entered into before or
after the Closing Date), including any Reinsurance Agreements that are in
a runoff mode on the Closing Date, which amendment or modification could
reasonably be expected to have a Material Adverse Effect, or the receipt
by the Borrower or any of its Subsidiaries of any written notice of denial
of coverage, litigation, claim or arbitration arising out of any
Reinsurance Agreement to which
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it is a party or any cancellation or change in any insurance policy
carried by it, which, in any case, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect;
(f) The occurrence of any ERISA Event with respect to the Borrower
or any of its ERISA Affiliates, together with (i) a written statement of
the president or chief financial officer of the Borrower specifying the
details of such ERISA Event and the action that the Borrower or such ERISA
Affiliate has taken or proposes to take with respect thereto, (ii) a copy
of any notice with respect to such ERISA Event that may be required to be
filed with the PBGC and (iii) any notice delivered by the PBGC to the
Borrower or such ERISA Affiliate with respect to such ERISA Event;
(g) The occurrence of any of the following, together with a
reasonably detailed description thereof and copies of any filings,
communications, reports or other information relating thereto made
available to the Borrower or any of its Subsidiaries: (i) the taking of
any remedial action by the Borrower, any of its Subsidiaries or any other
Person in response to the actual or alleged generation, storage, release,
disposal or discharge of any Hazardous Substances on, to, upon or from any
of the real property, leased or owned, of the Borrower or any of its
Subsidiaries; (ii) any pending Environmental Claim or written threat of an
Environmental Claim against or affecting the Borrower, any of its
Subsidiaries or any of their respective real property, leased or owned; or
(iii) any other condition or occurrence on or arising from or with respect
to any real property, leased or owned, of the Borrower or any of its
Subsidiaries, that (x) results in noncompliance by the Borrower or any of
its Subsidiaries with any applicable Environmental Law, (y) could
reasonably be anticipated to form the basis of an Environmental Claim
against the Borrower, any of its Subsidiaries or any of their respective
real property, leased or owned, or (z) could reasonably be anticipated to
cause any of such real property, or any interest therein (including
leaseholds), to be subject to any restrictions on ownership, occupancy,
use or transfer under any Environmental Law;
(h) Any information that would cause the representations and
warranties made pursuant to Article IV, to the extent such representations
and warranties related to Rockwood and its Subsidiaries, to be materially
incorrect or misleading; and
(i) Any other matter or event that has, or would be reasonably
likely to have, a Material Adverse Effect, together with a written
statement of the president or chief financial officer of the Borrower
setting forth the nature and period of existence thereof and the action
that each of the Borrower and its Subsidiaries has taken and proposes to
take with respect thereto.
5.5. Corporate Existence; Franchises; Maintenance of Properties; etc. The
Borrower will, and will cause each of its Subsidiaries to:
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(a) Maintain and preserve in full force and effect its corporate
existence; provided, that, so long as they have remained inactive from the
Closing Date and have de minimis assets, the Borrower may dissolve
Triangle or FRETS or both of them;
(b) Obtain, maintain and preserve in full force and effect all other
rights, franchises, licenses, permits, certifications, approvals and
authorizations (including, without limitation, Licenses) required by
Governmental Authorities and necessary to the ownership, occupation or use
of its properties or the conduct of its business, except to the extent
failure to do so would not be reasonably likely to have a Material Adverse
Effect; and
(c) Keep all properties useful to its business in good working order
and condition (normal wear and tear excepted) and from time to time make
all necessary repairs to and renewals and replacements of such properties,
except to the extent that any of such properties are obsolete or are being
replaced.
5.6. Compliance with Laws. The Borrower will, and will cause each of its
Subsidiaries to, comply in all material respects with all Requirements of Law
applicable in respect of the conduct of its business and the ownership and
operation of its properties, including, without limitation, applicable Insurance
Codes.
5.7. Performance of Obligations. The Borrower will, and will cause each of
its Subsidiaries to, (i) pay all Indebtedness as and when due (subject to any
applicable subordination provisions) and otherwise, in all material respects,
comply with and perform all contracts, agreements and instruments creating or
evidencing Indebtedness to which it is a party, and (ii) pay all other
obligations in accordance with their respective terms or customary trade
practices (except to the extent being contested in good faith and by proper
proceedings and for which adequate reserves have been established in accordance
with Generally Accepted Accounting Principles) and, except to the extent failure
to do so would not be reasonably likely to have a Material Adverse Effect,
otherwise comply with and perform all contracts, agreements and instruments
(other than those creating or evidencing Indebtedness) to which it is a party.
5.8. Payment of Taxes. The Borrower will, and will cause each of its
Subsidiaries to, pay and discharge (i) all taxes, assessments and governmental
charges or levies imposed upon it, upon its income or profits or upon any of its
properties, prior to the date on which penalties would attach thereto, and (ii)
all lawful claims that, if unpaid, might become a Lien upon any of the
properties of the Borrower or any of its Subsidiaries; provided, however, that
neither the Borrower nor any of its Subsidiaries shall be required to pay any
such tax, assessment, charge, levy or claim that is being contested in good
faith and by proper proceedings and as to which the Borrower or such Subsidiary
is maintaining adequate reserves with respect thereto in accordance with
Generally Accepted Accounting Principles, unless and until any tax lien notice
has become effective with respect thereto or until any Lien resulting therefrom
attaches to its properties and becomes enforceable against its other creditors.
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5.9. Insurance. The Borrower will, and will cause each of its Subsidiaries
to, maintain with responsible insurance companies insurance with respect to its
assets, properties and business, against such hazards and liabilities, of such
types and in such amounts, as is customarily maintained by prudent companies
similarly situated (including all coverages in effect as of the date hereof),
and in any event as may be required by applicable Requirements of Law and as
shall be reasonably satisfactory to the Agent.
5.10. Maintenance of Books and Records; Inspection. The Borrower will, and
will cause each of its Subsidiaries to:
(a) Maintain adequate books, accounts and records, in which full,
true and correct entries shall be made of all financial transactions in
relation to its business and properties, and prepare all financial
statements required under this Agreement, in each case in accordance with
Generally Accepted Accounting Principles or Statutory Accounting
Principles, as applicable, and in compliance with the requirements of any
Governmental Authority having jurisdiction over it; and
(b) Permit employees or agents of the Agent or any Lender to inspect
its properties and examine or audit its books, records, working papers and
accounts and make copies and memoranda of them, and to discuss its
affairs, finances and accounts with its officers and employees and, upon
notice to the Borrower, the independent public accountants of the Borrower
and its Subsidiaries (and by this provision the Borrower authorizes such
accountants to discuss the finances and affairs of the Borrower and its
Subsidiaries), all at such times and from time to time during business
hours as may be reasonably requested.
5.11. Interest Rate Protection. Within ninety (90) days after the Closing
Date, the Borrower will enter into or obtain, and will maintain in full force
and effect, Hedge Agreements pursuant to which the Borrower will obtain
protection against increases in interest rates, either (i) covering increases in
excess of three percentage points (3%) as to not less than fifty percent (50%)
of all principal amounts outstanding from time to time under the Loans for a
period of not less than three (3) years after the Closing Date, or (ii) on such
other terms and conditions as are reasonably acceptable to the Agent. The
Borrower will deliver to the Agent, promptly upon receipt thereof, copies of
such Hedge Agreements, and promptly upon request therefor, any other information
reasonably requested by the Agent to evidence its compliance with the provisions
of this Section.
5.12. Dividends. The Borrower will take all action necessary to cause its
Subsidiaries to make such dividends, distributions or other payments to the
Borrower as shall be necessary for the Borrower to make payments of the
principal of and interest on the Loans in accordance with this Agreement,
including scheduled repayments and mandatory prepayments required under Section
2.6, without the necessity of using funds held in the Cash Collateral Account.
In the event the approval of any Governmental Authority or other Person is
required in order for any such Subsidiary to make any such dividends,
distributions or other payments to the Borrower, or for the Borrower to make any
such principal or
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interest payments to the Lenders, the Borrower will forthwith exercise its best
efforts and take all actions premised by law and necessary to obtain such
approval.
5.13. Further Assurances. The Borrower will, and will cause each of its
Subsidiaries to, make, execute, endorse, acknowledge and deliver any amendments,
modifications or supplements hereto or restatements hereof and any other
agreements, instruments, financing statements, certificates or other documents,
and take any and all such other actions, as may from time to time be reasonably
requested by the Agent or the Required Lenders to perfect and maintain the
validity and priority of the Liens granted pursuant to the Loan Documents and to
effect, confirm or further assure or protect and preserve the interests, rights
and remedies of the Agent and Lenders under this Agreement and the other Loan
Documents.
ARTICLE VI
NEGATIVE COVENANTS
The Borrower covenants and agrees that, so long as any of the Obligations
shall remain unpaid, unless the Required Lenders shall have consented in
writing:
6.1. Consolidated Statutory Surplus. The Borrower will not permit
Consolidated Statutory Surplus to be less than $60,000,000 at any time from and
after the Closing Date.
6.2. Capitalization Ratio. The Borrower will not permit the Capitalization
Ratio to be greater than 0.5 to 1.0 at any time from and after the Closing Date.
6.3. Operating Leverage Ratio. The Borrower will not permit, at any time
from and after the Closing Date, the ratio of (i) Consolidated Net Written
Premiums to Consolidated Statutory Surplus to be greater than 2.5 to 1.0 or (ii)
Consolidated Gross Written Premiums to Consolidated Statutory Surplus to be
greater than 5.0 to 1.0 (or, in either case, any lower ratio required under any
applicable Requirement of Law).
6.4. Fixed Charge Coverage Ratio. The Borrower will not permit the Fixed
Charge Coverage Ratio to be less than (i) 1.25 to 1.0 as of the last day of the
fiscal quarter ending December 31, 1996, and as of the last day of any fiscal
quarter ending thereafter up to and including the fiscal quarter ending December
31, 1998, and (ii) 1.3 to 1.0 as of the last day of any fiscal quarter ending
thereafter.
6.5. Earnings Coverage Ratio. The Borrower will not permit the Earnings
Coverage Ratio to be less than (i) 1.15 to 1.0 as of the last day of the fiscal
quarter ending December 31, 1996, and as of the last day of any fiscal quarter
ending thereafter up to and including the fiscal quarter ending December 31,
1998, and (ii) 1.3 to 1.0 as of the last day of any fiscal quarter ending
thereafter.
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6.6. Risk-Based Capital. The Borrower will not permit "total adjusted
capital" (within the meaning of the Risk-Based Capital for Insurers Model Act as
promulgated by the NAIC as of the date hereof (the "Model Act")) of any
Insurance Subsidiary to be less than (i) as of the last day of the fiscal year
ending December 31, 1996, and as of the last day of any fiscal year ending
thereafter up to and including the fiscal year ending December 31, 1998, 135% of
the applicable "Company Action Level RBC" (within the meaning of the Model Act)
for such Insurance Subsidiary at such time, and (ii) as of the last day of any
fiscal year ending thereafter, to be less than 150% of the applicable "Company
Action Level RBC" for such Insurance Subsidiary at such time.
6.7. Capital Expenditures. The Borrower will not, and will not permit or
cause any of its Subsidiaries to, make any Capital Expenditure if, after giving
effect to such Capital Expenditure, the aggregate amount of all Capital
Expenditures made by the Borrower and its Subsidiaries shall exceed (i)
$1,500,000 during the fiscal year ending December 31, 1997 and (ii) $1,000,000
in any fiscal year thereafter.
6.8. Merger, Consolidation. The Borrower will not, and will not permit or
cause any of its Subsidiaries to, liquidate, wind up or dissolve, enter into any
consolidation, merger or other combination, or directly or indirectly sell,
assign, lease, convey, transfer or otherwise dispose of, whether in one or a
series of transactions, any Material Assets, or enter into any arrangement with
any Person providing for the lease by the Borrower or any of its Subsidiaries as
lessee of any asset that has been sold or transferred by the Borrower or such
Subsidiary to such Person, or agree to do any of the foregoing; provided,
however, that, (i) on the Closing Date, Rockwood may sell all of the issued and
outstanding Capital Stock of Premier to Fort Washington in accordance with the
Transaction Documents or on other terms and conditions satisfactory to the
Lenders, (ii) Colony may grant an option to Fort Washington to purchase all of
the issued and outstanding Capital Stock of Xxxxxxxx in accordance with the
Transaction Documents or on other terms and conditions satisfactory to the Agent
and, subject to such terms and conditions, such sale may occur upon exercise of
the option, and (iii) so long as they have remained inactive from the Closing
Date and have de minimis assets, the Borrower may dissolve Triangle or FRETS or
both of them. For purposes of this Agreement, "Material Asset" shall mean (i)
any asset or line of business of the Borrower or any of its Subsidiaries that is
material to its business, operations or condition (financial or otherwise),
including, without limitation, as to an Insurance Subsidiary at any time, any
insurance product line to which greater than five percent (5%) of such Insurance
Subsidiary's Net Written Premiums for the prior fiscal year are attributable,
and (ii) any Capital Stock of any Subsidiary of the Borrower.
6.9. Indebtedness. The Borrower will not, and will not permit or cause any
of its Subsidiaries to, create, incur, assume or suffer to exist any
Indebtedness other than:
(i) Indebtedness incurred pursuant to this Agreement and the other
Loan Documents;
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(ii) accrued expenses, current trade payables and other current
liabilities arising in the ordinary course of business and not incurred
through the borrowing of money;
(iii) noncurrent trade payables being contested in good faith and by
appropriate proceedings and with respect to which adequate reserves are
being maintained in accordance with Generally Accepted Accounting
Principles;
(iv) current amounts due within seven Business Days to or from
brokers for securities transactions in the ordinary course of business;
(v) Indebtedness under letters of credit for the benefit of the
Insurance Subsidiaries in the ordinary course of their business to secure
reinsurance obligations;
(vi) Indebtedness of the Borrower under the Hedge Agreements
required to be entered into pursuant to Section 5.11;
(vii) Surviving Indebtedness listed on Schedule 4.28 and in amounts
not exceeding the amounts listed thereon;
(viii) Indebtedness of the Borrower's Subsidiaries to the Borrower
in an aggregate principal amount not to exceed $300,000 at any time,
provided that such Indebtedness is, concurrently with its issuance,
evidenced by a written promissory note in form and substance satisfactory
to the Agent and pledged to the Agent for the benefit of the Lenders
pursuant to the Borrower Pledge and Security Agreement;
(ix) Indebtedness incurred by the Borrower or any of its
Subsidiaries (but not by any of the Insurance Subsidiaries) to finance
Capital Expenditures permitted under Section 6.8, provided that the
aggregate amount of all payments of principal and interest made in respect
of such Indebtedness during any fiscal year shall not, when taken together
with all other Capital Expenditures made during such fiscal year, exceed
(i) $1,500,000 during the fiscal year ending December 31, 1997 and (ii)
$1,000,000 in any fiscal year thereafter; and
(x) Indebtedness of the Borrower issued in payment of (i) accrued
dividends with respect to the Series A Preferred Stock in accordance with
the terms of the Amended Charter and (ii) any payments arising from the
exercise of the Rights; provided that such Indebtedness, in either case,
(a) is fully subordinated in right and time of payment to the prior
payment in full in cash of the Obligations on terms satisfactory to the
Required Lenders, (b) matures by its terms no earlier than the seventh
anniversary of the Closing Date, (c)
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does not include any provision creating a cross-default or
cross-acceleration in respect of the Obligations (d) does not require any
cash payment of interest or principal at any time prior to maturity, and
(e) is otherwise satisfactory to the Required Lenders in all respects.
(xi) purchase money note to Trirock for $13,180,000, provided, that any
such note must be paid in full on or before January 15, 1997.
6.10. Liens. The Borrower will not, and will not permit or cause any of
its Subsidiaries to, directly or indirectly, make, create, incur, assume or
suffer to exist, or enter into or suffer to exist any Lien upon or with respect
to any part of its property or assets, whether now owned or hereafter acquired,
or assign or otherwise convey any right to receive any income or profits
therefrom, or file or permit the filing of, or permit to remain in effect, any
financing statement or other similar notice of any Lien with respect to any such
property, asset, income or profits under the Uniform Commercial Code of any
state or under any similar recording or notice statute, or agree to do any of
the foregoing, other than Permitted Liens.
6.11. Investments. The Borrower will not, and will not permit or cause any
of its Subsidiaries to, directly or indirectly, create, organize or acquire any
Subsidiary or otherwise purchase, own, invest in or otherwise acquire any
capital stock, evidence of indebtedness or other obligation or security or any
interest whatsoever in any other Person, or make or permit to exist any loans,
advances or extensions of credit to, or any investment in cash or by delivery of
property in, any other Person, or become a partner or joint venturer in any
partnership or joint venture, or (other than in the ordinary course of business)
acquire any of the assets or properties of any Person (collectively,
"Investments"), or make a commitment or otherwise agree to do any of the
foregoing, other than:
(i) Cash Equivalents and, as to the Insurance Subsidiaries,
Investment Grade Securities maintained in compliance with the
provisions of clause (ix) below, but in each case excluding Asset
Backed Derivative Securities;
(ii) prepaid expenses incurred, and loans and advances to
employees for reasonable travel and business expenses made, in the
ordinary course of business;
(iii) without duplication, Investments permitted as
Indebtedness under Section 6.9;
(iv) Investments made in the consummation of the Acquisition,
including, without limitation, the promissory note of Fort
Washington in a principal amount not exceeding $2,500,000, given in
respect of the purchase of the Capital Stock of Premier;
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(v) accounts receivable owing to the Borrower or any of its
Subsidiaries created in the ordinary course of business and payable
in accordance with customary terms prevailing in the industry;
(vi) Investments made in connection with marketing joint
ventures entered into in the ordinary course of business, in an
amount not exceeding $100 with respect to each such joint venture;
(vii) existing Investments in corporations that are
Subsidiaries as of the Closing Date;
(viii) loans in an aggregate amount of up to $250,000 to
employees of the Borrower or its Subsidiaries for purchases of the
Borrower's Capital Stock; and
(ix) other Investments by any of the Insurance Subsidiaries in
compliance with the following restrictions (for purposes of the
following, valuations of Investments in equity securities shall be
made on the basis of cost):
(a) All Investments of each Insurance Subsidiary shall be in
compliance at all times with the applicable Insurance Code and with all
applicable insurance laws and regulations of any other relevant
jurisdictions relating to investments by such Insurance Subsidiary;
(b) The aggregate Investments of any Insurance Subsidiary in
Investment Grade Securities rated "A-" or lower or the then equivalent
grade by any of the rating agencies listed in the definition of
"Investment Grade Securities" shall constitute at all times no more than
ten percent (10%) of Admitted Assets of such Insurance Subsidiary;
(c) The aggregate Investments of any Insurance Subsidiary in
Non-Investment Grade Securities shall constitute at all times no more than
two percent (2%) of Admitted Assets of such Insurance Subsidiary;
(d) The aggregate Investments of any Insurance Subsidiary in equity
securities shall constitute at all times no more than seven percent (7%)
of Admitted Assets of such Insurance Subsidiary, provided, that interests
in closed end bond funds (A) having investment parameters limited to (y)
securities issued or unconditionally guaranteed by the United States of
America or any agency or instrumentality thereof and backed by the full
faith and credit of the United States of America and (z) Investment Grade
Securities rated "AAA" or the then equivalent grade by any of the rating
agencies listed in the definition of "Investment Grade Securities," or (B)
having investment parameters substantially limited to Investment Grade
Securities rated "2" or higher, or the then equivalent grades, by the NAIC
and which closed end bond fund Investments are otherwise applied against
the investment
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limitations of Section 6.11(ix)(b), in either case shall not be considered
equity securities for purposes of this subsection (d);
(e) The aggregate Investments of any Insurance Subsidiary in
securities of an Issuer Group shall constitute at all times no more than
two percent (2.0%) of Admitted Assets of such Insurance Subsidiary during
the period from the Closing Date through December 31, 1998, and no more
than one and one-half percent (1.5%) of Admitted Assets of such Insurance
Subsidiary thereafter;
(f) The aggregate Investments of any Insurance Subsidiary in any
single equity security shall constitute at all times no more than one and
one-quarter percent (1.25%) of Admitted Assets of such Insurance
Subsidiary during the period from the Closing Date through December 31,
1998, and no more than one percent (1.0%) of Admitted Assets of such
Insurance Subsidiary thereafter; and
(g) The promissory note or notes from Fort Washington representing a
portion of the purchase price for the Capital Stock of Premier or Xxxxxxxx
or both of them to the extent such Capital Stock is sold pursuant to
Section 6.8(i) and (ii);
provided, however, that, with respect to any violation of Section 6.11(ix)
that in the reasonable determination of the Agent has not resulted and is
not likely to result in a Material Adverse Effect, the Borrower shall have
sixty (60) days following the end of the calendar month in which the
violation occurred to cure such violation.
6.12. Transactions with Affiliates. Except for transactions (i) otherwise
permitted hereunder or described in Schedule 4.27 or (ii) transactions between
the Borrower and its Wholly-Owned Subsidiaries or between Wholly-Owned
Subsidiaries of the Borrower, the Borrower will not, and will not permit or
cause any of its Subsidiaries to, enter into any transaction with any officer,
director, stockholder or other Affiliate of the Borrower or any Subsidiary, or
any Affiliate of any of the foregoing, including without limitation PIC and Fort
Washington, except transactions that are otherwise permitted under this
Agreement and are entered into in the ordinary course of and pursuant to the
reasonable requirements of its business and upon fair and reasonable terms that
are no less favorable to it than would obtain in a comparable arm's length
transaction with a Person other than an Affiliate of the Borrower or such
Subsidiary.
6.13. Restricted Payments. (a) The Borrower will not, and will not permit
or cause any of its Subsidiaries to, directly or indirectly, declare or make any
dividend payment, or make any other distribution of cash, property or assets, in
respect of any of its capital stock or any warrants, rights or options to
acquire its capital stock, or purchase, redeem, retire or otherwise acquire for
value any shares of its capital stock or any warrants, rights or options to
acquire its capital stock, or set aside funds for any of the foregoing, except
that:
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(i) the Borrower may declare and make dividend payments or other
distributions payable solely in its common stock;
(ii) for so long as no Default shall have occurred and be
continuing, the Borrower may make (y) non-cash dividend payments with
respect to the Series A Preferred Stock to the extent expressly required
under the terms of the Amended Charter and (z) non-cash payments upon the
exercise of the Rights; provided, however, that, any such non-cash
payments are made in compliance with Section 6.9(x);
(iii) each Subsidiary may declare and make dividend payments or
other distributions to the Borrower or another Subsidiary to the extent
permitted under applicable Requirements of Law and, as to the Insurance
Subsidiaries, by each relevant Department (including, subject to the
foregoing limitations, the Special Dividend by Rockwood on the Closing
Date); and
(iv) the Borrower may redeem or repurchase all of the Warrants,
pursuant to their terms, for an aggregate purchase price not to exceed
$5,000.
(b) The Borrower will not, and will not permit or cause any of its
Subsidiaries to, make (or give any notice in respect of) any voluntary or
optional payment or prepayment on any of the Surviving Indebtedness or, directly
or indirectly, make any redemption (including pursuant to any change of control
provision), retirement, defeasance or other acquisition for value of any of the
Surviving Indebtedness or make any deposit or otherwise set aside funds for any
of the foregoing purposes.
6.14. Certain Amendments, etc. The Borrower will not, and will not permit
or cause any of its Subsidiaries to, (i) amend, modify, terminate or waive, or
permit the amendment, modification, termination or waiver of, any provision of
any of the Transaction Documents or any agreement, note or other instrument
evidencing any Surviving Indebtedness, (ii) breach or otherwise violate any of
the subordination provisions applicable to any Indebtedness of the type
described in Section 6.9(x), including, without limitation, restrictions against
payment of principal and interest thereon, (iii) amend, modify or change its
articles or certificate of incorporation (as to the Borrower, the Amended
Charter) or bylaws, or any other agreement entered into by it, in each case with
respect to its Capital Stock, other than amendments to Employee Plans permitted
hereunder and other than any immaterial amendments, modifications or changes
that could not reasonably be expected to affect the Lenders adversely (it being
understood that any such amendment relating to the Series A Preferred Stock
shall not be deemed immaterial), or (iv) enter into any new agreement with
respect to its Capital Stock other than Employee Plans permitted hereunder and
ancillary agreements relating thereto.
6.15. Limitation on Certain Restrictions. The Borrower will not, and will
not permit or cause any of its Subsidiaries to, directly or indirectly, create
or otherwise cause or suffer
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to exist or become effective any restriction or encumbrance on (i) the ability
of the Borrower and its Subsidiaries to perform and comply with their respective
obligations under the Loan Documents, (ii) the creation or assumption of any
Lien upon the assets or properties of the Borrower or any of its Subsidiaries as
security, directly or indirectly, for the Obligations, or (iii) the ability of
any Subsidiary of the Borrower to make any dividend payments or other
distributions in respect of its capital stock or any other interest or
participation in its profits owned by the Borrower or any other Subsidiary of
the Borrower, or to make loans or advances thereto, in each case other than such
restrictions or encumbrances in effect on the Closing Date or existing under or
by reason of (x) applicable law, (y) this Agreement and the other Loan Documents
and (z) customary provisions restricting subletting or assignment of any lease
governing a leasehold interest of the Borrower or any of its Subsidiaries.
6.16. New Business. The Borrower will not, and will not permit or cause
any of its Subsidiaries to, engage in any business other than the businesses in
which it is engaged on the date hereof or, in addition, in the case of an
Insurance Subsidiary, write insurance policies or contracts or offer and sell
any insurance products other than the types listed opposite its name on Schedule
6.16.
6.17. Compliance of Employee Plans. The Borrower will not, and will not
permit or cause any of its Subsidiaries or any ERISA Affiliate to, directly or
indirectly, (i) take or fail to take any action that could reasonably be
expected to result in any liability of the Borrower, any Subsidiary or any ERISA
Affiliate to the PBGC or to a Multiemployer Plan, which liability would be
reasonably likely to have a Material Adverse Effect, (ii) terminate any Pension
Plan subject to Title IV of ERISA so as to result in any liability of the
Borrower, any Subsidiary or any ERISA Affiliate, which liability would be
reasonably likely to have a Material Adverse Effect, (iii) permit to exist any
ERISA Event, or any other event or condition, that presents the risk of any
liability of the Borrower or any ERISA Affiliate, which liability would be
reasonably likely to have a Material Adverse Effect, (iv) enter into any new
Employee Plan or amend or modify any existing Employee Plan (other than in the
ordinary course of business consistent with past practice) where such new
Employee Plan or amendment or modification would be reasonably likely to have a
Material Adverse Effect and (v) operate any Employee Plan in a manner such that
the Borrower, any Subsidiary or any ERISA Affiliate will incur any tax liability
under Section 4980B of the Internal Revenue Code or a material liability to any
"qualified beneficiary" within the meaning of Section 4980B of the Internal
Revenue Code, which liability would be reasonably likely to have a Material
Adverse Effect.
6.18. Fiscal Year. The Borrower will not, and will not permit or cause any
of its Subsidiaries to, change the ending date of its fiscal year to a date
other than December 31.
6.19. Accounting Changes. The Borrower will not, and will not permit or
cause any of its Subsidiaries to, make or permit any material change in its
accounting policies or reporting practices, except as may be required by
Generally Accepted Accounting Principles or Statutory Accounting Principles, as
applicable.
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6.20. Change of Location or Name. The Borrower will not, and will not
permit or cause any of its Subsidiaries to, change (i) the location of its chief
executive office, principal place of business or records concerning its business
and financial affairs, or (ii) its corporate name or the trade or fictitious
name under which it conducts its business, in each case without having given the
Agent at least thirty (30) days' prior written notice and having taken any and
all action requested by the Agent to preserve and maintain the Agent's Liens in
and upon the Collateral as valid first priority perfected Liens, subject only to
Permitted Liens.
6.21. Best Rating. The Borrower will not, and will not permit or cause any
of its Insurance Subsidiaries to, permit the rating by A.M. Best & Company of
(i) FRIC, Colony or Xxxxxxxx to be lower than "B+" at any time or (ii) Rockwood
to be lower than "B" at any time.
6.22. Reinsurance Agreements. (a) The Borrower will not, and will not
permit or cause any of its Insurance Subsidiaries to, (i) be or become a party
to any Reinsurance Agreement (whether in effect as of the date hereof or at any
time hereafter) with any reinsurer not rated "A" or better by A.M. Best &
Company unless such reinsurer has provided collateral in form and amount
satisfactory to the Agent, (ii) renew or extend the term of any of the
Reinsurance Agreements designated on Schedule 4.22 as containing any Premium
Adjustment Provision, (iii) enter into any new Reinsurance Agreement containing
any Premium Adjustment Provision, or (iv) enter into any Reinsurance Agreement,
or reinsurance agreement as a reinsurer, with PIC, Fort Washington, or any
Affiliate thereof; provided, however, that any Insurance Subsidiary may enter
into a Reinsurance Agreement with another Insurance Subsidiary.
(b) Notwithstanding anything to the contrary set forth in Section
6.22(a)(i), the Borrower may permit the Insurance Subsidiaries to undertake the
following: (i) Colony may cede up to $1,000,000 in premiums, and Rockwood may
cede up to $3,000,000 in premiums, on an uncollateralized basis to reinsurers
having an A.M. Best rating lower than "A" but not lower than "B++," (ii) on the
Closing Date, Rockwood may cede to PIC and its Subsidiaries (including Premier),
on a collateralized basis satisfactory to the Agent, premiums relating to
private passenger automobile business written by Rockwood or its Subsidiaries
prior to the Closing Date, and (iii) each Insurance Subsidiary may remain a
party to Reinsurance Agreements (but not extend, renew or enter into any new
Reinsurance Agreements) with reinsurers whose ratings have been lowered below
the levels required by Sections 6.22(a)(i) or 6.22(b)(i), provided, with respect
to this subsection (iii), that (x) the aggregate amount, as of the end of each
fiscal year, of the net amount recoverable (as shown on Schedule F - Part 3,
column 13 of the Insurance Subsidiaries' Annual Statements) from such reinsurers
as of such year end is not or will not be greater than five percent (5%) of the
Consolidated Statutory Surplus for the Insurance Subsidiaries as of such year
end, (y) as of the end of each fiscal quarter, the aggregate amount of
reinsurance premiums ceded (calculated in the same manner as required for
Schedule F - Part 3, column 1 of the Insurance Subsidiaries' Annual Statements)
by the Insurance Subsidiaries as of such date to
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all such reinsurers is not or will not be greater than five percent (5%) of the
total reinsurance premiums ceded for the Insurance Subsidiaries as of such date,
and (z) promptly upon the Borrower or any Insurance Subsidiary obtaining
knowledge that A.M. Best has announced a lowering of the rating of a reinsurer
below the level required by Sections 6.22(a)(i) or 6.22(b)(i), the Borrower
shall provide notice thereof to the Agent and Lenders, together with a
computation, in form and detail acceptable to the Agent, demonstrating
compliance or anticipated compliance as of the next fiscal quarter and fiscal
year ends with the provisions of subsections (x) and (y) of this Section
6.22(b)(iii).
6.23. Hazardous Substances. The Borrower will not, and will not permit or
cause any of its Subsidiaries to, permit any Hazardous Substances, the removal
of which is required or the maintenance of which is restricted, prohibited or
penalized by any Governmental Authority, to be unlawfully brought on to or
located on any real property owned or leased by the Borrower or any of its
Subsidiaries (other than, with respect to leased properties, preexisting
Hazardous Substances for which the Borrower and its Subsidiaries are not legally
responsible), except in full compliance with all applicable Environmental Laws;
and if any such Hazardous Substance is brought or located thereon in violation
of any applicable law (other than, with respect to leased properties,
preexisting Hazardous Substances for which the Borrower and its Subsidiaries are
not legally responsible), it shall be immediately removed, with proper disposal,
and all required environmental cleanup procedures shall be diligently undertaken
pursuant to all such Environmental Laws; and the Borrower will permit the Agent
or any Lender to inspect any such real property, conduct tests thereon and
inspect all books, records and correspondence pertaining thereto and, at the
request of the Agent and at the Borrower's expense, will cause to be prepared
and delivered to the Agent and Lenders a report of a qualified environmental
engineer, satisfactory in form and substance to the Agent, that such removal and
cleanup has been completed, and such other and further assurances relating
thereto, in form and substance satisfactory to the Agent as it may reasonably
request.
ARTICLE VII
EVENTS OF DEFAULT
7.1. Events of Default. The occurrence of any one or more of the following
events shall constitute an "Event of Default":
(a) The Borrower shall fail to pay any principal of or interest on
the Loans when due;
(b) The Borrower shall fail to pay any fees or any other Obligations
(other than as provided in subsection (a) above) within three (3) Business
Days after notice from the Agent or any Lender that the same is due;
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(c) The Borrower shall fail to observe, perform or comply with any
term, condition or covenant contained in Sections 2.14, 5.1, 5.2, 5.3,
5.4, 5.5(a) or 5.11 or in Article VI;
(d) The Borrower shall tail to observe, perform or comply with any
term, condition or covenant contained in this Agreement other than those
enumerated in subsections (a), (b) or (c) above, and such failure shall
continue unremedied for a period of ten (10) Business Days after any
Responsible Officer acquires knowledge thereof; provided, however, that,
except with respect to any of the provisions of Article IV or Sections
5.5(b) or 5.13, the Borrower shall be entitled to a period of forty-five
(45) days to remedy any such failure if the Borrower demonstrates to the
satisfaction of the Required Lenders that the failure can be remedied in
such period, the Borrower is acting diligently to remedy such failure and
the Borrower is pursuing such remedy to completion;
(e) The Borrower or any of its Subsidiaries shall fail to observe,
perform or comply with any term, condition or covenant contained in any of
the Loan Documents other than this Agreement, and such failure shall
continue unremedied for any grace period specifically applicable thereto
or, if no such grace period is applicable, for a period of ten (10)
Business Days after any Responsible Officer acquires knowledge thereof;
provided, however, that, in the event no such grace period is specifically
applicable thereto, the Borrower shall be entitled to a period of
forty-five (45) days to remedy any such failure if the Borrower
demonstrates to the satisfaction of the Required Lenders that the failure
can be remedied in such period, the Borrower is acting diligently to
remedy such failure and the Borrower is pursuing such remedy to
completion;
(f) Any representation or warranty made in writing by or on behalf
of the Borrower or any of its Subsidiaries in this Agreement, any of the
other Loan Documents or in any certificate, instrument or document
delivered in connection herewith or therewith, or in connection with the
transactions contemplated hereby or thereby, shall prove to have been
false or incorrect in any material respect at the time as of which such
representation or warranty was made;
(g) The Borrower or any of its Subsidiaries shall fail to pay when
due, whether by scheduled maturity, acceleration or otherwise (taking into
account any applicable grace period), any principal of, interest on or
other amount payable in respect of any Indebtedness (other than the
Indebtedness incurred pursuant to this Agreement) having an aggregate
principal amount of at least $250,000; any other default or event of
default shall occur under the terms of any agreement or instrument
pursuant to which the Borrower or any of its Subsidiaries has incurred any
such Indebtedness, the effect of which default or event of default is to
accelerate, or permit acceleration of (after any applicable grace period,
notice or lapse of time), the maturity of at least $250,000 in principal
amount of such Indebtedness; or any such Indebtedness of the Borrower or
any of its Subsidiaries shall be declared to be due and payable or
required to be prepaid or redeemed (other than pursuant to a regular
schedule
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therefor), purchased or defeased, or an offer to prepay, redeem, purchase
or defease shall be required to be made, in each case prior to the stated
maturity thereof;
(h) Any Department or other Governmental Authority having
jurisdiction shall institute any action or proceeding seeking to place any
Insurance Subsidiary under supervision, conservation or rehabilitation, or
to appoint a receiver therefor;
(i) The Borrower or any of its Subsidiaries shall (i) file a
voluntary petition or commence a voluntary case seeking liquidation,
reorganization, dissolution, arrangement, readjustment of debts or any
other relief under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law. now or hereafter in effect, (ii)
consent to the appointment of or taking possession by a custodian,
trustee, receiver or similar official for or of all or a substantial part
of its properties (or any of the Collateral), (iii) fail generally to pay
its debts as they become due or admit in writing its inability to pay its
debts generally as they become due, (iv) make a general assignment for the
benefit of creditors or (v) take any corporate action to authorize or
approve any of the actions described above;
(j) Any involuntary petition or case shall be filed or commenced
against the Borrower or any of its Subsidiaries seeking liquidation,
reorganization, dissolution, arrangement, readjustment of debts, the
appointment of a custodian, trustee, receiver or similar official for it
or all or a substantial part of its properties (or any of the Collateral)
or any other relief under the Bankruptcy Code or under any other
applicable bankruptcy, insolvency or similar law now or hereafter in
effect, which petition or case is not dismissed, bonded or discharged
within sixty (60) days of the date of filing; or an order for relief
(including, without limitation, the appointment of a custodian, trustee,
receiver or similar official) shall be entered in any such proceeding,
which order is not stayed or made subject to other similar relief within
sixty (60) days thereafter;
(k) The Borrower or any of its Subsidiaries shall (i) cease to be
Solvent, (ii) cease to conduct business as now conducted or (iii) be
enjoined, restrained or in any way prevented by order of court or any
other Governmental Authority from conducting all or any material part of
its business affairs:
(l) Any one or more judgments, writs or warrants of attachment,
execution or similar processes involving an aggregate amount (not
reimbursed or reimbursable by an insurer (other than an Insurance
Subsidiary) that has acknowledged its liability in writing) in excess of
$250,000 (other than a liability of an Insurance Subsidiary under an
insurance contract written in the ordinary course of business) shall be
entered or filed against the Borrower or any of its Subsidiaries or any of
their respective properties, and all such judgments and processes shall
not be dismissed, vacated, stayed, discharged or bonded for a period of
thirty (30) days or in any event later than five (5) days prior to the
date of any proposed sale thereunder, and, if bonded, such bond (or a
replacement bond) shall not continue in effect at all times until such
judgment is dismissed or discharged;
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(m) Any Lien, levy or assessment, or notice thereof, shall be filed
of record with respect to all or any portion of the assets of the Borrower
or any of its Subsidiaries by the United States, or any department, agency
or instrumentality thereof, or by any other Governmental Authority,
including, without limitation, the PBGC; such Lien, levy or assessment,
taken together with all other Liens, levies or assessments then of record
with respect to the assets of the Borrower and its Subsidiaries, taken as
a whole, exceeds $250,000; and such Lien, levy or assessment shall be
executed upon or shall not be paid, dismissed, vacated, stayed, released,
bonded or discharged within thirty (30) days after the same becomes a Lien
or, in the case of a Lien involving ad valorem taxes, prior to the last
day when payment may be made without penalty;
(n) Any Loan Document, at any time after execution and delivery
thereof, shall for any reason cease to be a legal, valid and binding
obligation of the Borrower or any of its Subsidiaries to the extent a
party thereto, enforceable against it in accordance with its terms, or to
give the Agent and Lenders the rights, powers and remedies purported to be
created thereby, including, without limitation, a valid, first priority
perfected security interest in and Lien upon all of the Collateral
purported to be covered thereby, subject only to Permitted Liens, in each
case unless any such cessation is due to any act or failure to act on the
part of the Agent or any Lender;
(o) Any Non-Insurance Subsidiary of the Borrower or any Person
acting on behalf of any such Subsidiary shall deny or disaffirm such
Subsidiary's obligations under the Subsidiaries Guaranty;
(p) The occurrence of any of the following events: (i) the Borrower,
any Subsidiary or any ERISA Affiliate shall fail to pay when due, after
expiration of any applicable grace period, any installment payment with
respect to its Withdrawal Liabilities under a Multiemployer Plan; (ii) the
failure of the Borrower, any Subsidiary or any ERISA Affiliate to satisfy
its contribution requirements under Section 412(c)(11) of the Internal
Revenue Code, whether or not it has sought a waiver under Section 412(d)
of the Internal Revenue Code; (iii) notice of intent to terminate any
Pension Plan having Unfunded Pension Liabilities shall be filed under
Title IV of ERISA, where such Unfunded Pension Liabilities would be
reasonably likely to have a Material Adverse Effect; (iv) the institution
by the PBGC of proceedings under Title IV of ERISA to terminate any
Pension Plan; (v) the institution by a fiduciary of any Employee Plan of
proceedings against the Borrower, any Subsidiary or any ERISA Affiliate to
enforce Section 515 of ERISA to collect contributions; (vi) loss of
qualification of a Qualified Plan, where such loss would be reasonably
likely to have a Material Adverse Effect; or (vii) the existence of any
condition that would permit the PBGC under Section 4042 of ERISA to obtain
a decree adjudicating that any Pension Plan or Plans having Unfunded
Pension Liabilities must be terminated; provided, however, that no Event
of Default shall occur as a result of any of the matters described in
clause (i), (iv) or (v) above so long as such matter is being contested in
good faith and by proper proceedings and the Borrower and its Subsidiaries
are maintaining appropriate reserves therefor in accordance with Generally
Accepted Accounting Principles;
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(q) Any one or more licenses, permits or authorizations (including,
without limitation, Licenses) now or hereafter held by the Borrower or any
of its Subsidiaries shall be terminated, suspended or revoked or shall not
be renewed, which terminations, suspensions, revocations or failures to
renew would, individually or in the aggregate, be reasonably likely to
have a Material Adverse Effect;
(r) The occurrence of any one or more changes in any of the
Insurance Codes governing the dividend practices of any of the Insurance
Subsidiaries, which changes would, individually or in the aggregate, be
reasonably likely to have a Material Adverse Effect;
(s) The occurrence of any one or more changes in the status of any
of the Reinsurance Agreements of any of the Insurance Subsidiaries, which
changes would, individually or in the aggregate, be reasonably likely to
have a Material Adverse Effect;
(t) Any of J. Xxxx Xxxxx, Xxxx Xxxxxx, Xxxx Xxxxxx, or Xxxxx Xxxxx
shall have ceased to be employed by the Borrower or to continue to perform
his current duties pursuant to his respective Employment Agreement, and
the Borrower shall have failed to hire or appoint a replacement for him,
reasonably satisfactory to the Required Lenders, within one hundred eighty
(180) days thereafter; or
(u) The occurrence of a Change of Control.
7.2. Remedies; Acceleration, etc. Upon and at any time after the
occurrence and during the continuance of any Event of Default, the Agent shall
at the direction, or may with the consent, of the Required Lenders, take any or
all of the following actions at the same or different times:
(a) Declare all or any part of the outstanding principal amount of
the Loans, all unpaid interest accrued thereon, and all other amounts
payable under this Agreement, the Term Notes and the other Loan Documents
to be immediately due and payable, whereupon such outstanding principal
amount, accrued interest and other such amounts shall become immediately
due and payable without presentment, demand, protest, notice of intent to
accelerate or other notice or legal process of any kind, all of which are
hereby knowingly and expressly waived by the Borrower to the greatest
extent permitted by law (provided that, upon the occurrence of an Event of
Default pursuant to Sections 7.1(h), (i) or (j), all of such outstanding
principal amount, accrued interest and other such amounts shall
automatically become immediately due and payable); and
(b) Exercise all rights and remedies available to it under this
Agreement, the other Loan Documents and applicable law.
7.3. Remedies; Set-Off. In addition to all other rights and remedies
available under the Loan Documents or applicable law or otherwise, upon and at
any time after the
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occurrence and during the continuance of any Event of Default, each Lender and
each of its Affiliates may, and each is hereby authorized by the Borrower, at
any such time and from time to time, to the fullest extent permitted by
applicable law, without presentment, demand, protest or other notice of any
kind, all of which are hereby knowingly and expressly waived by the Borrower to
the greatest extent permitted by applicable law, to set off and to apply any and
all deposits (general or special, time or demand, provisional or final,
including without limitation the Cash Collateral Account) and any other property
at any time held, and any other indebtedness at any time owing, by any Lender or
any of its Affiliates to or for the credit or the account of the Borrower
against any or all of the Obligations now or hereafter existing, whether or not
such Obligations may be contingent or unmatured, the Borrower hereby granting to
the Lenders a continuing security interest in and Lien upon all such deposits
and other property as security for such Obligations. The Lenders agree promptly
to notify the Borrower after any such set-off and application; provided,
however, that the failure to give such notice shall not affect the validity of
such set-off and application.
ARTICLE VIII
THE AGENT
8.1. Appointment. Each Lender hereby irrevocably appoints and authorizes
First Union to act as Agent hereunder and under the other Loan Documents and to
take such actions as agent on its behalf hereunder and under the other Loan
Documents, and to exercise such powers and to perform such duties, as are
specifically delegated to the Agent by the terms hereof or thereof, together
with such other powers and duties as are reasonably incidental thereto.
8.2. Nature of Duties. The Agent shall have no duties or responsibilities
other than those expressly set forth in this Agreement and the other Loan
Documents. The Agent shall not have, by reason of this Agreement or any other
Loan Document, a fiduciary relationship in respect of any Lender; and nothing in
this Agreement or any other Loan Document, express or implied, is intended to or
shall be so construed as to impose upon the Agent any obligations or liabilities
in respect of this Agreement or any other Loan Document except as expressly set
forth herein or therein. The Agent may execute any of its duties under this
Agreement or any other Loan Document by or through agents or attorneys-in-fact
and shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact that it selects with reasonable care. The Agent shall be
entitled to consult with legal counsel, independent public accountants and other
experts selected by it with respect to all matters pertaining to this Agreement
and the other Loan Documents and its duties hereunder and thereunder and shall
not be liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts. The Lenders
hereby acknowledge that the Agent shall not be under any duty to take any
discretionary action permitted to be taken by it pursuant to the provisions of
this Agreement or any other Loan Document unless it shall be requested in
writing to do so by the Required Lenders (or, where a higher percentage of the
Lenders is expressly required hereunder, such Lenders).
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8.3. Exculpatory Provisions. Neither the Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates shall be (i)
liable for any action taken or omitted to be taken by it or such Person under or
in connection with the Loan Documents, except for its or such Person's own gross
negligence or willful misconduct, (ii) responsible in any manner to any Lender
for any recitals, statements, information, representations or warranties herein
or in any other Loan Document or in any document, instrument, certificate,
report or other writing delivered in connection herewith or therewith, for the
execution, effectiveness, genuineness, validity, enforceability or sufficiency
of this Agreement or any other Loan Document, or for the financial condition of
the Borrower, its Subsidiaries or any other Person, or (iii) required to
ascertain or make any inquiry concerning the performance or observance of any of
the terms, provisions or conditions of this Agreement or any other Loan Document
or the existence or possible existence of any Default or Event of Default, or to
inspect the properties, books or records of the Borrower or any of its
Subsidiaries.
8.4. Reliance by Agent. The Agent shall be entitled to rely, and shall be
fully protected in relying, upon any notice, statement, consent or other
communication (including, without limitation, any thereof by telephone,
telecopy, telex, telegram or cable) believed by it in good faith to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons. The Agent may deem and treat each Lender as the owner of its interest
hereunder for all purposes hereof unless and until a written notice of the
assignment, negotiation or transfer thereof shall have been given to the Agent
in accordance with the provisions of this Agreement. The Agent shall be entitled
to refrain from taking or omitting to take any action in connection with this
Agreement or any other Loan Document (i) if such action or omission would, in
the reasonable opinion of the Agent, violate any applicable law or any provision
of this Agreement or any other Loan Document or (ii) unless and until it shall
have received such advice or concurrence of the Required Lenders (or, where a
higher percentage of the Lenders is expressly required hereunder, such Lenders)
as it deems appropriate or it shall first have been indemnified to its
satisfaction by the Lenders against any and all liability and expense (other
than liability and expense arising from its own gross negligence or willful
misconduct) that may be incurred by it by reason of taking, continuing to take
or omitting to take any such action. Without limiting the foregoing, no Lender
shall have any right of action whatsoever against the Agent as a result of the
Agent's acting or refraining from acting hereunder or under any other Loan
Document in accordance with the instructions of the Required Lenders (or, where
a higher percentage of the Lenders is expressly required hereunder, such
Lenders), and such instructions and any action taken or failure to act pursuant
thereto shall be binding upon all of the Lenders (including all subsequent
Lenders).
8.5. Non-Reliance on Agent and Other Lenders. Each Lender expressly
acknowledges that neither the Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates has made any representation
or warranty to it and that no act by the Agent or any such Person hereafter
taken, including any review of the affairs of the Borrower and its Subsidiaries,
shall be deemed to constitute any representation or warranty
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by the Agent to any Lender. Each Lender represents to the Agent that (i) it has,
independently and without reliance upon the Agent or any other Lender and based
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, prospects, operations,
properties, financial and other condition and creditworthiness of the Borrower
and its Subsidiaries and made its own decision to enter into this Agreement and
extend credit to the Borrower hereunder, and (ii) it will, independently and
without reliance upon the Agent or any other Lender and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit analysis, appraisals and decisions in taking or not taking action
hereunder and under the other Loan Documents and to make such investigation as
it deems necessary to inform itself as to the business, prospects, operations,
properties, financial and other condition and creditworthiness of the Borrower
and its Subsidiaries. Except as expressly provided in this Agreement and the
other Loan Documents, the Agent shall have no duty or responsibility, either
initially or on a continuing basis, to provide any Lender with any credit or
other information concerning the business, prospects, operations, properties,
financial or other condition or creditworthiness of the Borrower, its
Subsidiaries or any other Person that may at any time come into the possession
of the Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates.
8.6. Notice of Default. The Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default unless the Agent
shall have received written notice from the Borrower or a Lender referring to
this Agreement, describing such Default or Event of Default and stating that
such notice is a "notice of default." In the event that the Agent receives such
a notice, the Agent will give notice thereof to the Lenders as soon as
reasonably practicable; provided, however, that if any such notice has also been
furnished to the Lenders, the Agent shall have no obligation to notify the
Lenders with respect thereto. The Agent shall (subject to Sections 8.4 and 9.6)
take such action with respect to such Default or Event of Default as shall
reasonably be directed by the Required Lenders; provided that, unless and until
the Agent shall have received such directions, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable in the best
interests of the Lenders.
8.7. Indemnification. To the extent the Agent is not reimbursed by or on
behalf of the Borrower, and without limiting the obligation of the Borrower to
do so, the Lenders agree (i) to indemnify the Agent and its officers, directors,
employees, agents, attorneys-in-fact and Affiliates, ratably in proportion to
their respective percentages as used in determining the Required Lenders as of
the date of determination, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses (including, without limitation, attorneys' fees and expenses) or
disbursements of any kind or nature whatsoever that may at any time (including,
without limitation, at any time following the repayment in full of the Loans) be
imposed on, incurred by or asserted against the Agent in any way relating to or
arising out of this Agreement or any other Loan Document or any documents
contemplated by or referred to herein or the transactions
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contemplated hereby or thereby or any action taken or omitted by the Agent under
or in connection with any of the foregoing, and (ii) to reimburse the Agent upon
demand, ratably in proportion to their respective percentages as used in
determining the Required Lenders as of the date of determination, for any
expenses incurred by the Agent in connection with the preparation, negotiation,
execution, delivery, administration, amendment, modification, waiver or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement
or any of the other Loan Documents (including, without limitation, reasonable
attorneys' fees and expenses and compensation of agents and employees paid for
services rendered on behalf of the Lenders); provided, however, that no Lender
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
to the extent resulting from the gross negligence or willful misconduct of the
party to be indemnified.
8.8. The Agent in its Individual Capacity. With respect to its Commitment,
the Loans made by it and the Term Note issued to it, the Agent in its individual
capacity and not as Agent shall have the same rights and powers under the Loan
Documents as any other Lender and may exercise the same as though it were not
performing the agency duties specified herein; and the terms "Lenders,"
"Required Lenders," and any similar terms shall, unless the context clearly
otherwise indicates, include the Agent in its individual capacity. The Agent and
its Affiliates may accept deposits from, lend money to, make investments in, and
generally engage in any kind of banking, trust, financial advisory or other
business with the Borrower, any of its Subsidiaries or any of their respective
Affiliates as if the Agent were not performing the agency duties specified
herein, and may accept fees and other consideration from any of them for
services in connection with this Agreement and otherwise without having to
account for the same to the Lenders.
8.9. Successor Agent. The Agent may resign at any time by giving ten (10)
days' prior written notice to the Borrower and the Lenders. Upon any such notice
of resignation, the Required Lenders will, with the prior written consent of the
Borrower (which consent shall not be unreasonably withheld), appoint from among
the Lenders a successor to the Agent (provided that the Borrower's consent shall
not be required in the event a Default or Event of Default shall have occurred
and be continuing). If no successor to the Agent shall have been so appointed by
the Required Lenders and shall have accepted such appointment within such
ten-day period, then the retiring Agent may, on behalf of the Lenders and after
consulting with the Lenders and the Borrower, appoint a successor Agent from
among the Lenders. Upon the acceptance of any appointment as Agent by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations
hereunder and under the other Loan Documents. After any retiring Agent's
resignation as Agent, the provisions of this Article shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was Agent. If no
successor to the Agent has accepted appointment as Agent by the thirtieth (30th)
day following a retiring Agent's notice of resignation, the retiring Agent's
resignation shall nevertheless thereupon become
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effective, and the Lenders shall thereafter perform all of the duties of the
Agent hereunder and under the other Loan Documents until such time, if any, as
the Required Lenders appoint a successor Agent as provided for hereinabove.
8.10. Collateral Matters. (a) The Agent is hereby authorized on behalf of
the Lenders, without the necessity of any notice to or further consent from the
Lenders, from time to time (but without any obligation) to take any action with
respect to the Collateral and the Loan Documents that may be necessary to
perfect and maintain perfected the Liens upon the Collateral granted pursuant to
the Loan Documents.
(b) The Lenders hereby irrevocably authorize the Agent, at its option and
in its discretion, to release any Lien granted to or held by the Agent upon any
Collateral (i) upon termination of the Commitments and payment in full of all of
the Obligations, (ii) constituting property sold or to be sold or disposed of as
part of or in connection with any disposition expressly permitted hereunder or
under any other Loan Document or to which the Required Lenders have consented or
(iii) otherwise pursuant to and in accordance with the provisions of any
applicable Loan Document. Upon request by the Agent at any time, the Lenders
will confirm in writing the Agent's authority to release Collateral pursuant to
this subsection (b).
ARTICLE IX
MISCELLANEOUS
9.1. Fees and Expenses. The Borrower agrees (i) whether or not the
transactions contemplated by this Agreement shall be consummated, to pay upon
demand all reasonable out-of-pocket costs and expenses of the Agent (including,
without limitation, the reasonable fees and expenses of counsel to the Agent) in
connection with the examination, review and due diligence investigation in
connection with, the preparation, negotiation, execution, delivery and
syndication of, and any amendment, modification or waiver of or consent with
respect to, this Agreement and the other Loan Documents, (ii) to pay upon demand
all reasonable out-of-pocket costs and expenses of the Agent and each Lender
(including, without limitation, the reasonable fees and expenses of counsel to
the Agent or any Lender) in connection with (y) any restructuring of the credit
arrangement provided under this Agreement, whether in the nature of a
"work-out," in any insolvency or bankruptcy proceeding or otherwise and whether
or not consummated, and (z) the enforcement, attempted enforcement or
preservation of any rights or remedies under this Agreement or any of the other
Loan Documents, whether in any action, suit or proceeding (including any
bankruptcy or insolvency proceeding) or otherwise, and (iii) to pay and hold
harmless the Agent and each Lender from and against all liability for any
intangibles, documentary, stamp or other similar taxes, fees and excises, if
any, including any interest and penalties, and any finder's or brokerage fees,
commissions and expenses (other than any fees, commissions or expenses of
finders or brokers engaged by the Agent or any Lender), that may be payable in
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connection with the transactions contemplated by this Agreement and the other
Loan Documents.
9.2. Indemnification. The Borrower agrees, whether or not the transactions
contemplated by this Agreement shall be consummated, to indemnify and hold
harmless the Agent and each Lender and each of their respective directors,
officers, employees, agents and Affiliates (each, an "Indemnified Person") from
and against any and all claims, losses, damages, obligations, liabilities,
penalties, costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses) of any kind or nature whatsoever, whether direct,
indirect or consequential (collectively, "Indemnified Costs"), that may at any
time be imposed on, incurred by or asserted against any such Indemnified Person
as a result of, arising from or in any way relating to the performance or
enforcement of this Agreement, any of the other Loan Documents or any of the
other Transaction Documents, any of the transactions contemplated herein or
therein (including, without limitation, the Transactions) or any transaction
financed or to be financed in whole or in part, directly or indirectly, with the
proceeds of the Loans, or any action, suit or proceeding (including any inquiry
or investigation) by any Person, whether threatened or initiated, related to any
of the foregoing, including, without limitation, the actual or alleged
generation, presence or release of any Hazardous Substances on or from, or the
transportation of Hazardous Substances to or from, any real property owned or
leased by the Borrower or any of its Subsidiaries, and all other Environmental
Claims, and in any case whether or not such Indemnified Person is a party to any
such action, proceeding or suit or a subject of any such inquiry or
investigation; provided, however, that no Indemnified Person shall have the
right to be indemnified hereunder for any Indemnified Costs to the extent
resulting from the gross negligence or willful misconduct of such Indemnified
Person. All of the foregoing Indemnified Costs of any Indemnified Person shall
be paid or reimbursed by the Borrower, as and when incurred and upon demand.
9.3. Governing Law; Consent to Jurisdiction. THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS HAVE BEEN EXECUTED, DELIVERED AND ACCEPTED IN, AND SHALL BE
DEEMED TO HAVE BEEN MADE IN, NORTH CAROLINA AND SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH
CAROLINA (WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF). THE
BORROWER HEREBY CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF ANY STATE COURT
WITHIN MECKLENBURG COUNTY, NORTH CAROLINA OR ANY FEDERAL COURT LOCATED WITHIN
THE WESTERN DISTRICT OF THE STATE OF NORTH CAROLINA FOR ANY PROCEEDING
INSTITUTED HEREUNDER OR UNDER ANY OF THE OTHER LOAN DOCUMENTS, OR ARISING OUT OF
OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, OR ANY
PROCEEDING TO WHICH THE AGENT OR ANY LENDER OR THE BORROWER IS A PARTY,
INCLUDING ANY ACTIONS BASED UPON, ARISING OUT OF, OR IN CONNECTION WITH, ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER ORAL OR WRITTEN) OR
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ACTIONS OF THE AGENT OR ANY LENDER OR THE BORROWER. THE BORROWER IRREVOCABLY
AGREES TO BE BOUND (SUBJECT TO ANY AVAILABLE RIGHT OF APPEAL) BY ANY JUDGMENT
RENDERED OR RELIEF GRANTED THEREBY AND FURTHER WAIVES ANY OBJECTION THAT IT MAY
HAVE BASED ON LACK OF JURISDICTION OR IMPROPER VENUE OR FORUM NON CONVENIENS TO
THE CONDUCT OF ANY SUCH PROCEEDING. THE BORROWER CONSENTS THAT ALL SERVICE OF
PROCESS BE MADE BY REGISTERED OR CERTIFIED MAIL DIRECTED TO IT AT ITS ADDRESS
SET FORTH HEREINBELOW, AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON
THE EARLIER OF ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE
UNITED STATES MAILS, PROPER POSTAGE PREPAID AND PROPERLY ADDRESSED. NOTHING IN
THIS SECTION SHALL AFFECT THE RIGHT TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR AFFECT THE RIGHT OF ANY PARTY TO BRING ANY ACTION OR
PROCEEDING AGAINST ANY OTHER PARTY IN THE COURTS OF ANY OTHER JURISDICTION.
9.4. Arbitration; Preservation and Limitation of Remedies. (a) Upon demand
of any party hereto whether made before or after institution of any judicial
proceeding, any dispute, claim or controversy arising out of, connected with or
relating to this Agreement or any other Loan Document ("Disputes") between or
among the Borrower, the Agent and the Lenders, or any of them, shall be resolved
by binding arbitration as provided herein. Institution of a judicial proceeding
by a party does not waive the right of that party to demand arbitration
hereunder. Disputes may include, without limitation, tort claims, counterclaims,
claims brought as class actions, claims arising from documents executed in the
future, or claims arising out of or connected with the transactions contemplated
by this Agreement and the other Loan Documents. Arbitration shall be conducted
under and governed by the Commercial Financial Disputes Arbitration Rules (the
"Arbitration Rules") of the American Arbitration Association (the "AAA"), as in
effect from time to time, and Title 9 of the U.S. Code, as amended. All
arbitration hearings shall be conducted in the city in which the principal
office of the Agent is located. The expedited procedures set forth in Rule 51 et
seq. of the Arbitration Rules shall be applicable to claims of less than
$1,000,000. All applicable statutes of limitation shall apply to any Dispute. A
judgment upon the award may be entered in any court having jurisdiction. The
panel from which all arbitrators are selected shall be comprised of licensed
attorneys. The single arbitrator selected for expedited procedure shall be a
retired judge from the highest court of general jurisdiction, state or federal,
of the state where the hearing will be conducted. Notwithstanding the foregoing,
this arbitration provision does not apply to Disputes under or related to Hedge
Agreements.
(b) Notwithstanding the preceding binding arbitration provisions, the
parties hereto agree to preserve, without diminution, certain remedies that any
party hereto may employ or exercise freely, either alone, in conjunction with or
during a Dispute. Any party hereto shall have the right to proceed in any court
of proper jurisdiction or by self-help to exercise or prosecute the following
remedies, as applicable: (i) all rights to foreclose
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against any Collateral by exercising a power of sale granted pursuant to any of
the Loan Documents or under applicable law or by judicial foreclosure and sale,
including a proceeding to confirm the sale; (ii) all rights of self-help,
including peaceful occupation of real property and collection of rents, set-off,
and peaceful possession of personal property; (iii) obtaining provisional or
ancillary remedies, including injunctive relief, sequestration, garnishment,
attachment, appointment of a receiver and filing an involuntary bankruptcy
proceeding; and (iv) when applicable, a judgment by confession of judgment.
Preservation of these remedies does not limit the power of an arbitrator to
grant similar remedies that may be requested by a party in a Dispute. The
parties hereto agree that no party shall have a remedy of punitive or exemplary
damages against any other party in any Dispute, and each party hereby waives any
right or claim to punitive or exemplary damages that it has now or that may
arise in the future in connection with any Dispute, whether such Dispute is
resolved by arbitration or judicially.
9.5. Notices. All notices and other communications provided for hereunder
shall be in writing (including facsimile transmission) and mailed, telecopied or
delivered to the party to be notified at the following addresses:
(a) if to the Borrower, to Front Royal, Inc., 0000 Xxxxxxx
Xxxxxxxxx, Xxxxx 000, Xxxxxxxxxxx, Xxxxx Xxxxxxxx 0000X, Attention: Xxxxx
Xxxxx, Telecopy No. (000) 000-0000; with a copy to, Xxxxxxx X. Xxxxxxxxx,
Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP, 0000 Xxxxxx xx xxx
Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Telecopy No. (000) 000-0000;
(b) if to the Agent, to First Union National Bank of North Carolina,
One First Union Center, TOO-IO, 000 Xxxxx Xxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxx
Xxxxxxxx 00000-0000, Attention: Syndication Agency Services, Telecopy No.
(000) 000-0000; and
(c) if to any Lender, to it at the address for notices set forth on
its signature page hereto (or if to any Lender not a party hereto as of
the date hereof, at the address for notices set forth in its Assignment
and Acceptance);
or in each case, to such other address as any party may designate for itself by
like notice to all other parties hereto. All such notices and communications
shall be deemed to have been given (i) if mailed by first class, certified or
registered mail, postage prepaid, on the fifth Business Day after deposit in the
mails, (ii) if telecopied, when transmitted by telecopier, or (iii) if delivered
by overnight courier or by hand, upon delivery; provided that notices and
communications to the Agent shall not be effective until received by the Agent.
9.6. Amendments, Waivers, etc. No amendment, modification, waiver or
discharge or termination of, or consent to any departure by the Borrower from,
any provision of this Agreement or any other Loan Document, shall be effective
unless in a writing signed by the Required Lenders (or by the Agent at the
direction or with the consent of the Required Lenders), and then the same shall
be effective only in the specific instance and for the
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specific purpose for which given; provided, however, that no such amendment,
modification, waiver, discharge, termination or consent shall:
(a) unless agreed to by each Lender directly affected thereby, (i)
reduce or forgive the principal amount of any Loan, reduce the rate of or
forgive any interest thereon, or reduce or forgive any fees or other
Obligations (other than fees payable to the Agent for its own account), or
(ii) extend the Maturity Date or any other date fixed for the payment of
any principal of or interest on any Loan (other than additional interest
payable under Section 2.8(b) at the election of the Required Lenders, as
provided therein), any fees (other than fees payable to the Agent for its
own account) or any other Obligations;
(b) unless agreed to by all of the Lenders, (i) increase or extend
the Commitment of any Lender (it being understood that a waiver of any
Event of Default, if agreed to by the requisite Lenders hereunder, shall
not constitute such an increase or extension), (ii) change the percentage
of the aggregate Commitments or of the aggregate unpaid principal amount
of the Loans, or the number or percentage of Lenders, that shall be
required for the Lenders or any of them to take or approve, or direct the
Agent to take or approve, any action hereunder (including as set forth in
the definition of "Required Lenders"), (iii) except as may be otherwise
specifically provided in this Agreement or in any other Loan Document,
release all or substantially all of the Collateral or release any
guarantor from the Subsidiaries Guaranty, or (iv) change any provision of
Section 2.15 or this Section 9.6; and
(c) unless agreed to by the Agent in addition to the Lenders
required as provided hereinabove to take such action, affect the rights or
obligations of the Agent hereunder or under any of the other Loan
Documents;
and provided further that the Fee Letter and any Hedge Agreement to which
any Lender is a party may be amended or modified, and any rights
thereunder waived, in a writing signed by the parties thereto.
9.7. Assignments, Participations. (a) Each Lender may assign to one or
more other Eligible Assignees (each, an "Assignee") all or a portion of its
rights and obligations under this Agreement (including, without limitation, all
or a portion of its Commitment, the outstanding Loans made by it and the Term
Note or Term Notes held by it); provided, however, that (i) any such assignment
(other than an assignment to a Lender or an Affiliate of a Lender) shall not be
made without the prior written consent of the Agent and the Borrower (to be
evidenced by their counter-execution of the relevant Assignment and Acceptance),
which consents shall not be unreasonably withheld, provided that the Borrower's
consent shall not be required in the event a Default or Event of Default shall
have occurred and be continuing, (ii) except in the case of an assignment to a
Lender or an Affiliate of a Lender, no such assignment shall be in an aggregate
principal amount (determined as of the date of the Assignment and Acceptance
with respect to such assignment) less than $5,000,000 (or, if less, the full
amount of the assigning Lender's
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outstanding Loans), and (iii) the parties to each such assignment will execute
and deliver to the Agent, for its acceptance and recording in the Register, an
Assignment and Acceptance, together with any Term Note or Term Notes subject to
such assignment, and will pay a nonrefundable processing fee of $3,000 to the
Agent for its own account. Upon such execution, delivery, acceptance and
recording of the Assignment and Acceptance, from and after the effective date
specified therein, which effective date shall be at least five Business Days
after the execution thereof (unless the Agent shall otherwise agree), (A) the
Assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, shall have the rights and obligations of the assigning Lender
hereunder with respect thereto and (B) the assigning Lender shall, to the extent
that rights and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights (other than rights under the
provisions of this Agreement and the other Loan Documents relating to
indemnification or payment of fees, costs and expenses, to the extent such
rights relate to the time prior to the effective date of such Assignment and
Acceptance) and be released from its obligations under this Agreement (and, in
the case of an Assignment and Acceptance covering all or the remaining portion
of such assigning Lender's rights and obligations under this Agreement, such
Lender shall cease to be a party hereto). The terms and provisions of each
Assignment and Acceptance shall, upon the effectiveness thereof, be incorporated
into and made a part of this Agreement, and the covenants, agreements and
obligations of each Lender set forth therein shall be deemed made to and for the
benefit of the Agent and the other parties hereto as if set forth at length
herein.
(b) The Agent will maintain at its address for notices referred to herein
a copy of each Assignment and Acceptance delivered to and accepted by it and a
register for the recordation of the names and addresses of the Lenders and the
Commitments of, and principal amount of the Loans owing to, each Lender from
time to time (the "Register"). The entries in the Register shall be conclusive
and binding for all purposes, absent manifest error, and the Borrower, the Agent
and the Lenders may treat each Person whose name is recorded in the Register as
a Lender hereunder for all purposes of this Agreement. The Register shall be
available for inspection by the Borrower and each Lender at any reasonable time
and from time to time upon reasonable prior notice.
(c) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an Assignee and counter executed by the
Borrower and the Issuing Lender (if required), together with the Term Note or
Term Notes subject to such assignment and the processing fee referred to in
subsection (a) above, the Agent will (i) accept such Assignment and Acceptance,
(ii) on the effective date thereof, record the information contained therein in
the Register and (iii) give notice thereof to the Borrower and the Lenders.
Within five (5) Business Days after its receipt of such notice, the Borrower, at
its own expense, will execute and deliver to the Agent, in exchange for the
surrendered Term Note or Term Notes, a new Term Note or Term Notes to the order
of the Assignee (and, if the assigning Lender has retained any portion of its
rights and obligations hereunder, to the order of the assigning Lender),
prepared in accordance with the provisions of Section 2.4 as
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necessary to reflect, after giving effect to the assignment, the outstanding
Loans of the Assignee and (to the extent of any retained interests) the
assigning Lender, dated the date of the replaced Term Note or Term Notes and
otherwise in substantially the form of Exhibit A.
The Agent will return cancelled Term Notes to the Borrower.
(d) Each Lender may, without the consent of the Borrower, the Agent or any
other Lender, sell to one or more other Persons (each, a "Participant")
participations in any portion comprising less than all of its rights and
obligations under this Agreement (including, without limitation, a portion of
its Commitments, the outstanding Loans made by it and the Term Note or Term
Notes held by it); provided, however, that (i) such Lender's obligations under
this Agreement shall remain unchanged and such Lender shall remain solely
responsible for the performance of such obligations, (ii) no Lender shall sell
any participation that, when taken together with all other participations, if
any, sold by such Lender, covers all of such Lender's rights and obligations
under this Agreement, (iii) the Borrower, the Agent and the other Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement, and no Lender shall permit
any Participant to have any voting rights or any right to control the vote of
such Lender with respect to any amendment, modification, waiver, consent or
other action hereunder or under any other Loan Document (except as to actions
that would (x) reduce or forgive the principal amount of any Loan, reduce the
rate of or forgive any interest thereon, or reduce or forgive any fees or other
Obligations, (y) extend the Maturity Date or any other date fixed for the
payment of any principal of or interest on any Loan, any fees or any other
Obligations, or (z) increase or extend the Commitment of any Lender), and (iv)
no Participant shall have any rights under this Agreement or any of the other
Loan Documents, each Participant's rights against the granting Lender in respect
of any participation to be those set forth in the participation agreement, and
all amounts payable by the Borrower hereunder shall be determined as if such
Lender had not granted such participation. Notwithstanding the foregoing, each
Participant shall have the rights of a Lender for purposes of Sections 2.16(a),
2.16(b), 2.17, 2.18 and 7.3, and shall be entitled to the benefits thereto, to
the extent that the Lender granting such participation would be entitled to such
benefits if the participation had not been made, provided that no Participant
shall be entitled to receive any greater amount pursuant to any of such Sections
than the Lender granting such participation would have been entitled to receive
in respect of the amount of the participation made by such Lender to such
Participant had such participation not been made.
(e) Nothing in this Agreement shall be construed to prohibit any Lender
from pledging or assigning all or any portion of its rights and interest
hereunder or under any Term Note or any of the other Loan Documents to any
Federal Reserve Bank as security for borrowings therefrom; provided, however,
that no such pledge or assignment shall release a Lender from any of its
obligations hereunder.
(f) Any Lender may, in connection with any assignment or participation or
proposed assignment or participation pursuant to this Section, disclose to the
Assignee or
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Participant or proposed Assignee or Participant any information relating to the
Borrower and its Subsidiaries furnished to it by or on behalf of any other party
hereto, provided that such Assignee or Participant or proposed Assignee or
Participant agrees in writing to keep such information confidential to the same
extent required of the Lenders under Section 9.13.
9.8. No Waiver. The rights and remedies of the Agent and the Lenders
expressly set forth in this Agreement and the other Loan Documents are
cumulative and in addition to, and not exclusive of, all other rights and
remedies available at law, in equity or otherwise. No failure or delay on the
part of the Agent or any Lender in exercising any right, power or privilege
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right, power or privilege preclude any other or further exercise
thereof or the exercise of any other right, power or privilege or be construed
to be a waiver of any Default or Event of Default. No course of dealing between
any of the Borrower and the Agent or the Lenders or their agents or employees
shall be effective to amend, modify or discharge any provision of this Agreement
or any other Loan Document or to constitute a waiver of any Default or Event of
Default. No notice to or demand upon the Borrower in any case shall entitle the
Borrower to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the right of the Agent or any Lender to
exercise any right or remedy or take any other or further action in any
circumstances without notice or demand.
9.9. Successors and Assigns. This Agreement shall be binding upon, inure
to the benefit of and be enforceable by the respective successors and assigns of
the parties hereto, and all references herein to any party shall be deemed to
include its successors and assigns; provided, however, that (i) the Borrower
shall not sell, assign or transfer any of its rights, interests, duties or
obligations under this Agreement or any other Loan Document without the prior
written consent of all of the Lenders and (ii) any Assignees shall have such
rights and obligations with respect to this Agreement and the other Loan
Documents as are provided for under and pursuant to the provisions of Section
9.7.
9.10. Survival. All representations, warranties and agreements made by or
on behalf of the Borrower or any of its Subsidiaries in this Agreement and in
the other Loan Documents shall survive the execution and delivery hereof or
thereof and the making and repayment of the Loans. In addition, notwithstanding
anything herein or under applicable law to the contrary, the provisions of this
Agreement and the other Loan Documents relating to indemnification or payment of
fees, costs and expenses, including, without limitation, the provisions of
Sections 2.16(a), 2.16(b), 2.17, 2.18, 8.7, 9.1 and 9.2, shall survive the
payment in full of all Loans, the termination of the Commitments, and any
termination of this Agreement or any of the other Loan Documents.
9.11. Severability. To the extent any provision of this Agreement is
prohibited by or invalid under the applicable law of any jurisdiction, such
provision shall be ineffective only to the extent of such prohibition or
invalidity and only in such jurisdiction, without prohibiting or invalidating
such provision in any other jurisdiction or the remaining provisions of this
Agreement in any jurisdiction.
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9.12. Construction. The headings of the various articles, sections and
subsections of this Agreement have been inserted for convenience only and shall
not in any way affect the meaning or construction of any of the provisions
hereof. Except as otherwise expressly provided herein and in the other Loan
Documents, in the event of any inconsistency or conflict between any provision
of this Agreement and any provision of any of the other Loan Documents, the
provision of this Agreement shall control.
9.13. Confidentiality. Each Lender agrees to keep confidential, pursuant
to its customary procedures for handling confidential information of a similar
nature and in accordance with safe and sound banking practices, all nonpublic
information provided to it by or on behalf of the Borrower or any of its
Subsidiaries in connection with this Agreement or any other Loan Document;
provided, however, that any Lender may disclose such information (i) to its
directors, employees and agents and to its auditors, counsel and other
professional advisors, (ii) at the demand or request of any bank regulatory
authority, court or other Governmental Authority having or asserting
jurisdiction over such Lender, as may be required pursuant to subpoena or other
legal process, or otherwise in order to comply with any applicable Requirement
of Law, (iii) in connection with any proceeding to enforce its rights hereunder
or under any other Loan Document or any other litigation or proceeding related
hereto or to which it is a party, (iv) to the Agent or any other Lender, (v) to
the extent the same has become publicly available other than as a result of a
breach of this Agreement and (vi) pursuant to and in accordance with the
provisions of Section 9.7(f).
9.14. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto on separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. This Agreement shall
become effective upon the execution of a counterpart hereof by each of the
parties hereto and receipt by the Agent and the Borrower of written or
telephonic notification of such execution and authorization of delivery thereof.
9.15. Entire Agreement. THIS AGREEMENT AND THE OTHER DOCUMENTS AND
INSTRUMENTS EXECUTED AND DELIVERED IN CONNECTION HEREWITH (A) EMBODY THE ENTIRE
AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES HERETO AND THERETO RELATING TO
THE SUBJECT MATTER HEREOF AND THEREOF, (B) SUPERSEDE ANY AND ALL PRIOR
AGREEMENTS AND UNDERSTANDINGS OF SUCH PERSONS, ORAL OR WRITTEN, RELATING TO THE
SUBJECT MATTER HEREOF AND THEREOF, INCLUDING THE COMMITMENT LETTER FROM FIRST
UNION TO THE BORROWER DATED NOVEMBER 14, 1996, BUT SPECIFICALLY EXCLUDING THE
FEE LETTER, AND (C) MAY NOT BE AMENDED, SUPPLEMENTED, CONTRADICTED OR OTHERWISE
MODIFIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF
THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
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FRONT ROYAL, INC.
By:/s/J. Xxxx Xxxxx
------------------------------
J. Xxxx Xxxxx,
Chief Executive Officer
(signatures continued)
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FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, as Agent and as a Lender
Commitment: By:/s/Xxxx X. Xxxxxxxxx
$38,000,000 ------------------------------
Xxxx X. Xxxxxxxxx,
Senior Vice President
Instructions for wire transfers to the Agent:
First Union National Bank of
North Carolina
ABA Routing Xx. 000000000
Xxxxxxxxx, Xxxxx Xxxxxxxx
General Ledger No. 465906, RC No. 5007
Attention: Syndication Agency Services
Re: Front Royal, Inc.
Address for notices (as a Lender):
First Union National Bank of
North Carolina
One First Union Center, 5th Floor
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000-0000
Attention: Xxx X. Xxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Lending Office:
First Union National Bank of
North Carolina
One First Union Center, 5th Floor
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000-0000
Attention: Xxx X. Xxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
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Exhibit A to Credit Agreement
First Union National Bank
of North Carolina, as Agent
Front Royal, Inc.
December 18, 1996 / $38,000,000
_______________________________
Borrower's Taxpayer Identification No.__________
TERM NOTE
$ _________, 199__
Charlotte, North Carolina
FOR VALUE RECEIVED, FRONT ROYAL, INC., a North Carolina corporation (the
"Borrower"), hereby promises to pay to the order of ___________________ (the
"Lender"), at the offices of First Union National Bank of North Carolina (the
"Agent") located at One First Union Center, 301 South College Street, Charlotte,
North Carolina (or at such other place or places as the Agent may designate), at
the times and in the manner provided in the Credit Agreement, dated as of
December 18, 1996 (as amended, modified or supplemented from time to time, the
"Credit Agreement"), among the Borrower, the Lenders from time to time parties
thereto, and First Union National Bank of North Carolina, as Agent, the
principal sum of DOLLARS ($___________________ ), under the terms and conditions
of this promissory note (this "Term Note") and the Credit Agreement. The defined
terms in the Credit Agreement are used herein with the same meaning. The
Borrower also unconditionally promises to pay interest on the aggregate unpaid
principal amount of this Term Note at the rates applicable thereto from time to
time as provided in the Credit Agreement.
This Term Note is one of a series of Term Notes referred to in the Credit
Agreement and is issued to evidence the Loans made by the Lender pursuant to the
Credit Agreement. All of the terms, conditions and covenants of the Credit
Agreement are expressly made a part of this Term Note by reference in the same
manner and with the same effect as if set forth herein at length, and any holder
of this Term Note is entitled to the benefits of and remedies provided in the
Credit Agreement and the other Loan Documents. Reference is made to the Credit
Agreement for provisions relating to the interest rate, maturity, payment,
prepayment and acceleration of this Term Note.
In the event of an acceleration of the maturity of this Term Note, this
Term Note shall become immediately due and payable, without presentment, demand,
protest or notice of any kind, all of which are hereby waived by the Borrower.
In the event this Term Note is not paid when due at any stated or
accelerated maturity, the Borrower agrees to pay, in addition to the principal
and interest, all costs of collection, including reasonable attorneys' fees.
This Term Note shall be governed by and construed in accordance with the
internal laws and judicial decisions of the State of North Carolina. The
Borrower hereby submits to the nonexclusive jurisdiction and venue of the
federal and state courts located in Mecklenburg County, North Carolina, although
the Lender shall not be limited to bringing an action in such courts.
IN WITNESS WHEREOF, the Borrower has caused this Term Note to be executed
under seal by its duly authorized corporate officer as of the date and year
first above written.
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FRONT ROYAL, INC.
By:________________________________
Title:_____________________________
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Exhibit B to Credit Agreement First
Union National Bank of North
Carolina, as Agent
Front Royal, Inc.
December 18, 1996/ $38,000,000
______________________________
EXCESS CASH FLOW CERTIFICATE
THIS CERTIFICATE is given pursuant to Section 2.6(f) of the Credit
Agreement, dated as of December 18, 1996 (as amended, modified or supplemented
from time to time, the "Credit Agreement"), among FRONT ROYAL, INC. (the
"Borrower"), certain banks and other financial institutions from time to time
parties thereto (the "Lenders"), and FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, as agent to the Lenders (in such capacity, the "Agent").
The undersigned hereby certifies that:
1. He is the duly elected Chief Financial Officer of the Borrower.
2. Attached to this Certificate as Attachment A is a worksheet
reflecting the computation of the Borrower's Excess Cash Flow for the
fiscal year ended December 31, ____ and the amount required to be prepaid
in respect of the Loans pursuant to Section 2.6(f) of the Credit
Agreement.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Certificate as of the ____ day of ____, ____.
FRONT ROYAL, INC.
By:___________________________
Title: Chief Financial Officer
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ATTACHMENT A
EXCESS CASH FLOW WORKSHEET
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(1) Borrower cash receipts for the fiscal year ended December 31,__:
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(a) Available Dividend Amount of the Insurance Subsidiaries $
-----
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(b) Combined Net Cash Flow of Non-Insurance Subsidiaries
(other then CMS)1
$
-----
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(c) All tax refunds received. $
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(d) Other monies received2 $
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(e) Total gross cash receipts:
Add Lines (1)(a), (b), (c) and (d)
$
-----
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(2) Borrower cash expenditures for such period:
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(a) Debt Service $
-----
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(b) Net Overhead $
-----
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(c) Tax Payments $
-----
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(d) Total Cash expenditures: $
Add Lines 2(a), (b) and (c) -----
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(3) Total Excess Cash Flow:
Subtract Line (2)(d) from Line 1(e) $
=====
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(4) Percentage of Excess Cash Flow required to be paid pursuant to
Section 2.6(f) 35%
-----
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(5) Amount of excess Cash Flow prepayment:
Multiply Lines 3 and 4 $
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1 If negative, cannot exceed $(250,000).
2 Other than items already included and other than Excluded Items.
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Exhibit C to Credit Agreement First
Union National Bank of North
Carolina, as Agent
Front Royal, Inc.
December 18, 1996 $38,000,000
_____________________________
NOTICE OF CONVERSION/CONTINUATION
[Date]
First Union National Bank of
North Carolina, as Agent
Xxx Xxxxx Xxxxx Xxxxxx, XX-00
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000-0000
Attention: Syndication Agency Services
Ladies and Gentlemen:
The undersigned, Front Royal, Inc. (the "Borrower"), refers to the Credit
Agreement, dated as of December 18, 1996, (as amended, modified or supplemented
from time to time, the "Credit Agreement") among the Borrower, certain banks and
other financial institutions from time to time parties thereto (the "Lenders"),
and you, as agent for the Lenders (in such capacity, the "Agent"), and, pursuant
to Section 2.11(b) of the Credit Agreement, hereby gives you, as Agent,
irrevocable notice that the Borrower requests a [conversion] [continuation]1 of
Loans under the Credit Agreement, and to that end sets forth below the
information relating to such [conversion] [continuation] (the "Proposed
[Conversion] [Continuation]") as required by Section 2.11(b) of the Credit
Agreement:
(i) The Proposed [Conversion] [Continuation] is requested to be made on
______.2
(ii) The Proposed [Conversion] [Continuation] involves $_________ 3 in
aggregate principal amount of Loans, which Loans are presently
maintained as [Base Rate] [LIBOR] Loans and are proposed hereby to
be [converted into Base Rate Loans] [converted into LIBOR Loans]
[continued as LIBOR Loans].4
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1 Insert "conversion" or "continuation" throughout the notice, as
applicable.
2 Shall be a Business Day at least one Business Day after the date hereof
(in the case of any conversion of LIBOR Loans into Base Rate Loans) or at
least three Business Days after the date hereof (in the case of any
conversion of Base Rate Loans into, or continuation of, LIBOR Loans), and
additionally, in the case of any conversion of LIBOR Loans into Base Rate
Loans, or continuation of LIBOR Loans, shall be the last day of the
Interest Period applicable to such LIBOR Loans.
3 Shall be an amount not less than $1,000,000 or, if greater, an integral
multiple of $125,000 in excess thereof (in the case of any conversion of
LIBOR Loans into Base Rate Loans) or $2,000,000 or, if greater, an
integral multiple of $125,000 in excess thereof (in the case of any
conversion of Base Rate Loans into, or continuation of, LIBOR Loans).
4 Complete with the applicable bracketed language.
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[(iii) The initial Interest Period for the Loans being [converted into]
[continued as] LIBOR Loans pursuant to the Proposed
[Conversion][Continuation]shall be [one/two/three/six months].]5
The Borrower hereby certifies that the following statement is true both on
and as of the date hereof and on and as of the effective date of the Proposed
[Conversion] [Continuation]: no Default or Event of Default has or will have
occurred and is continuing or would result from the Proposed [Conversion]
[Continuation].
Very truly yours,
FRONT ROYAL, INC.
By:______________
Title:___________
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5 include this clause in the case of a proposed Conversion or Continuation
involving a conversion of Base Rate Loans into, or continuation of, LIBOR
Loans, and select the applicable Interest Period.
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Exhibit D to Credit Agreement First
Union National Bank of North
Carolina, as Agent
Front Royal, Inc.
December 18, 1996 /$38,000,000
______________________________
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT, dated as of the ____ day of December,
1996 (this "Agreement"), is made by FRONT ROYAL, INC., a North Carolina
corporation (the "Pledgor"), in favor of FIRST UNION NATIONAL BANK OF NORTH
CAROLINA ("First Union"), as agent (in such capacity, the "Agent") for the
Lenders (as hereinafter defined) under the Credit Agreement referred to below,
for the benefit of the Agent and the Lenders (collectively, the "Secured
Parties"). Capitalized terms used herein and not defined elsewhere herein shall
have the meanings given to them in the Credit Agreement referred to below.
RECITALS
A. The Pledgor, certain banks and other financial institutions (the
"Lenders") and the Agent are parties to a Credit Agreement, dated as of December
18, 1996 (as amended, modified, supplemented or restated from time to time, the
"Credit Agreement"), pursuant to which the Lenders have agreed to make Loans to
the Pledgor upon the terms and conditions set forth therein.
B. The Pledgor and the Agent have, as of the date hereof, entered into the
Escrow Agreement and established the Cash Collateral Account (as defined in the
Escrow Agreement) as security for the Obligations of the Pledgor.
C. It is a condition to the making of the Loans to the Pledgor under the
Credit Agreement that the Pledgor shall have agreed, by executing and delivering
this Agreement, to secure the payment in full of the Obligations.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, to induce the Agent and the Lenders to enter into the Credit
Agreement and to induce the Lenders to make the Loans to the Pledgor thereunder,
the Pledgor hereby agrees as follows:
1. Pledge. The Pledgor hereby pledges and assigns to the Agent, for the
ratable benefit of the Secured Parties, and grants to the Agent, for the ratable
benefit of the Secured Parties, a security interest in, all of the Pledgor's
right, title and interest in and to the following property (collectively, the
"Collateral"):
(i) all of the issued and outstanding shares of capital stock of the
direct Subsidiaries of the Pledgor identified in Part I of Annex A, and
all additional shares of, all warrants, options and other rights to
acquire, and all securities convertible into, capital stock of the direct
Subsidiaries (whether now or hereafter existing) of the Pledgor at any
time owned by the Pledgor, including any securities described in clause
(iii) below, together with all certificates, instruments and entries upon
the books of financial intermediaries at any time evidencing any of the
foregoing (collectively, the "Pledged Stock");
(ii) all promissory notes and debentures of the Subsidiaries of the
Pledgor identified in Part II of Annex A, and all additional promissory
notes and debentures (including any surplus notes and debentures) and
similar instruments at any time issued to the Pledgor by any of its
Subsidiaries or other Affiliates, together with all amendments,
modifications and supplements to, restatements, extensions and renewals
of,
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substitutions for, and documents and instruments at any time evidencing,
any of the foregoing (collectively, the "Pledged Notes"; and the Pledged
Notes, together with the Pledged Stock, the "Pledged Investments");
(iii) subject to the provisions of Section 7, and as described more
fully therein, all interest, dividends, distributions and other amounts,
and all additional stock, warrants, options, securities and other
property, paid or payable or distributed or distributable in respect of
any Pledged Investments;
(iv) the Escrow Agreement and the funds, investments and securities
maintained and held from time to time in the Cash Collateral Account
established thereunder; and
(v) all proceeds of any of the foregoing. For purposes of this
Agreement, the term "proceeds" shall mean and include all cash, securities
and other property of any nature received or receivable upon the sale,
exchange or other disposition of or realization upon any Collateral,
together with all distributions in respect of any Collateral, including
pursuant to any liquidation, reorganization or similar proceeding with
respect to the Pledgor or any issuer of or obligor on any Collateral.
2. Security for Obligations. This Agreement and the Collateral secure the
full and prompt payment, at any time and from time to time as and when due
(whether at the stated maturity, by acceleration or otherwise), of all
Obligations of the Pledgor, including, without limitation, all principal of and
interest on the Loans and all fees, expenses, indemnities and other amounts
payable by the Pledgor hereunder, under the Credit Agreement or under any other
Loan Document (including interest accruing after the filing of a petition or
commencement of a case by or with respect to the Pledgor seeking relief under
any bankruptcy or insolvency laws, whether or not the claim for such interest is
allowed in such proceeding), and all Obligations that, but for the operation of
the automatic stay under Section 362(a) of the Bankruptcy Code, would become
due, in each case whether now existing or hereafter created or arising and
whether direct or indirect, absolute or contingent, due or to become due.
3. Delivery of Collateral. All certificates or instruments representing or
evidencing any Collateral shall be delivered to the Agent and held by the Agent
on behalf of the Secured Parties pursuant hereto, shall be in form suitable for
transfer by delivery and shall be delivered together with the endorsement of the
Pledgor (in the case of Pledged Notes), undated stock powers (in the case of
Pledged Stock) or other necessary instruments of transfer or assignment, duly
executed in blank and in form and substance satisfactory to the Agent.
4. Representations and Warranties. The Pledgor represents and warrants as
follows:
(a) As of the date hereof, and after giving effect to the
Acquisition, (i) Part I of Annex A contains a true and complete listing of
all direct Subsidiaries of the Pledgor, (ii) the Pledged Stock consists of
the number and type of shares of the capital stock of the direct
Subsidiaries of the Pledgor as described in Part I of Annex A and, as to
each such Subsidiary, constitutes 100% of the issued and outstanding
capital stock of such Subsidiary, and (iii) the Pledged Notes consist of
the promissory notes described in Part II of Annex A.
(b) As to any Pledged Investments required to be pledged at any time
after the date hereof, as of the date so pledged, (i) the Pledged Stock
shall consist of the number and type of shares of the capital stock of the
direct Subsidiaries of the Pledgor as described in Part I of Annex A to
the relevant Pledge Amendment (as hereinafter defined) and, as to each
such Subsidiary, shall, together with all other Pledged Stock of such
Subsidiary, constitute 100% of the issued and outstanding capital stock
and other equity securities of such Subsidiary, and (ii) the Pledged Notes
shall consist of the promissory notes described in Part II of such Annex
A.
(c) The Pledgor is, or at the time when pledged hereunder will be,
the sole legal, record and beneficial owner of, and has, or at the time
pledged hereunder will have, good and marketable title to, all Pledged
Investments pledged hereunder, free and clear of any Lien whatsoever other
than the security interest created by this Agreement (other than the Liens
in favor of First Union with respect to Existing Senior Debt).
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(d) All shares of Pledged Stock are, or at the time when pledged
hereunder will be, duly and validly issued, fully paid and nonassessable
and not subject to any preemptive rights, warrants, options or similar
rights or restrictions in favor of third parties or any contractual or
other restrictions upon transfer, whether pursuant to any shareholders'
agreement or otherwise.
(e) Each of the Pledged Notes has been, or at the time when pledged
hereunder will have been, duly authorized, issued, executed and delivered
and to the knowledge of the Pledgor is, or at the time when pledged
hereunder will be, the legal, valid and binding obligation of the issuer
thereof, enforceable in accordance with its terms.
(f) No consent, approval, authorization, exemption or other action
by, notice to, or filing with, any Governmental Authority is required in
connection with the due execution, delivery and performance by the Pledgor
of this Agreement, the pledge of the Collateral hereunder or the exercise
by the Agent of the voting or other rights and remedies in respect of the
Collateral provided for herein, except for (i) the financing statements
described in subsection (g) below, (ii) such filings and approvals as have
been made or obtained as required in accordance with the Credit Agreement,
(iii) with respect to the exercise by the Agent of its rights and remedies
hereunder, such approvals and consents of Departments or other
Governmental Authorities as may be required after the date hereof in any
particular instance, and (iv) such approvals and consents as may be
required in connection with a disposition of any Collateral by laws
affecting the offering and sale of securities generally.
(g) Assuming (i) in the case of Pledged Investments evidenced by
certificates or instruments, continuous possession by the Agent of such
certificates and instruments, (ii) the possession by the Escrow Agent, for
the benefit of the Secured Parties, of the funds and certificated
investments and securities maintained and held from time to time in, and
the registration by the issuer of the Agent as pledgee of any
uncertificated securities constituting part of, the Cash Collateral
Account, all in accordance with the terms of the Escrow Agreement, and
(iii) in the case of all other Collateral, proper filing of appropriately
completed financing statements in all filing locations required for the
perfection of a security interest therein under the applicable Uniform
Commercial Code, the pledge of the Collateral pursuant to this Agreement
is effective to create in favor of the Agent a valid and perfected first
priority security interest in and Lien upon the Collateral, securing the
payment and performance of the Obligations.
5. Additional Investments. (a) The Pledgor will cause the Pledged Stock to
constitute at all times 100% of the capital stock and other equity securities of
each of its direct Subsidiaries then outstanding, and will not cause or permit
any of its direct Subsidiaries to issue or sell any new shares of its capital
stock or any warrants, options or rights to acquire its capital stock to any
Person other than the Pledgor.
(b) If the Pledgor shall, at any time and from time to time after the date
hereof, acquire any additional Pledged Investments or certificates or
instruments representing or evidencing the same, whether from Subsidiaries
existing as of the date hereof or created or acquired hereafter, the Pledgor
will forthwith pledge and deposit such Pledged Investments with the Agent and
deliver to the Agent any certificates or instruments therefor, together with the
endorsement of the Pledgor (in the case of Pledged Notes), undated stock powers
(in the case of Pledged Stock) or other necessary instruments of transfer or
assignment, duly executed in blank and in form and substance satisfactory to the
Agent, and will promptly thereafter deliver to the Agent a fully completed and
duly executed amendment to this Agreement in the form of Exhibit A (each, a
"Pledge Amendment") in respect of such additional Pledged Investments. The
Pledgor hereby authorizes the Agent to attach each Pledge Amendment to this
Agreement, and agrees that all such Pledged Investments listed on any Pledge
Amendment shall for all purposes be deemed Pledged Investments hereunder and
shall be subject to the provisions hereof; provided that the failure of the
Pledgor to execute and deliver any Pledge Amendment with respect to any such
additional Pledged Investments as required hereinabove shall not impair the
security interest of the Agent in such Pledged Investments or otherwise
adversely affect the rights and remedies of the Agent hereunder with respect
thereto.
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(c) Notwithstanding anything to the contrary contained herein, if any
Pledged Investments (whether now owned or hereafter acquired) are
"uncertificated securities" within the meaning of the applicable Uniform
Commercial Code or are otherwise not evidenced by any stock certificate or
similar certificate or instrument, the Pledgor will promptly notify the Agent
thereof and will promptly take and cause to be taken all actions required under
applicable law, including, as applicable, under Article 8 or 9 of the applicable
Uniform Commercial Code, to perfect the security interest of the Agent therein.
6. Voting Rights. So long as no Event of Default shall have occurred and
be continuing, the Pledgor shall be entitled to exercise all voting and other
consensual rights pertaining to the Pledged Investments (subject to its
obligations under Section 5(b)), and for that purpose the Agent will execute and
deliver or cause to be executed and delivered to the Pledgor all such proxies
and other instruments as the Pledgor may reasonably request in writing to enable
the Pledgor to exercise such voting and other consensual rights; provided,
however, that the Pledgor will not cast any vote, give any consent, waiver or
ratification, or take or fail to take any action, in any manner that would, or
could reasonably be expected to, violate or be inconsistent with any of the
terms of this Agreement, the Credit Agreement or any other Loan Document, or
have the effect of impairing the position or interests of the Agent or any
Lender.
7. Dividends and Other Distributions. So long as no Event of Default shall
have occurred and be continuing (or would occur as a result thereof), and except
as provided otherwise herein, all interest, dividends, distributions and other
amounts payable in cash in respect of the Pledged Investments may be paid to and
retained by the Pledgor; provided, however, that all such interest, dividends,
distributions and other amounts shall, at all times after the occurrence and
during the continuance of an Event of Default, be paid to the Agent and retained
by it as part of the Collateral (except to the extent applied upon receipt to
the repayment of the Obligations). The Agent shall also be entitled at all times
(whether or not during the continuance of an Event of Default) to receive, and
to retain as part of the Collateral, all interest, dividends, distributions or
other amounts paid or payable in cash or other property in respect of any
Pledged Investments in connection with the dissolution, liquidation,
recapitalization or reclassification of the capital of any Subsidiary of the
Pledgor to the extent representing an extraordinary, liquidating or other
distribution in return of capital, and all additional stock, warrants, options
or other securities or property (including cash, unless applied upon receipt to
the repayment of the Obligations) paid or payable or distributed or
distributable in respect of any Pledged Investments in connection with any
noncash dividend, stock split, spin-off, split-up, reclassification, combination
of shares or similar rearrangement, or (without affecting any restrictions
against such actions contained in the Credit Agreement) any consolidation,
merger, exchange of stock, liquidation or other reorganization; provided,
however, that the payment of dividends, distributions or other amounts, to the
extent expressly provided for in the Credit Agreement and made in such manner,
shall not be limited hereby. All interest, dividends, distributions or other
amounts that are received by the Pledgor in violation of the provisions of this
Section shall be received in trust for the benefit of the Agent, shall be
segregated from other property or funds of the Pledgor and shall be forthwith
delivered to the Agent as Collateral in the same form as so received (with any
necessary endorsements).
8. Remedies. (a) If an Event of Default shall have occurred and be
continuing, subject to the limitations under applicable law, the Agent may:
(i) notify the parties obligated on any of the Collateral to make
payment to the Agent of any amount due or to become due thereunder and
receive all such amounts;
(ii) transfer to or register in its name or the name of any of its
agents or nominees all or any part of the Collateral, without notice to
the Pledgor and with or without disclosing that such Collateral is subject
to the security interest created hereunder;
(iii) accelerate any Pledged Note that may be accelerated in
accordance with its terms, and take any other lawful action to collect
upon any Pledged Note; and
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(iv) exercise all voting, consensual and other rights and powers
pertaining to the Pledged Investments (whether or not transferred into the
name of the Agent), and for that purpose the Pledgor will promptly execute
and deliver or cause to be executed and delivered to the Agent, upon
request, all such proxies and other instruments as the Agent may
reasonably request to enable the Agent to exercise such rights and powers;
AND IN FURTHERANCE OF THE FOREGOING AND WITHOUT LIMITATION THEREOF BUT
SUBJECT TO APPLICABLE LAW, THE PLEDGOR HEREBY IRREVOCABLY CONSTITUTES AND
APPOINTS THE AGENT AS THE TRUE AND LAWFUL PROXY AND ATTORNEY-IN-FACT OF
THE PLEDGOR, WITH FULL POWER OF SUBSTITUTION IN THE PREMISES, TO EXERCISE,
AFTER THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT,
ALL SUCH VOTING, CONSENSUAL AND OTHER RIGHTS AND POWERS TO WHICH ANY
HOLDER OF THE PLEDGED INVESTMENTS WOULD BE ENTITLED BY VIRTUE OF HOLDING
THE SAME, WHICH PROXY AND POWER OF ATTORNEY, BEING COUPLED WITH AN
INTEREST, ARE IRREVOCABLE, SHALL COMMENCE ON THE DATE HEREOF AND SHALL
REMAIN IN EFFECT FOR SO LONG AS THIS AGREEMENT SHALL BE IN EFFECT; and
(v) exercise in respect of the Collateral, in addition to all other
rights and remedies provided for herein (including, without limitation,
under clauses (i) through (iv) above and Sections 12(b) and (d)) or
otherwise available to it (whether under any other Loan Document, by law,
in equity or otherwise), all rights and remedies of a secured party under
the Uniform Commercial Code as in effect in each relevant jurisdiction,
and may sell, resell, assign and deliver, in its sole discretion, all or
any of the Collateral, in one or more parcels, on any securities exchange
on which the Pledged Securities may be listed, or at public or private
sale, for cash, upon credit or for future delivery, at such time or times
and at such price or prices and upon such other terms as the Agent may
deem satisfactory. If any of the Collateral is sold by the Agent upon
credit or for future delivery, the Agent shall not be liable for the
failure of the purchaser to purchase or pay for the same and, in the event
of any such failure, the Agent may resell such Collateral. In no event
shall the Pledgor be credited with any part of the proceeds of sale of any
Collateral until and to the extent cash payment in respect thereof has
actually been received by the Agent. Each purchaser at any such sale shall
hold the property sold absolutely, free from any claim or right of
whatsoever kind, including any equity or right of redemption of the
Pledgor, and, to the greatest extent permitted by applicable law, the
Pledgor hereby expressly waives all rights of redemption, stay (other than
the automatic stay under Section 362 of the Bankruptcy Code) or appraisal
that it has or may have under any rule of law or statute now existing or
hereafter adopted. No demand, advertisement or notice, all of which are
hereby expressly waived by the Pledgor to the greatest extent permitted by
applicable law, shall be required in connection with any sale or other
disposition of any part of the Collateral that threatens to decline
speedily in value or that is of a type customarily sold in a recognized
market; otherwise, the Agent shall give the Pledgor at least ten (10)
days' prior notice of the time and place of any public sale and of the
time after which any private sale or other disposition is to be made,
which notice the Pledgor agrees is commercially reasonable, the Pledgor
hereby expressly waiving all other demands, advertisements and notices.
The Agent shall not be obligated to make any sale of Collateral if it
shall determine not to do so, regardless of the fact that notice of sale
may have been given. The Agent may, without notice or publication, adjourn
any public or private sale or cause the same to be adjourned from time to
time by announcement at the time and place fixed for sale, and such sale
may, without further notice, be made at the time and place to which the
same was so adjourned. The Agent shall promptly notify the Assignor (in
advance if reasonably possible) of the adjournment of any public or
private sale; provided, however, that the failure of the Agent to provide
the Assignor with any such notice shall neither affect any obligations of
the Assignor hereunder or under any of the Loan Documents nor result in
any liability of the Agent to the Assignor or any Lender. Upon each
private sale of Collateral of a type customarily sold in a recognized
market and upon each public sale, the Agent may purchase all or any of the
Collateral being sold, free from any equity, right of redemption or other
claim or demand, and may make payment therefor by endorsement and
application (without recourse) of the Obligations in lieu of cash as a
credit on account of the purchase price for such Collateral.
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(b) If the Agent determines to exercise its rights to sell any Collateral,
subject to the limitations under applicable law, the Pledgor will, and will
cause each of its Subsidiaries to, furnish promptly to the Agent all such
information as the Agent may reasonably request in order to determine the number
of shares and other instruments comprising such Collateral that may be sold in
transactions exempt under the Securities Act of 1933, as amended from time to
time, and the rules and regulations promulgated thereunder (the "Securities
Act"), and applicable state securities laws as in effect from time to time.
9. Private Sale. The Pledgor recognizes that, by reason of certain
prohibitions contained in the Securities Act and applicable state securities
laws as in effect from time to time, the Agent may be compelled, with respect to
any sale of all or any part of the Collateral conducted without registration or
qualification under the Securities Act and such state securities laws, to limit
purchasers to any one or more Persons who will represent and agree, among other
things, to acquire such Collateral for their own account, for investment and not
with a view to the distribution or resale thereof. The Pledgor acknowledges that
any such private sales may be made in such manner and under such circumstances
as the Agent may deem necessary or advisable in its sole and absolute
discretion, including at prices and on terms less favorable than those
obtainable through a public sale without such restrictions (including, without
limitation, a public offering made pursuant to a registration statement under
the Securities Act), and, notwithstanding such circumstances, agrees that any
such private sale shall be deemed to have been made in a commercially reasonable
manner and agrees that the Agent shall have no obligation to conduct any public
sales and no obligation to delay the sale of any Collateral for the period of
time necessary to permit its registration for public sale under the Securities
Act and applicable state securities laws, and shall not have any responsibility
or liability as a result of its election so not to conduct any such public sales
or delay the sale of any Collateral, notwithstanding the possibility that a
substantially higher price might be realized if the sale were deferred until
after such registration. The Pledgor hereby waives any claims against the Agent
or any Lender arising by reason of the fact that the price at which any
Collateral may have been sold at any private sale was less than the price that
might have been obtained at a public sale or was less than the aggregate amount
of the Obligations, even if the Agent accepts the first offer received and does
not offer the Collateral to more than one offeree.
10. Indemnity and Expenses. The Pledgor agrees:
(a) To indemnify and hold harmless the Agent and each Lender from
and against any and all claims, demands, losses, judgments and liabilities
in any way arising out of or in connection with this Agreement and the
transactions contemplated hereby, except to the extent the same shall
arise as a result of the gross negligence or willful misconduct of the
Agent or such Lender as finally determined by a court of competent
jurisdiction and not subject to any further appeal or pursuant to
arbitration as provided in Section 9.4 of the Credit Agreement; and
(b) To pay and reimburse the Agent upon demand for all reasonable
costs and expenses (including, without limitation, reasonable attorneys'
fees and expenses) that the Agent may incur in connection with (i) the
administration of this Agreement, (ii) the custody, use or preservation
of, or the sale of, collection from or other realization upon, any of the
Collateral, (iii) the exercise or enforcement of any rights or remedies
granted hereunder (including, without limitation, under Sections 12(b) and
(d)) or under the other Loan Documents, or otherwise available to it
(whether at law, in equity or otherwise), or (iv) the failure by the
Pledgor to perform or observe any of the provisions hereof.
11. Application of Proceeds. (a) All proceeds collected by the Agent upon
any sale, other disposition of or realization upon any of the Collateral,
together with all other moneys received by the Agent hereunder, shall be applied
as follows:
(i) first, to the payment of all costs and expenses of such sale,
disposition or other realization, including the reasonable costs and
expenses of the Agent and the reasonable fees and expenses of its agents
and counsel, all amounts advanced by the Agent for the account of the
Pledgor, and all other amounts payable under Section 10;
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(ii) second, after payment in full of the amounts specified in
clause (i) above, to the ratable payment of all other Obligations owing to
the Secured Parties, in such order and manner as the Agent may elect; and
(iii) third, after payment in full of the amounts specified in
clauses (i) and (ii) above, and following the termination of this
Agreement, to the Pledgor or any other Person lawfully entitled to receive
such surplus.
(b) The Pledgor shall remain liable to the extent of any deficiency
between the amount of all proceeds of the Collateral and the aggregate amount of
the sums referred to in clauses (i) and (ii) of subsection (a) above.
12. Further Assurances, etc, (a) The Pledgor agrees that it will, at any
time and from time to time and at its own expense, file and maintain in effect
under each applicable Uniform Commercial Code such financing statements,
continuation statements and other documents and instruments as the Agent may
reasonably deem necessary or advisable in order to perfect and preserve the
Agent's security interest in the Collateral granted or purported to be granted
hereby, and agrees to do such further acts and things and to execute and deliver
to the Agent such additional conveyances, assignments, proxies, agreements and
instruments as the Agent may reasonably deem necessary or advisable to carry out
the purposes of this Agreement or to further assure and confirm unto the Agent
its rights, powers and remedies hereunder, including, without limitation, to use
its best efforts to obtain any approvals and consents of Governmental
Authorities that may be necessary in order to permit the Agent to exercise any
of its rights and remedies hereunder.
(b) The Pledgor hereby irrevocably appoints the Agent its lawful
attorney-in-fact, with full authority in the place and stead of the Pledgor and
in the name of the Pledgor, the Agent or otherwise, and with full power of
substitution in the premises (which power of attorney, being coupled with an
interest, is irrevocable for so long as this Agreement shall be in effect), from
time to time in the Agent's reasonable discretion to take any action and to
execute any instruments that the Agent may deem necessary or advisable to
accomplish the purpose of this Agreement, including, without limitation:
(i) to sign the name of the Pledgor on any financing statement,
notice or other similar document that, in the Agent's opinion, should be
made or filed in order to perfect or continue perfected the security
interest granted under this Agreement;
(ii) after the occurrence and during the continuance of an Event of
Default, to ask, demand, collect, xxx for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(iii) after the occurrence and during the continuance of an Event of
Default, to receive, endorse and collect any checks, drafts, instruments
and other orders for the payment of money made payable to the Pledgor
representing any interest, dividend, distribution or other amount payable
in respect of any of the Collateral and to give full discharge for the
same; and
(iv) after the occurrence and during the continuance of an Event of
Default, to file any claims or take any action or institute any
proceedings that the Agent may deem necessary or advisable for the
collection of any of the Collateral or otherwise to enforce the rights of
the Agent with respect to any of the Collateral.
(c) The Pledgor agrees that it will warrant and defend the right, title
and interest of the Secured Parties in and to the Collateral against the claims
and demands of all other Persons.
(d) If the Pledgor fails to perform any covenant or agreement contained in
this Agreement after written request to do so by the Agent (provided that no
such request shall be necessary at any time after the occurrence and during the
continuance of an Event of Default), the Agent may itself perform, or cause the
performance of, such
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covenant or agreement and may take any other action that it deems necessary and
appropriate for the maintenance and preservation of the Collateral or its
security interest therein, and the reasonable expenses so incurred in connection
therewith shall be payable by the Pledgor under Section 10.
13. Reasonable Care. The obligations of the Agent as holder of Collateral
and interests therein and with respect to the disposition thereof, and otherwise
under this Agreement and the other Loan Documents, are only those expressly set
forth in this Agreement and the other Loan Documents. The powers conferred on
the Agent hereunder are solely to protect the Agent's interest, on behalf of the
Secured Parties, in the Collateral and shall not impose any duty upon it to
exercise any such powers. Except for treatment of the Collateral in its
possession in a manner substantially equivalent to that which the Agent, in its
individual capacity, accords its own property of a similar nature, and the
accounting for moneys actually received by it hereunder, the Agent shall have no
duty as to any Collateral or as to the taking of any necessary steps to preserve
rights against prior parties or any other rights pertaining to the Collateral.
Neither the Agent nor any Lender, nor any of their respective officers,
directors, employees or agents, shall be liable for any action taken or omitted
to be taken by it or them hereunder or in connection herewith, except to the
extent arising out of its or their own gross negligence or willful misconduct.
14. Certain Actions. The Pledgor will not (i) sell or otherwise dispose
of, grant any options, warrants or other rights with respect to, or mortgage,
pledge, grant any Lien with respect to or otherwise encumber, any Collateral or
any interest therein, except for the security interest created by this
Agreement, (ii) amend, modify, supplement or waive any provision of any Pledged
Note, or compromise, release or extend the time for payment of any obligation of
the maker thereunder, in a manner that would, or could reasonably be expected
to, have the effect of impairing the position or interests of the Agent or any
Lender, (iii) invoke or assert the benefit of any rule of law or statute now or
hereafter in effect, including, without limitation, any right to prior notice or
judicial hearing or marshalling of assets in connection with the Agent's
possession, custody or disposition of any Collateral and any appraisal,
valuation, stay (other than the automatic stay under Section 362 of the
Bankruptcy Code), extension, moratorium or redemption law, or take or fail to
take any other action, that would, or could reasonably be expected to, have the
effect of delaying, impeding or preventing the exercise of any rights and
remedies in respect of any Collateral, the absolute sale of any Collateral or
the possession thereof by any purchaser at any sale thereof, and the Pledgor
hereby waives the benefit of all such laws, or (iv) agree to do or cause to be
done any of the foregoing; provided, however, that the foregoing shall not limit
the Pledgor's ability to take those actions expressly permitted in Section 6.8
of the Credit Agreement.
15. Security Interest Absolute. The Pledgor agrees that its obligations,
and the security interest granted to and all rights of the Agent, hereunder are
irrevocable, absolute and unconditional and shall not be discharged, limited or
otherwise affected by reason of any of the following, whether or not the Pledgor
has notice or knowledge thereof:
(i) any change in the time, manner or place of payment of, or in any
other term of, any Obligations, or any amendment, modification or
supplement to, restatement of, or consent to any rescission or waiver of
or departure from, any provisions of the Credit Agreement, any other Loan
Document or any agreement or instrument delivered pursuant thereto;
(ii) the invalidity or unenforceability of any particular
Obligations or any provisions of the Credit Agreement, any other Loan
Document or any agreement or instrument delivered pursuant thereto;
(iii) the obtaining of any guaranty or other liability in respect of
any Obligations; any sale, exchange, release, substitution, compromise,
nonperfection or other action or inaction in respect of any Collateral or
other collateral pledged as direct or indirect security for any
Obligations (including the taking of a security interest in any property
as security for the Obligations or for any guaranty or other liability in
respect thereof); or any discharge, modification, settlement, compromise,
extension or other action or inaction in respect of any guaranty or other
direct or indirect liability for any Obligations;
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(iv) the proceeding against or resorting to the Collateral for
payment on any Obligations, whether or not the Agent shall have proceeded
against or resorted to any other collateral pledged as direct or indirect
security for any Obligations or shall have proceeded against any other
Person primarily or secondarily liable with respect to the Obligations; or
(v) any other circumstance that might otherwise constitute a legal
or equitable discharge of, or a defense, set-off or counterclaim available
to, the Pledgor, other than the indefeasible payment in full of the
Obligations.
16. No Waiver. The rights and remedies of the Secured Parties expressly
set forth in this Agreement and the other Loan Documents are cumulative and in
addition to, and not exclusive of, all other rights and remedies available at
law, in equity or otherwise. No delay or failure to take action on the part of
any Secured Party in exercising any right, power or privilege shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or privilege preclude other or further exercise thereof or the exercise of
any other right, power or privilege or be construed to be a waiver of any
Default or Event of Default. No course of dealing between the Pledgor and the
Secured Parties or their agents or employees shall be effective to change,
modify or discharge any provision of this Agreement or any other Loan Document
or to constitute a waiver of any Default or Event of Default. No notice to or
demand upon the Pledgor in any case shall entitle the Pledgor to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the right of any Secured Party to exercise any right or remedy or take
any other or further action in any circumstances without notice or demand.
17. Amendments, Waivers, etc. No amendment, modification, waiver,
discharge or termination of, or consent to any departure by the Pledgor from,
any provision of this Agreement, shall be effective unless in a writing signed
by the Agent and executed and delivered in accordance with Section 9.6 of the
Credit Agreement, and then the same shall be effective only in the specific
instance and for the specific purpose for which given.
18. Continuing Security Interest; Term; Successors and Assigns;
Assignment; Termination; Survival. This Agreement shall create a continuing
security interest in the Collateral and shall secure the payment and performance
of all of the Obligations as the same may arise and be outstanding at any time
and from time to time from and after the date hereof, and shall (i) remain in
full force and effect until the indefeasible payment in full of the Obligations,
(ii) be binding upon and enforceable against the Pledgor and its successors and
assigns (provided, however, that the Pledgor may not sell, assign or transfer
any of its rights, interests, duties or obligations hereunder without the prior
written consent of the Lenders) and (iii) inure to the benefit of and be
enforceable by each Secured Party and its successors and assigns. Upon the
indefeasible payment in full of the Obligations, this Agreement shall terminate,
and the Agent, at the request and expense of the Pledgor, will execute and
deliver to the Pledgor such documents and instruments evidencing such
termination as the Pledgor may reasonably request and will assign, transfer and
deliver to the Pledgor, without recourse and without representation or warranty
(other than that the Collateral is free and clear of Liens incurred by the Agent
or Lenders), such of the Collateral as may then be in the possession of the
Agent together with any moneys then held by the Agent hereunder. All
representations, warranties, covenants and agreements herein shall survive the
execution and delivery of this Agreement and any Pledge Amendment.
19. Notices. All notices and other communications provided for hereunder
shall be given to the parties in the manner, at the addresses and subject to the
other notice provisions set forth in the Credit Agreement.
20. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of North Carolina (without
regard to the conflicts of law provisions thereof).
21. Severability. To the extent any provision of this Agreement is
prohibited by or invalid under the applicable law of any jurisdiction, such
provision shall be ineffective only to the extent of such prohibition or
invalidity and only in any such jurisdiction, without prohibiting or
invalidating such provision in any other jurisdiction or the remaining
provisions of this Agreement in any jurisdiction.
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22. Construction. The headings of the various sections and subsections of
this Agreement have been inserted for convenience only and shall not in any way
affect the meaning or construction of any of the provisions hereof. Unless the
context otherwise requires, words in the singular include the plural and words
in the plural include the singular. For purposes of this Agreement, in addition
to the terms defined elsewhere herein, all terms used herein without definition
shall have the meanings accorded to them by the Uniform Commercial Code to the
extent the same are used or defined therein.
23. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto on separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the pledgor has caused this Agreement to be executed
under seal by its duly authorized officer as of the date first above written.
FRONT ROYAL, INC.
By:____________________
Title:_________________
Accepted and agreed to:
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA, as Agent
By:_________________________
Title:
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Annex A to Pledge and Security Agreement
First Union National Bank of
North Carolina, as Agent
Front Royal, Inc.
December 18, 1996/ $38,000,000
______________________________
Part I. Pledged Stock
Percentage of
Outstanding
Name of Type of Number of Certificate Shares of
Issuing Corporation Shares Shares Number Capital Stock
------------------- ------ ------ ------ -------------
Colony Management Common 100 _____ 100%
Services, Inc.
Front Royal Environmental
Insurance Management, Inc. Common 60,000 _____ 100%
Front Royal Environmental
Services, Inc. Common 11,875 _____ 100%
Front Royal ETS, Inc. Common 100 _____ 100%
Colony Insurance Company Common 200,000 _____ 100%
Rockwood Insurance Company Class A Common 500,000 _____ 100%
Class B Common 571,961 _____ 100%
Part II. Pledged Notes
Original
Principal
Date Lender Borrower Amount
---- ------ -------- ------
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PLEDGE AMENDMENT
THIS PLEDGE AMENDMENT, dated as of _________, 19__, is delivered by FRONT
ROYAL, INC. (the "Pledgor") pursuant to Section 5(b) of the Pledge Agreement
referred to hereinbelow. The Pledgor hereby agrees that this Pledge Amendment
may be attached to the Pledge Agreement, dated as of December 18, 1996, made by
the Pledgor in favor of First Union National Bank of North Carolina, as Agent
(as amended, modified, supplemented or restated from time to time, the "Pledge
Agreement," capitalized terms defined therein being used herein as therein
defined), and that the Pledged Investments listed on Annex A to this Pledge
Amendment shall be deemed to be part of the Pledged Investments within the
meaning of the Pledge Agreement and shall become part of the Collateral and
shall secure all of the Obligations as provided in the Pledge Agreement. This
Pledge Amendment and its attachments are hereby incorporated into the Pledge
Agreement and made a part thereof.
FRONT ROYAL, INC.
By:________________________________
Title:_____________________________
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Exhibit A to Pledge and Security Agreement
First Union National Bank of
North Carolina, as Agent
Front Royal, Inc.
December 18, 1996 / $38,000,000
Part I. Pledged Stock
Name of Type of Number of Certificate Shares of
Issuing Corporation Shares Shares Number Capital Stock
------------------- ------ ------ ------ -------------
Part II. Pledged Notes
Original
Principal
Date Lender Borrower Amount
---- ------ -------- ------
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Exhibit E to Credit Agreement
First Union National Bank
of North Carolina, as Agent
Front Royal, Inc.
December 18, 1996/$38,000,000
SUBSIDIARIES GUARANTY
THIS SUBSIDIARIES GUARANTY, dated as of the _____ day of December, 1996
(this "Guaranty"), is made by each of the undersigned Non-Insurance Subsidiaries
of FRONT ROYAL, INC., a North Carolina corporation (the "Borrower"), and each
other Non-Insurance Subsidiary of the Borrower that, after the date hereof,
executes an instrument of accession hereto substantially in the form of Exhibit
A (a "Guarantor Accession"; the undersigned and such other Non-Insurance
Subsidiaries of the Borrower, collectively, the "Guarantors"), in favor of the
Guaranteed Parties (as hereinafter defined). Capitalized terms used herein
without definition shall have the meanings given to them in the Credit Agreement
referred to below.
RECITALS
A. The Borrower, certain banks and other financial institutions
(collectively, the "Lenders"), and First Union National Bank of North Carolina,
as agent for the Lenders (in such capacity, the "Agent"), are parties to a
Credit Agreement, dated as of December 18, 1996 (as amended, modified,
supplemented or restated from time to time, the "Credit Agreement"), pursuant to
which the Lenders have agreed to make Loans to the Borrower upon the terms and
conditions set forth therein (the Lenders and the Agent, collectively, the
"Guaranteed Parties").
B. It is a condition to the making of the Loans to the Borrower under the
Credit Agreement that each Guarantor shall have agreed, by executing and
delivering this Guaranty, to guarantee to the Guaranteed Parties the payment in
full of the Guaranteed Obligations (as hereinafter defined). The Guaranteed
Parties are relying on this Guaranty in their decision to make the Loans to the
Borrower under the Credit Agreement, and would not enter into the Credit
Agreement without this Guaranty.
C. The Borrower and the Guarantors are engaged in related businesses and
undertake certain activities and operations on an integrated basis. As part of
such integrated operations, the Borrower, among other things, will advance to
the Guarantors from time to time certain proceeds of the Loans made to the
Borrower by the Lenders under the Credit Agreement. Each Guarantor will obtain
benefits as a result of the making of the Loans to the Borrower under the Credit
Agreement, which benefits are hereby acknowledged, and, accordingly, desires to
execute and deliver this Guaranty.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, to induce the Guaranteed Parties to enter into the Credit
Agreement and to induce the Lenders to make the Loans to the Borrower
thereunder, each Guarantor hereby agrees as follows:
1. Guaranty. (a) Each guarantor hereby irrevocably, absolutely and
unconditionally, and jointly and severally:
(i) guarantees to the Guaranteed Parties the full and prompt
payment, at any time and from time to time as and when due (whether at the
stated maturity, by acceleration or otherwise), of all Obligations of the
Borrower under the Credit Agreement and the other Loan Documents,
including, without limitation, all principal of and interest on the Loans,
all fees, expenses, indemnities and other amounts payable by the Borrower
under the Credit Agreement or any other Loan Document (including interest
accruing after the filing of a petition or commencement of a case by or
with respect to the Borrower seeking relief under any Insolvency Laws (as
hereinafter defined), whether or not the claim for such interest is
allowed in such proceeding), and all Obligations that, but for the
operation of the automatic stay under Section 362(a) of the Bankruptcy
Code, would become due, in each case whether now existing or hereafter
created or arising and whether direct or indirect, absolute or contingent,
due or due to become due (all liabilities and obligations described in
this clause (i), collectively, the "Guaranteed Obligations"); and
(ii) agrees to pay or reimburse upon demand all reasonable costs and
expenses (including, without limitation, reasonable attorneys' fees and
expenses) incurred or paid by (y) any Guaranteed Party in connection with
any suit, action or proceeding to enforce or protect any rights of the
Guaranteed Parties hereunder, and (z) the Agent in connection with any
amendment, modification or waiver hereof or consent pursuant hereto (all
liabilities and obligations described in this clause (ii), collectively,
the "Other Obligations"; and the Other Obligations, together with the
Guaranteed Obligations, the "Total Obligations").
(b) Notwithstanding the provisions of subsection (a) above and
notwithstanding any other provisions contained herein or in any other Loan
Document:
(i) no provision of this Guaranty shall require or permit the
collection from any Guarantor of interest in excess of the maximum rate or
amount that such Guarantor may be required or permitted to pay pursuant to
applicable law; and
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(ii) the liability of each Guarantor under this Guaranty as of any
date shall be limited to a maximum aggregate amount (the "Maximum
Guaranteed Amount") equal to the greatest amount that would not render
such Guarantor's obligations under this Guaranty subject to avoidance,
discharge or reduction as of such date as a fraudulent transfer or
conveyance under applicable federal and state laws pertaining to
bankruptcy, reorganization, arrangement, moratorium, readjustment of
debts, dissolution, liquidation or other debtor relief, specifically
including, without limitation, the Bankruptcy Code and any fraudulent
transfer and fraudulent conveyance laws (collectively, "Insolvency Laws"),
in each instance after giving effect to all other liabilities of such
Guarantor, contingent or otherwise, that are relevant under applicable
Insolvency Laws (specifically excluding, however, any liabilities of such
Guarantor in respect of intercompany indebtedness to the Borrower or any
of its Affiliates to the extent that such indebtedness would be discharged
in an amount equal to the amount paid by such Guarantor hereunder, and
after giving effect as assets to the value (as determined under applicable
Insolvency Laws) of any rights to subrogation, contribution,
reimbursement, indemnity or similar rights of such Guarantor pursuant to
(y) applicable law or (z) any agreement (including this Guaranty)
providing for an equitable allocation among such Guarantor and other
Affiliates of the Borrower of obligations arising under guaranties by such
parties).
(c) The Guarantors desire to allocate among themselves, in a fair and
equitable manner, their obligations arising under this Guaranty. Accordingly, in
the event any payment or distribution is made hereunder on any date by a
Guarantor (a "Funding Guarantor") that exceeds its Fair Share (as hereinafter
defined) as of such date, that Funding Guarantor shall be entitled to a
contribution from each of the other Guarantors in the amount of such other
Guarantor's Fair Share Shortfall (as hereinafter defined) as of such date, with
the result that all such contributions will cause each Guarantor's Aggregate
Payments (as hereinafter defined) to equal its Fair Share as of such date. "Fair
Share" means, with respect to a Guarantor as of any date of determination, an
amount equal to (i) the ratio of (x) the Adjusted Maximum Guaranteed Amount (as
hereinafter defined) with respect to such Guarantor to (y) the aggregate of the
Adjusted Maximum Guaranteed Amounts with respect to all Guarantors, multiplied
by (ii) the aggregate amount paid or distributed on or before such date by all
Funding Guarantors hereunder in respect of the obligations guaranteed. "Fair
Share Shortfall" means, with respect to a Guarantor as of any date of
determination, the excess, if any, of the Fair Share of such Guarantor over the
Aggregate Payments of such Guarantor. "Adjusted Maximum Guaranteed Amount"
means, with respect to a Guarantor as of any date of determination, the Maximum
Guaranteed Amount of such Guarantor, determined in accordance with the
provisions of subsection (b) above; provided that, solely for purposes of
calculating the "Adjusted Maximum Guaranteed Amount" with respect to any
Guarantor for purposes of this subsection (c), any assets or liabilities arising
by virtue of any rights to subrogation, reimbursement or indemnity or any rights
to or obligations of contribution hereunder shall not be considered as assets or
liabilities of such Guarantor.
-3-
"Aggregate Payments" means, with respect to a Guarantor as of any date of
determination, the aggregate amount of all payments and distributions made on or
before such date by such Guarantor in respect of this Guaranty (including,
without limitation, in respect of this subsection (c)). The amounts payable as
contributions hereunder shall be determined as of the date on which the related
payment or distribution is made by the applicable Funding Guarantor. Each
Funding Guarantor's right of contribution under this subsection (c) shall be
subject to the Provisions of Section 4. The allocation among Guarantors of their
obligations as set forth in this subsection (c) shall not be construed in any
way to limit the liability of any Guarantor hereunder to the Guaranteed Parties.
(d) The guaranty of each Guarantor set forth in this Section is a guaranty
of payment as a primary obligor, and not a guaranty of collection. Each
Guarantor hereby acknowledges and agrees that the Guaranteed Obligations, at any
time and from time to time, may exceed the Maximum Guaranteed Amount of such
Guarantor and may exceed the aggregate of the Maximum Guaranteed Amounts of all
Guarantors, in each case without discharging, limiting or otherwise affecting
the obligations of any Guarantor hereunder or the rights, powers and remedies of
any Guaranteed Party hereunder or under any other Loan Document.
2. Guaranty Absolute. Each Guarantor agrees that its obligations hereunder
are irrevocable, absolute and unconditional, are independent of the Guaranteed
Obligations and any Collateral or other security therefor or other guaranty or
liability in respect thereof, whether given by such Guarantor or any other
Person, and shall not be discharged, limited or otherwise affected by reason of
any of the following, whether or not such Guarantor has notice or knowledge
thereof:
(i) any change in the time, manner or place of payment of, or in any
other term of, any Guaranteed Obligations or any guaranty or other
liability in respect thereof, or any amendment, modification or supplement
to, restatement of, or consent to any rescission or waiver of or departure
from, any provisions of the Credit Agreement, any other Loan Document or
any agreement or instrument delivered pursuant to any of the foregoing;
(ii) the invalidity or unenforceability of any Guaranteed
Obligations, any guaranty or other liability in respect thereof or any
provisions of the Credit Agreement, any other Loan Document or any
agreement or instrument delivered pursuant to any of the foregoing;
(iii) the addition or release of Guarantors hereunder or the taking,
acceptance or release of other guarantees of any Guaranteed Obligations or
additional Collateral or other security for any Guaranteed Obligations or
for any guaranty or other liability in respect thereof;
-4-
(iv) any discharge, modification, settlement, compromise or other
action in respect of any Guaranteed Obligations or any guaranty or other
liability in respect thereof, including any acceptance or refusal of any
offer or performance with respect to the same or the subordination of the
same to the payment of any other obligations;
(v) any agreement not to pursue or enforce or any failure to pursue
or enforce (whether voluntarily or involuntarily as a result of operation
of law, court order or otherwise) any right or remedy in respect of any
Guaranteed Obligations, any guaranty or other liability in respect thereof
or any Collateral or other security for any of the foregoing; any sale,
exchange, release, substitution, compromise or other action in respect of
any such Collateral or other security; or any failure to create, protect,
perfect, secure, insure, continue or maintain any Liens in any such
Collateral or other security;
(vi) the exercise of any right or remedy available under the Loan
Documents, at law, in equity or otherwise in respect of any Collateral or
other security for any Guaranteed Obligations or for any guaranty or other
liability in respect thereof, in any order and by any manner thereby
permitted, including, without limitation, foreclosure on any such
Collateral or other security by any manner of sale thereby permitted,
whether or not every aspect of such sale is commercially reasonable;
(vii) any bankruptcy, reorganization, arrangement, liquidation,
insolvency, dissolution, termination, reorganization or like change in the
corporate structure or existence of the Borrower or any other Person
directly or indirectly liable for any Guaranteed Obligations;
(viii) any manner of application of any payments by or amounts
received or collected from any Person, by whomsoever paid and howsoever
realized, whether in reduction of any Guaranteed Obligations or any other
obligations of the Borrower or any other Person directly or indirectly
liable for any Guaranteed Obligations, regardless of what Guaranteed
Obligations may remain unpaid after any such application; or
(ix) any other circumstance that might otherwise constitute a legal
or equitable discharge of, or a defense, set-off or counterclaim available
to, the Borrower, any Guarantor or a surety or guarantor generally, other
than the payment in full of the Total Obligations (such payment in full,
the "Termination Requirement").
-5-
3. Certain Waivers. Each Guarantor hereby knowingly, voluntarily and
expressly waives:
(i) presentment, demand for payment, demand for performance, protest
and notice of any other kind, including, without limitation, notice of
nonpayment or other nonperformance (including notice of default under any
Loan Document with respect to any Guaranteed Obligations), protest,
dishonor, acceptance hereof, extension of additional credit to the
Borrower and of any of the matters referred to in Section 2 and of any
rights to consent thereto;
(ii) any right to require the Guaranteed Parties or any of them, as
a condition of payment or performance by such Guarantor hereunder, to
proceed against, or to exhaust or have resort to any Collateral or other
security from or any deposit balance or other credit in favor of, the
Borrower, any other Guarantor or any other Person directly or indirectly
liable for any Guaranteed Obligations, or to pursue any other remedy or
enforce any other right; and any other defense based on an election of
remedies with respect to any Collateral or other security for any
Guaranteed Obligations or for any guaranty or other liability in respect
thereof, notwithstanding that any such election (including any failure to
pursue or enforce any rights or remedies) may impair or extinguish any
right of indemnification, contribution, reimbursement or subrogation or
other right or remedy of any Guarantor against the Borrower, any other
Guarantor or any other Person directly or indirectly liable for any
Guaranteed Obligations or any such Collateral or other security; and,
without limiting the generality of the foregoing, each Guarantor hereby
specifically waives the benefits of Sections 26-7 through 26-9, inclusive,
of the General Statutes of North Carolina, as amended from time to time,
and any similar statute or law of any other jurisdiction, as the same may
be amended from time to time;
(iii) any right or defense based on or arising by reason of any
right or defense of the Borrower or any other Person, including, without
limitation, any defense based on or arising from a lack of authority or
other disability of the Borrower or any other Person, the invalidity or
unenforceability of any Guaranteed Obligations, any Collateral or other
security therefor or any Loan Document or other agreement or instrument
delivered pursuant thereto, or the cessation of the liability of the
Borrower for any reason other than the satisfaction of the Termination
Requirements;
(iv) any defense based on any Guaranteed Party's acts or omissions
in the administration of the Obligations, any guaranty or other liability
in respect thereof or any Collateral or other security for any of the
foregoing, and promptness, diligence or any requirement that any
Guaranteed
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Party create, protect, perfect, secure, insure, continue or maintain any
Liens in any such Collateral or other security;
(v) any right to assert against any Guaranteed Party, as a defense,
counterclaim, crossclaim or set-off, any defense, counterclaim, claim,
right of recoupment or set-off that it may at any time have against any
Guaranteed Party (including, without limitation, failure of consideration,
statute of limitations, payment, accord and satisfaction and usury), other
than compulsory counterclaims; and
(vi) any defense based on or afforded by any applicable law that
limits the liability of or exonerates guarantors or sureties or that may
in any other way conflict with the terms of this Guaranty.
4. Waiver of Subrogation; Subordination. Each Guarantor hereby knowingly,
voluntarily and expressly waives all claims and rights that it may have against
the Borrower at any time as a result of any payment made under or in connection
with this Guaranty or the performance or enforcement hereof, including all
rights of subrogation to the rights of any of the Guaranteed Parties against the
Borrower, all rights of indemnity, contribution or reimbursement against the
Borrower (including rights of contribution as set forth in Section 1(c)), all
rights to enforce any remedies of any Guaranteed Party to secure payment of the
Guaranteed Obligations, in each case whether such claims or rights arise by
contract, statute (including without limitation the Bankruptcy Code), common law
or otherwise. Each Guarantor agrees that all indebtedness and other obligations,
whether now or hereafter existing, of the Borrower or any other Affiliate of the
Borrower to any Guarantor, including, without limitation, any such indebtedness
in any proceeding under the Bankruptcy Code and any intercompany receivables,
together with any interest thereon, shall be, and hereby are, subordinated and
made junior in right of payment to the Total Obligations. Each Guarantor further
agrees that if any amount shall be paid to or any distribution received by any
Guarantor (i) on account of any such indebtedness at any time after the
occurrence and during the continuance of an Event of Default, or (ii) on account
of any such rights of subrogation, indemnity, contribution or reimbursement at
any time prior to the satisfaction of the Termination Requirements, such amount
or distribution shall be deemed to have been received and to be held in trust
for the benefit of the Guaranteed Parties, and shall forthwith be delivered to
the Agent in the form received (with any necessary endorsements in the case of
written instruments), to be applied against the Guaranteed Obligations, whether
or not matured, in accordance with the terms of the applicable Loan Documents
and without in any way discharging, limiting or otherwise affecting the
liability of such Guarantor under any other provision of this Guaranty.
Additionally, in the event the Borrower or any Subsidiary of the Borrower
becomes a "debtor" within the meaning of the Bankruptcy Code, the Agent shall be
entitled, at its option, on behalf of the Guaranteed Parties and as
attorney-in-fact for each Guarantor, and is hereby authorized and appointed by
each Guarantor, to file proofs of claim on behalf of each relevant Guarantor and
vote the rights of each such Guarantor in any plan of reorganization, and to
demand, xxx for, collect and receive every payment and
-7-
distribution on any indebtedness of the Borrower or such Subsidiary to any
Guarantor in any such proceeding, each Guarantor hereby assigning to the Agent
all of its rights in respect of any such claim, including the right to receive
payments and distributions in respect thereof.
5. Representations and Warranties. Each Guarantor hereby represents and
warrants to the Guaranteed Parties as follows:
(a) Such Guarantor is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation and has the full corporate power and authority to execute,
deliver and perform this Guaranty and the other Loan Documents to which it
is or will be a party, to own and hold its property and to engage in its
business as presently conducted.
(b) Such Guarantor has taken all necessary corporate action to
execute, deliver and perform this Guaranty and each of the other Loan
Documents to which it is or will be a party, and has, or on any later date
of execution and delivery will have, validly executed and delivered each
of the Loan Documents to which it is or will be a party. This Guaranty
constitutes, and each of such other Loan Documents upon execution and
delivery will constitute, the legal, valid and binding obligation of such
Guarantor, enforceable against such Guarantor in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally or by general equitable principles.
(c) The execution, delivery and performance by such Guarantor of
this Guaranty and the other Loan Documents to which it is a party, and
compliance by it with the terms hereof and thereof, do not and will not
(i) violate any provision of its articles or certificate of incorporation
or bylaws, (ii) contravene any Requirement of Law applicable to it, (iii)
conflict with, result in a breach of or constitute (with notice, lapse of
time or both) a default under any indenture, loan agreement, mortgage,
deed of trust, lease or other agreement or instrument to which it is a
party, by which it or any of its properties is bound or to which it is
subject, or (iv) result in or require the creation or imposition of any
Lien upon any of its properties, other than Liens created pursuant to the
Loan Documents.
(d) No consent, approval, authorization or other action by, notice
to, or registration or filing with, any Governmental Authority is or will
be required as a condition to or otherwise in connection with the due
execution, delivery and performance by such Guarantor of this Guaranty and
the other Loan Documents to which it is a party or the legality, validity
or enforceability hereof or thereof, other than the filing of financing
statements as provided in the Subsidiaries Collateral Assignment of
Agreements.
(e) Except as may be disclosed in Schedule 4.5 to the Credit
Agreement, there are no actions, investigations, suits or proceedings
pending or, to the knowledge of such Guarantor, threatened, at law, in
equity or in arbitration, before any court, other Governmental Authority
or other Person, (i) against or affecting such Guarantor
-8-
or any of its properties that would, if adversely determined, be
reasonably likely to have a Material Adverse Effect or (ii) with respect
to this Guaranty or any of the other Loan Documents to which such
Guarantor is a party.
(f) Such Guarantor has been provided with a true and complete copy
of the executed Credit Agreement, as in effect as of the date it became a
party hereto, and its principal officers are familiar with the contents
thereof, particularly insofar as the contents thereof relate or apply to
such Guarantor.
6. Financial Condition of Borrower. Each Guarantor represents that it has
knowledge of the Borrower's financial condition and affairs and that it has
adequate means to obtain from the Borrower on an ongoing basis information
relating thereto and to the Borrower's ability to pay and perform the Guaranteed
Obligations, and agrees to assume the responsibility for keeping, and to keep,
so informed for so long as this Guaranty is in effect with respect to such
Guarantor. Each Guarantor agrees that the Guaranteed Parties shall have no
obligation to investigate the financial condition or affairs of the Borrower for
the benefit of any Guarantor nor to advise any Guarantor of any fact respecting,
or any change in, the financial condition or affairs of the Borrower that might
become known to any Guaranteed Party at any time, whether or not such Guaranteed
Party knows or believes or has reason to know or believe that any such fact or
change is unknown to any Guarantor, or might (or does) materially increase the
risk of any Guarantor as guarantor, or might (or would) affect the willingness
of any Guarantor to continue as a guarantor of the Guaranteed Obligations.
7. Payments; Application; Set-Off. (a) Each Guarantor agrees that, upon
the failure of the Borrower to pay any Guaranteed Obligations when and as the
same shall become due (whether at the stated maturity, by acceleration or
otherwise), and without limitation of any other right or remedy that any
Guaranteed Party may have at law, in equity or otherwise against such Guarantor,
such Guarantor will, subject to the provisions of Section 1(b), forthwith pay or
cause to be paid to the Agent, for the benefit of the Guaranteed Parties, an
amount equal to the amount of the Guaranteed Obligations then due and owing as
aforesaid.
(b) All payments made by each Guarantor hereunder will be made in Dollars
to the Agent, without set-off, counterclaim or other defense and, in accordance
with Section 2.17 of the Credit Agreement, free and clear of and without
deduction for any Taxes, each Guarantor hereby agreeing to comply with and be
bound by the provisions of Section 2.17 of the Credit Agreement in respect of
all payments made by it hereunder and the provisions of which Section are hereby
incorporated into and made a part of this Guaranty by this reference as if set
forth herein at length.
(c) All payments made hereunder shall be applied upon receipt as follows:
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(i) first, to the payment of all Other Obligations owing to the
Agent;
(ii) second, after payment in full of the amounts specified in
clause (i) above, to the ratable payment of all other Total Obligations
owing to the Guaranteed Parties; and
(iii) third, after payment in full of the amounts specified in
clauses (i) and (ii) above, and following the termination of this
Guaranty, to the Guarantors or any other Person lawfully entitled to
receive such surplus.
(d) The Guarantors shall remain jointly and severally liable to the extent
of any deficiency between the amount of all payments made hereunder and the
aggregate amount of the sums referred to in clauses (i) and (ii) of subsection
(c) above.
(e) In addition to all other rights and remedies available under the Loan
Documents or applicable law or otherwise, upon and at any time after the
occurrence and during the continuance of any Event of Default, each Guaranteed
Party may, and is hereby authorized by each Guarantor, at any such time and from
time to time, to the fullest extent permitted by applicable law, without
presentment, demand, protest or other notice of any kind, all of which are
hereby knowingly and expressly waived by each Guarantor, to set off and to apply
any and all deposits (general or special, time or demand, provisional or final)
and any other property at any time held (including at any branches or agencies,
wherever located), and any other indebtedness at any time owing, by such
Guaranteed Party to or for the credit or the account of such Guarantor against
any or all of the obligations of such Guarantor to such Guaranteed Party
hereunder now or hereafter existing, whether or not such obligations may be
contingent or unmatured, each Guarantor hereby granting to each Guaranteed Party
a continuing security interest in and Lien upon all such deposits and other
property as security for such obligations. Each Guaranteed Party agrees promptly
to give notice to any affected Guarantor after any such set-off and application;
provided, however, that the failure to give such notice shall not affect the
validity of such set-off and application.
8. No Waiver. The rights and remedies of the Guaranteed Parties expressly
set forth in this Guaranty and the other Loan Documents are cumulative and in
addition to, and not exclusive of, all other rights and remedies available at
law, in equity or otherwise. No failure or delay on the part of any Guaranteed
Party in exercising any right, power or privilege shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
privilege preclude any other or further exercise thereof or the exercise of any
other right, power or privilege or be construed to be a waiver of any Default or
Event of Default. No course of dealing between any of the Guarantors and the
Guaranteed Parties or their agents or employees shall be effective to amend,
modify or discharge any provision of this Guaranty or any other Loan Document or
to constitute a waiver of any Default or Event of Default. No notice to or
demand upon any Guarantor in
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any case shall entitle such Guarantor or any other Guarantor to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the right of any Guaranteed Party to exercise any right or remedy or
take any other or further action in any circumstances without notice or demand.
9. Enforcement. The Guaranteed Parties agree that, except as provided in
Section 7(e), this Guaranty may be enforced only by the Agent, acting upon the
instructions or with the consent of the Required Lenders as provided for in the
Credit Agreement, and that no Guaranteed Party shall have any right individually
to enforce or seek to enforce this Guaranty or to realize upon any Collateral or
other security given to secure the payment and performance of the Guarantors'
obligations hereunder. The obligations of each Guarantor hereunder are
independent of the Guaranteed Obligations, and a separate action or actions may
be brought against each Guarantor whether or not action is brought against the
Borrower or any other Guarantor and whether or not the Borrower or any other
Guarantor is joined in any such action. Each Guarantor agrees that to the extent
all or part of any payment of the Guaranteed Obligations made by any Person is
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid by or on behalf of any Guaranteed Party to a trustee,
receiver or any other party under any Insolvency Laws (the amount of any such
payment, a "Reclaimed Amount"), then, to the extent of such Reclaimed Amount,
this Guaranty shall continue in full force and effect or be revived and
reinstated, as the case may be, as to the Guaranteed Obligations intended to be
satisfied as if such payment had not been received; and each Guarantor
acknowledges that the term "Guaranteed Obligations" includes all Reclaimed
Amounts that may arise from time to time.
10. Amendments, Waivers, etc. No amendment, modification, waiver,
discharge or termination of, or consent to any departure by any Guarantor from,
any provision of this Guaranty, shall be effective unless in a writing signed by
the Agent and such of the Lenders as may be required under the provisions of the
Credit Agreement to concur in the action then being taken, and then the same
shall be effective only in the specific instance and for the specific purpose
for which given.
11. Addition, Release of Guarantors. Each Guarantor recognizes that the
provisions of the Credit Agreement require Persons that become Non-Insurance
Subsidiaries of the Borrower and that are not already parties hereto to become
Guarantors hereunder by executing a Guarantor Accession, and agrees that its
obligations hereunder shall not be discharged, limited or otherwise affected by
reason of the same, or by reason of the Agent's action in effecting the same or
in releasing any Guarantor hereunder, in each case without the necessity of
giving notice to or obtaining the consent of any other Guarantor.
12. Continuing Guaranty; Term; Successors and Assigns; Assignment;
Survival. This Guaranty is a continuing guaranty and covers all of the
Guaranteed Obligations as the same may arise and be outstanding at any time and
from time to time from and after the date hereof, and shall (i) remain in full
force and effect until the satisfaction of all of the Termination Requirements,
(ii) be binding upon and enforceable against each
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Guarantor and its successors and assigns (provided, however, that no Guarantor
may sell, assign or transfer any of its rights, interests, duties or obligations
hereunder without the prior written consent of the Lenders) and (iii) inure to
the benefit of and be enforceable by each Guaranteed Party and its successors
and assigns. Without limiting the generality of clause (iii) above, any
Guaranteed Party may, in connection with an assignment pursuant to Section 9.7
of the Credit Agreement, assign all or a portion of the Guaranteed Obligations
held by it (including by the sale of participations), whereupon each Person that
becomes the holder of any such Guaranteed Obligations shall (except as may be
otherwise agreed between such Guaranteed Party and such Person) have and may
exercise all of the rights and benefits in respect thereof granted to such
Guaranteed Party under this Guaranty or otherwise; provided, however, that,
except as may be otherwise permitted by the Credit Agreement, no participant in
any Guaranteed Obligations shall be entitled to exercise any rights under
Section 7(e). Each Guarantor irrevocably waives notice of and consents in
advance to the assignment as provided above from time to time by any Guaranteed
Party of all or any portion of the Guaranteed Obligations held by it and of the
corresponding rights and interests of such Guaranteed Party hereunder in
connection therewith. All representations, warranties, covenants and agreements
herein shall survive the execution and delivery of this Guaranty and any
Guarantor Accession.
13. Governing Law; Consent to Jurisdiction; Appointment of Borrower as
Representative; Process Agent; Attorney-in-fact. (a) THIS GUARANTY HAS BEEN
EXECUTED, DELIVERED AND ACCEPTED AT, AND SHALL BE DEEMED TO HAVE BEEN MADE IN,
NORTH CAROLINA AND SHALL BE INTERPRETED, AND THE RIGHTS AND LIABILITIES OF THE
GUARANTEED PARTIES AND THE GUARANTORS DETERMINED, IN ACCORDANCE WITH THE
INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAW PROVISIONS) OF THE STATE OF NORTH
CAROLINA. AS PART OF THE CONSIDERATION FOR NEW VALUE THIS DAY RECEIVED, EACH
GUARANTOR HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE COURT WITHIN
MECKLENBURG COUNTY, NORTH CAROLINA OR ANY FEDERAL COURT LOCATED WITHIN THE
WESTERN DISTRICT OF THE STATE OF NORTH CAROLINA FOR ANY PROCEEDING INSTITUTED
HEREUNDER OR UNDER ANY OF THE OTHER LOAN DOCUMENTS, OR ARISING OUT OF OR IN
CONNECTION WITH THIS GUARANTY OR ANY OF THE OTHER LOAN DOCUMENTS, OR ANY
PROCEEDING TO WHICH ANY GUARANTEED PARTY OR SUCH GUARANTOR IS A PARTY, INCLUDING
ANY ACTIONS BASED UPON, ARISING OUT OF, OR IN CONNECTION WITH ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER ORAL OR WRITTEN) OR ACTIONS OF
ANY GUARANTEED PARTY OR SUCH GUARANTOR. EACH GUARANTOR IRREVOCABLY AGREES TO BE
BOUND (SUBJECT TO ANY AVAILABLE RIGHT OF APPEAL) BY ANY JUDGMENT RENDERED OR
RELIEF GRANTED THEREBY AND FURTHER WAIVES ANY OBJECTION THAT IT MAY HAVE BASED
ON LACK OF JURISDICTION OR IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT
OF ANY SUCH PROCEEDING.
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(b) EACH GUARANTOR HEREBY IRREVOCABLY DESIGNATES AND APPOINTS THE BORROWER
AS ITS DESIGNEE, APPOINTEE AND AGENT TO RECEIVE ON ITS BEHALF ALL SERVICE OF
PROCESS IN ANY ACTION OR PROCEEDING ANY OTHER NOTICE OR COMMUNICATION HEREUNDER,
CONSENTS THAT ALL SERVICE OF PROCESS UPON IT MAY BE MADE BY REGISTERED OR
CERTIFIED MAIL DIRECTED TO THE BORROWER AT ITS ADDRESS SET FORTH HEREINABOVE
(AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON THE EARLIER OR ACTUAL
RECEIPT THEREOF OR THREE (3) BUSINESS DAYS AFTER DEPOSIT IN THE UNITED STATES
MAILS, PROPER POSTAGE PREPAID AND PROPERLY ADDRESSED, AND AGREES THAT SERVICE SO
MADE SHALL BE EFFECTIVE AND BINDING UPON SUCH GUARANTOR IN EVERY RESPECT AND
THAT ANY OTHER NOTICE OR COMMUNICATION GIVEN TO THE BORROWER AT THE ADDRESS AND
IN THE MANNER SPECIFIED HEREIN SHALL BE EFFECTIVE NOTICE TO SUCH GUARANTOR.
FURTHER, EACH GUARANTOR DOES HEREBY IRREVOCABLY MAKE, CONSTITUTE AND APPOINT THE
BORROWER AS ITS TRUE AND LAWFUL ATTORNEY-IN-FACT, WITH FULL AUTHORITY IN ITS
PLACE AND STEAD AND IN ITS NAME, THE BORROWER'S NAME OR OTHERWISE, AND WITH FULL
POWER OF SUBSTITUTION IN THE PREMISES, FROM TIME TO TIME IN THE BORROWER'S
DISCRETION TO AGREE ON BEHALF OF, AND SIGN THE NAME OF, SUCH GUARANTOR TO ANY
AMENDMENT, MODIFICATION OR SUPPLEMENT TO, RESTATEMENT OF, OR WAIVER OR CONSENT
IN CONNECTION WITH, THIS GUARANTY, ANY OTHER LOAN DOCUMENT OR ANY DOCUMENT OR
INSTRUMENT PURSUANT HERETO OR THERETO, AND TO TAKE ANY OTHER ACTION AND DO ALL
OTHER THINGS ON BEHALF OF SUCH GUARANTOR THAT THE BORROWER MAY DEEM NECESSARY OR
ADVISABLE TO CARRY OUT AND ACCOMPLISH THE PURPOSES OF THIS GUARANTY AND THE
OTHER LOAN DOCUMENTS. THE BORROWER WILL NOT BE LIABLE FOR ANY ACT OR OMISSION
NOR FOR ANY ERROR OF JUDGMENT OR MISTAKE OF FACT UNLESS THE SAME SHALL OCCUR AS
A RESULT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE BORROWER. THIS
POWER, BEING COUPLED WITH AN INTEREST, IS IRREVOCABLE BY ANY GUARANTOR FOR SO
LONG AS THIS GUARANTY SHALL BE IN EFFECT WITH RESPECT TO SUCH GUARANTOR. BY ITS
SIGNATURE HERETO, THE BORROWER CONSENTS TO ITS APPOINTMENT AS PROVIDED FOR
HEREIN AND AGREES PROMPTLY TO DISTRIBUTE ALL PROCESS, NOTICES AND OTHER
COMMUNICATIONS TO EACH GUARANTOR.
(c) NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT TO SERVE LEGAL PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF ANY GUARANTEED PARTY
TO BRING ANY ACTION OR PROCEEDING AGAINST ANY GUARANTOR IN THE COURTS OF ANY
OTHER JURISDICTION.
-13-
14. Arbitration; Preservation and Limitation of Remedies. (i) Upon demand
of any party hereto, whether made before or after institution of any judicial
proceeding, any dispute, claim or controversy arising out of, connected with or
relating to this Agreement or any other Loan Document ("Disputes") between or
among any Guarantor, the Agent and the Lenders, or any of them, shall be
resolved by binding arbitration as provided herein. Institution of a judicial
proceeding by a party does not waive the right of that party to demand
arbitration hereunder. Disputes may include, without limitation, tort claims,
counterclaims, claims brought as class actions, claims arising from documents
executed in the future, or claims arising out of or connected with the
transactions contemplated by this Agreement and the other Loan Documents.
Arbitration shall be conducted under and governed by the Commercial Financial
Disputes Arbitration Rules (the "Arbitration Rules") of the American Arbitration
Association (the "AAA"), as in effect from time to time, and Title 9 of the U.S.
Code, as amended. All arbitration hearings shall be conducted in the city in
which the principal office of the Agent is located. The expedited procedures set
forth in Rule 51 et seq. of the Arbitration Rules shall be applicable to claims
of less than $1,000,000. All applicable statutes of limitation shall apply to
any Dispute. A judgment upon the award may be entered in any court having
jurisdiction. The panel from which all arbitrators are selected shall be
comprised of licensed attorneys. The single arbitrator selected for expedited
procedure shall be a retired judge from the highest court of general
jurisdiction, state or federal, of the state where the hearing will be
conducted. Notwithstanding the foregoing, this arbitration provision does not
apply to Disputes under or related to Hedge Agreements.
(ii) Notwithstanding the preceding binding arbitration provisions, the
parties hereto agree to preserve, without diminution, certain remedies that any
party hereto may employ or exercise freely, either alone, in conjunction with or
during a Dispute. Any party hereto shall have the right to proceed in any court
of proper jurisdiction or by self-help to exercise or prosecute the following
remedies, as applicable: (i) all rights to foreclose against any Collateral by
exercising a power of sale granted pursuant to any of the Loan Documents or
under applicable law or by judicial foreclosure and sale, including a proceeding
to confirm the sale; (ii) all rights of self-help, including peaceful occupation
of real property and collection of rents, set-off, and peaceful possession of
personal property; (iii) obtaining provisional or ancillary remedies, including
injunctive relief, sequestration, garnishment, attachment, appointment of a
receiver and filing an involuntary bankruptcy proceeding; and (iv) when
applicable, a judgment by confession of judgment. Preservation of these remedies
does not limit the power of an arbitrator to grant similar remedies that may be
requested by a party in a Dispute. The parties hereto agree that no party shall
have a remedy of punitive or exemplary damages against any other party in any
Dispute, and each party hereby waives any right or claim to punitive or
exemplary damages that it has now or that may arise in the future in connection
with any Dispute, whether such Dispute is resolved by arbitration or judicially.
15. Notices. All notices and other communications provided for hereunder
shall be in writing (including facsimile transmission) and mailed, telecopied,
or delivered (a)
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if to any Guarantor, in care of the Borrower and at the Borrower's address for
notices set forth in the Credit Agreement and (b) if to any Guaranteed Party, at
its address for notices set forth in the Credit Agreement; or to such other
address as any of the Persons listed above may designate for itself by like
notice to the other Persons listed above; and in each case, with copies to such
other Persons as may be specified under the provisions of the Credit Agreement.
All such notices and communications shall be deemed to have been given (i) if
mailed by first class, certified or registered mail, postage prepaid, on the
fifth Business Day after deposit in the mails, (ii) if telecopied, when
transmitted by telecopier or (iii) if delivered by overnight courier or by hand,
upon delivery; provided that notices and communications to the Agent shall not
be effective until received by the Agent.
16. Severability; Savings Provisions. (a) To the extent any provision of
this Guaranty is prohibited by or invalid under the applicable law of any
jurisdiction, such provision shall be ineffective only to the extent of such
prohibition or invalidity and only in such jurisdiction, without prohibiting or
invalidating such provision in any other jurisdiction or the remaining
provisions of this Guaranty in any jurisdiction.
(b) It is the intent of the parties hereto that in no event shall the
incurrence or enforcement of any Guarantor's obligations hereunder constitute or
result in a violation of any Insolvency Laws of any relevant jurisdiction. In
furtherance of the foregoing, it is noted that the obligations of the Guarantors
hereunder have been limited as set forth in clause (ii) of Section 1(b). To that
end, but only to the extent that the obligations of any Guarantor would be
reduced to an amount less than the Maximum Guaranteed Amount of such Guarantor
as a result of the application of Insolvency Laws (including, pursuant to any
applicable fraudulent transfer or fraudulent conveyance laws or statutes, if
such Guarantor is deemed not to have received valuable consideration, fair value
or reasonably equivalent value in exchange for its obligations hereunder, or if
such Guarantor's obligations hereunder would render such Guarantor insolvent,
leave such Guarantor with an unreasonably small capital with which to conduct
its business, or cause such Guarantor to have incurred debts (or to have
intended to have incurred such debts) beyond its ability to pay such debts as
they mature), in each case as of the time such obligations are deemed to have
been incurred under Insolvency Laws, then the obligations of such Guarantor
hereunder shall be reduced to the maximum amount that, after giving full effect
to the application of such Insolvency Laws, would not be subject to any further
reduction, avoidance, discharge or other limitation thereunder. The provisions
of this subsection (b) are intended solely to preserve the rights of the
Guaranteed Parties hereunder to the maximum extent that would cause or permit
the obligations of any Guarantor hereunder not to be subject to reduction,
avoidance, discharge or other limitation under Insolvency Laws, and no Guarantor
or any other Person shall have any right or claim under this subsection (b) as
against the Secured Parties or any of them that would not otherwise be available
to such Guarantor or other Person under applicable Insolvency Laws.
17. Construction. The headings of the various sections and subsections of
this Guaranty have been inserted for convenience only and shall not in any way
affect the
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meaning or construction of any of the provisions hereof. Unless the context
otherwise requires, words in the singular include the plural and words in the
plural include the singular.
18. Covenants of FRESI. During the term of this Guaranty, FRESI will not
sell, transfer or otherwise dispose of, or pledge, encumber or otherwise permit
or cause any Lien to be created or to exist upon or with respect to, any of the
outstanding capital stock of Triangle Engineering, Inc.
19. Counterparts; Effectiveness. This Guaranty may be executed in any
number of counterparts and by different parties hereto on separate counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument. This Guaranty shall
become effective, as to any Guarantor, upon the execution and delivery by such
Guarantor of a counterpart hereof or a Guarantor Accession.
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be executed
by its duly authorized officer as of the date first above written.
THE SIGNATURES OF THE GUARANTORS EXECUTING THIS GUARANTY
AS OF THE DATE FIRST ABOVE WRITTEN ARE ON THE FOLLOWING
SEQUENTIALLY NUMBERED SIGNATURE PAGES.
The Borrower hereby joins in this Guaranty for purposes of evidencing its
consent to, and agreement to perform, the provisions of Section 13(b).
FRONT ROYAL, INC.
By:________________________________
Title:______________________________
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Accepted and agreed to:
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA, as Agent
By:___________________________
Title:________________________
Subsidiaries Guaranty
Front Royal, Inc.
First Union National Bank of North Carolina
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COLONY MANAGEMENT SERVICES, INC.
By:_______________________________
Title:_____________________________
Address for notices:
0000 Xxxxxxxxxx Xxxx Xxxxx
Xxxx Xxxxx, Xxxxxxxx 00000
Attention:________________
Telecopy: (804)___________
Subsidiaries Guaranty
Front Royal, Inc.
First Union National Bank of North Carolina
-18-
` FRONT ROYAL ENVIRONMENTAL
INSURANCE MANAGEMENT, INC.
By:_________________________________
Title:______________________________
Address for notices:
00000 Xxxxxx Xxxx Xxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention:_________________
Telecopy: (__)____________
Subsidiaries Guaranty
Front Royal, Inc.
First Union National Bank of North Carolina
-19-
FRONT ROYAL ENVIRONMENTAL
SERVICES, INC.
By:__________________________________
Title:_______________________________
Address for notices:
0000 Xxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: J. Xxxx Xxxxx
Telecopy: (919)______________
Subsidiaries Guaranty
Front Royal, Inc.
First Union National Bank of North Carolina
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FRONT ROYALETS, INC.
By:___________________________________
Title:________________________________
Address for notices:
___________________________
___________________________
Attention:___________________
Telecopy: (__)_______________
Subsidiaries Guaranty
Front Royal, Inc.
First Union National Bank of North Carolina
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Exhibit A to Subsidiaries Guaranty
First Union National Bank of North
Carolina, as Agent
Front Royal, Inc.
December 18, 1996/ $38,000,000
GUARANTOR ACCESSION
THIS GUARANTOR ACCESSION, dated as of __________, 19__, is delivered by
[NAME OF NEW GUARANTOR] (the "Guarantor") pursuant to Section 11 of the Guaranty
referred to hereinbelow.
Reference is hereby made to the Subsidiaries Guaranty, dated as of
December __, 1996, made by the Guarantors (as defined therein) party thereto (as
amended, modified, supplemented or restated from time to time, the "Guaranty,"
capitalized terms defined therein being used herein as therein defined).
The undersigned is a Non-Insurance Subsidiary of Front Royal, Inc. (the
"Borrower") and is required to guarantee the Guaranteed Obligations. The
undersigned hereby adopts and makes for itself all of the representations and
warranties set forth in Section 5 of the Guaranty as if such representations and
warranties were set forth herein at length.
The undersigned hereby acknowledges that, upon the execution and delivery
of this Guarantor Accession, it will become a party to the Guaranty as a
Guarantor thereunder. The undersigned hereby adopts the terms and provisions of
the Guaranty and agrees to be bound thereby. This Guarantor Accession and its
attachments are hereby incorporated into the Guaranty and made a part thereof.
[NAME OF NEW GUARANTOR]
By:__________________________________
Title:_______________________________
Address for notices:
___________________________
___________________________
___________________________
Subsidiaries Guaranty
Front Royal, Inc.
First Union National Bank of North Carolina
-22-
Exhibit F-1 to Credit Agreement
First Union National Bank
of North Carolina, as Agent
Front Royal, Inc.
December 18, 1996 / $38,000,000
-------------------------------
COLLATERAL ASSIGNMENT OF AGREEMENTS
(Front Royal, Inc.)
THIS COLLATERAL ASSIGNMENT OF AGREEMENTS, dated as of the __ day of
December, 1996 (this "Agreement"), is made by FRONT ROYAL, INC., a North
Carolina corporation (the "Assignor"), in favor of FIRST UNION NATIONAL BANK OF
NORTH CAROLINA ("First Union"), as agent (in such capacity, the "Agent") for the
Lenders (as hereinafter defined) under the Credit Agreement referred to below,
for the benefit of the Agent and the Lenders (collectively, the "Secured
Parties"). Capitalized terms used herein and not defined elsewhere herein shall
have the meanings given to them in the Credit Agreement referred to below.
RECITALS
A. The Assignor, certain banks and other financial institutions (the
"Lenders") and the Agent are parties to a Credit Agreement, dated as of December
18, 1996 (as amended, modified, supplemented or restated from time to time, the
"Credit Agreement"), pursuant to which the Lenders have agreed to make Loans to
the Assignor upon the terms and conditions set forth therein.
B. It is a condition to the making of the Loans to the Assignor under the
Credit Agreement that the Assignor shall have agreed, by executing and
delivering this Agreement, to secure the payment in full of the Obligations.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, to induce the Agent and the Lenders to enter into the Credit
Agreement and to induce the Lenders to makes the Loans to the Assignor
thereunder, the Assignor hereby agrees as follows:
1. Assignment and Security Interest. The Assignor hereby pledges and
assigns to the Agent, for the ratable benefit of the Secured Parties, and grants
to the Agent, for the ratable benefit of the Secured Parties, a security
interest in, all of the Assignor's right, title and interest in and to the
agreements and contracts listed on Schedule 1, together with any and all
amendments, modifications, renewals, extensions and restatements thereof and
supplements thereto (collectively, the "Contracts"), all records relating
thereto, and any and all proceeds of the foregoing (collectively, the
"Collateral"). For purposes of this Agreement, the term "proceeds" shall mean
and include all cash, securities and other property of any
nature received or receivable upon the sale, exchange or other disposition of or
realization upon any Collateral, together with all distributions in respect of
any Collateral, including pursuant to any liquidation, reorganization or similar
proceeding with respect to the Assignor.
2. Security for Obligations. This Agreement and the Collateral secure the
full and prompt payment, at any time and from time to time as and when due
(whether at the stated maturity, by acceleration or otherwise), of all
Obligations of the Assignor, including, without limitation, all principal of and
interest on the Loans and all fees, expenses, indemnities and other amounts
payable by the Assignor hereunder, under the Credit Agreement or under any other
Loan Document (including interest accruing after the filing of a petition or
commencement of a case by or with respect to the Assignor seeking relief under
any bankruptcy or insolvency laws, whether or not the claim for such interest is
allowed in such proceeding), and all Obligations that, but for the operation of
the automatic stay under Section 362(a) of the Bankruptcy Code, would become
due, in each case whether now existing or hereafter created or arising and
whether direct or indirect, absolute or contingent, due or to become due.
3. Representations and Warranties. The Assignor represents and warrants as
follows:
(a) The Assignor has heretofore delivered to the Agent a true,
complete and correct copy of each of the Contracts currently in effect,
together with all schedules and exhibits thereto and amendments and
modifications thereof. Each such Contract sets forth the entire agreement
and understanding of the parties thereto relating to the subject matter
thereof, and there are no other agreements, arrangements or
understandings, written or oral, relating to the matters covered thereby.
(b) The Assignor's right, title and interest in and to each Contract
is free and clear of any Lien whatsoever other than the security interest
created by this Agreement (and other than the Liens in favor of First
Union with respect to the Existing Senior Debt).
(c) Each of the Contracts has been duly authorized, executed and
delivered and is the legal, valid and binding obligation of the Assignor
(and, to the knowledge of the Assignor, each other party thereto),
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally or by general equitable
principles, and no defense, offset, deduction or counterclaim exists
thereunder in favor of any party.
(d) The Assignor is not in breach of or default under any of the
Contracts, and, to the knowledge of the Assignor, no other party to any of
the Contracts is in breach thereof or default thereunder.
-2-
(e) Except as specifically provided by the transactions contemplated
by the Credit Agreement and the other Loan Documents, the Assignor has not
performed any act that might prevent the Assignor from performing its
undertakings hereunder or that might prevent the Agent from operating
under or enforcing any of the terms and conditions hereof or that would
limit the Agent in such operation or enforcement.
(f) No consent, approval, authorization, exemption or other action
by, notice to, or filing with, any Governmental Authority or other Person
is required in connection with the due execution, delivery and performance
by the Assignor of this Agreement, the pledge of the Collateral hereunder
or the exercise by the Agent of the rights and remedies in respect of the
Collateral provided for herein, except for the financing statements
described in subsection (g) below and except for such consents of parties
to the Contracts as have been obtained and true and complete copies of
which have been delivered to the Agent, on behalf of the Secured Parties.
(g) Assuming proper filing of appropriately completed financing
statements in the locations listed on Schedule 2 and termination by First
Union of its Liens with respect to the Existing Senior Debt, the
assignment of the Collateral pursuant to this Agreement is effective to
create in favor of the Secured Parties a valid and perfected first
priority security interest in and Lien upon the Collateral, securing the
payment and performance of the Obligations and subject only to Permitted
Liens.
4. Covenants of the Assignor. (a) The Assignor will, for so long as this
Agreement shall be in effect, (i) observe and perform all of its obligations
under each of the Contracts and enforce the performance by each other party
thereto of all of such party's obligations thereunder, in accordance with the
terms and conditions thereof, (ii) keep original copies of all Contracts and all
records relating thereto at its principal offices, and (iii) notify the Agent in
writing promptly upon obtaining knowledge of the occurrence of any breach or
violation of or default under any of the Contracts by any party thereto.
(b) In the event the Assignor shall, at any time and from time to time
after the date hereof, enter into any new Service Agreement, all of the
Assignor's right, title and interest in and to such new Contract, all records
relating thereto and any and all proceeds of the foregoing shall, immediately
and automatically upon the Assignor's execution thereof, and without the
necessity of any further action by the Assignor or the Lender, be pledged to the
Lender as additional Collateral hereunder and shall be subject to the security
interest created hereby, and in such event the Assignor will forthwith (and in
any event within fifteen (15) days after its execution of any such new Service
Agreement) notify the Agent and furnish to the Agent true, correct and complete
copies thereof, and the Assignor will take any and all such further action that
the Agent may reasonably deem necessary and advisable to perfect the security
interest of the Agent created hereby as to such additional Collateral,
including, without limitation, the obtaining, in form and substance satisfactory
to the Agent, of any necessary consents of third parties to the pledge and
assignment hereunder. In the event that any such new Contract or the assignment
thereof as contemplated herein would,
-3-
absent any such consent, be voidable by any party as a result of such
assignment, such assignment shall be void ab initio, and in such event the
Assignor will exercise all of its rights and remedies under such Contract at the
direction of and for the benefit of the Secured Parties and will be deemed to
hold all such rights and remedies in trust for the Secured Parties until such
time as such consent shall have been obtained, at which time the pledge and
assignment of such Contract provided for hereinabove shall automatically be
remade and reaffirmed.
5. Remedies. If an Event of Default shall have occurred and be continuing,
the Agent may:
(i) notify the parties obligated on any of the Contracts to make
payment to the Agent of any amount due or to become due thereunder and
receive all such amounts (and each of such parties, upon written notice
from the Agent of the occurrence of an Event of Default, shall be and is
hereby authorized by the Assignor to perform the relevant Contracts for
the benefit of the Secured Parties in accordance with the terms and
conditions thereof, without any obligation to determine whether an Event
of Default has in fact occurred);
(ii) transfer to or register in its name or the name of any of its
agents or nominees all or any part of the Collateral, without notice to
the Assignor and with or without disclosing that such Collateral is
subject to the security interest created hereunder; and
(iii) exercise in respect of the Collateral, in addition to all
other rights and remedies provided for herein (including, without
limitation, under clauses (i) and (ii) above and Sections 8(b) and (d)) or
otherwise available to it (whether under any other Loan Document, by law,
in equity or otherwise), all rights and remedies of a secured party under
the Uniform Commercial Code as in effect in each relevant jurisdiction,
and may, without limitation of the foregoing, set off and apply to the
payment of any or all of the Obligations, any or all of the Contracts, in
such manner as the Agent shall in its sole discretion determine, enforce
payment of any of the Contracts, settle, compromise or release, in whole
or in part, any amounts owing on the Contracts, prosecute any action, suit
or proceeding with respect to the Contracts, extend the time of payment
under any of the Contracts, make allowances and adjustment with respect
thereto, and enforce any and all of the terms and provisions thereof in
the place and stead of the Assignor, and may sell, resell, assign and
deliver, in its sole discretion, all or any of the Collateral, in one or
more parcels, at public or private sale, for cash, upon credit or for
future delivery, at such time or times and at such price or prices and
upon such other terms as the Agent may deem satisfactory. If any of the
Collateral is sold by the Agent upon credit or for future delivery, the
Agent
-4-
shall not be liable for the failure of the purchaser to purchase or pay
for the same and, in the event of any such failure, the Agent may resell
such Collateral. In no event shall the Assignor be credited with any part
of the proceeds of sale of any Collateral until and to the extent cash
payment in respect thereof has actually been received by the Agent. Each
purchaser at any such sale shall hold the property sold absolutely, free
from any claim or right of whatsoever kind, including any equity or right
of redemption of the Assignor, and, to the greatest extent permitted by
applicable law, the Assignor hereby expressly waives all rights of
redemption, stay (other than the automatic stay under Section 362 of the
Bankruptcy Code) or appraisal that it has or may have under any rule of
law or statute now existing or hereafter adopted. No demand, advertisement
or notice, all of which are hereby expressly waived by the Assignor to the
greatest extent permitted by applicable law, shall be required in
connection with any sale or other disposition of any part of the
Collateral that threatens to decline speedily in value or that is of a
type customarily sold in a recognized market; otherwise, the Agent shall
give the Assignor at least ten (10) days' prior notice of the time and
place of any public sale and of the time after which any private sale or
other disposition is to be made, which notice the Assignor agrees is
commercially reasonable, the Assignor hereby expressly waiving all other
demands, advertisements and notices. The Agent shall not be obligated to
make any sale of Collateral if it shall determine not to do so, regardless
of the fact that notice of sale may have been given. The Agent may,
without notice or publication, adjourn any public or private sale or cause
the same to be adjourned from time to time by announcement at the time and
place fixed for sale, and such sale may, without further notice, be made
at the time and place to which the same was so adjourned. The Agent shall
promptly notify the Assignor (in advance if reasonably possible) of the
adjournment of any public or private sale; provided, however, that the
failure of the Agent to provide the Assignor with any such notice shall
neither affect any obligations of the Assignor hereunder or under any of
the Loan Documents nor result in any liability of the Agent to the
Assignor or any Lender. Upon each private sale of Collateral of a type
customarily sold in a recognized market and upon each public sale, the
Agent may purchase all or any of the Collateral being sold, free from any
equity, right of redemption or other claim or demand, and may make payment
therefor by endorsement and application (without recourse) of the
Obligations in lieu of cash as a credit on account of the purchase price
for such Collateral.
6. Indemnity and Expenses. The Assignor agrees:
(a) To indemnify and hold harmless the Agent and each Lender from
and against any and all claims, demands, losses, judgments and liabilities
in any way arising out of or in connection with this Agreement and the
transactions contemplated hereby, except to the extent the same shall
arise as a result of the gross negligence or willful
-5-
misconduct of the Agent or such Lender as finally determined by a court of
competent jurisdiction and not subject to any further appeal or pursuant
to arbitration as provided in Section 9.4 of the Credit Agreement; and
(b) To pay and reimburse the Agent upon demand for all reasonable
costs and expenses (including, without limitation, reasonable attorneys'
fees and expenses) that the Agent may incur in connection with (i) the
administration of this Agreement, (ii) the custody, use or preservation
of, or the sale of, collection from or other realization upon, any of the
Collateral, (iii) the exercise or enforcement of any rights or remedies
granted hereunder (including, without limitation, under Sections 8(b) and
(d)) or under the other Loan Documents, or otherwise available to it
(whether at law, in equity or otherwise), or (iv) the failure by the
Assignor to perform or observe any of the provisions hereof.
7. Application of Proceeds. (a) All proceeds collected by the Agent upon
any sale, other disposition of or realization upon any of the Collateral,
together with all other moneys received by the Agent hereunder, shall be applied
as follows:
(i) first, to the payment of all costs and expenses of such sale,
disposition or other realization, including the reasonable costs and
expenses of the Agent and the reasonable fees and expenses of its agents
and counsel, all amounts advanced by the Agent for the account of the
Assignor, and all other amounts payable under Section 6;
(ii) second, after payment in full of the amounts specified in
clause (i) above, to the ratable payment of all other Obligations owing to
the Secured Parties, in such order and manner as the Agent may elect; and
(iii) third, after payment in full of the amounts specified in
clauses (i) and (ii) above, and following the termination of this
Agreement, to the Assignor or any other Person lawfully entitled to
receive such surplus.
(b) The Assignor shall remain liable to the extent of any deficiency
between the amount of all proceeds of the Collateral and the aggregate amount of
the sums referred to in clauses (i) and (ii) of subsection (a) above.
8. Further Assurances, etc. (a) The Assignor agrees that it will, at any
time and from time to time and at its own expense, file and maintain in effect
under each applicable Uniform Commercial Code such financing statements,
continuation statements and other documents and instruments as the Agent may
reasonably deem necessary or advisable in order to perfect and preserve the
Agent's security interest in the Collateral granted or purported to be granted
hereby, and agrees to do such further acts and things and to execute and deliver
to the Agent such additional conveyances, assignments, proxies, agreements and
instruments as the Agent may reasonably deem necessary or advisable to carry out
the purposes of this Agreement or to further assure and confirm unto the Agent
its rights,
-6-
powers and remedies hereunder, including, without limitation, to use its best
efforts to obtain any approvals and consents of Governmental Authorities that
may be necessary in order to permit the Agent to exercise any of its rights and
remedies hereunder.
(b) The Assignor hereby irrevocably appoints the Agent its lawful
attorney-in-fact, with full authority in the place and stead of the Assignor and
in the name of the Assignor, the Agent or otherwise, and with full power of
substitution in the premises (which power of attorney, being coupled with an
interest, is irrevocable for so long as this Agreement shall be in effect), from
time to time in the Agent's reasonable discretion to take any action and to
execute any instruments that the Agent may deem necessary or advisable to
accomplish the purpose of this Agreement, including, without limitation:
(i) to sign the name of the Assignor on any financing statement,
continuation statement, notice or other similar document that, in the
Agent's opinion, should be made or filed in order to perfect or continue
perfected the security interest granted under this Agreement;
(ii) after the occurrence and during the continuance of an Event of
Default, to ask, demand, collect, xxx for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(iii) after the occurrence and during the continuance of an Event of
Default, to receive, endorse and collect any checks, drafts, instruments
and other orders for the payment of money made payable to the Assignor
representing any interest, dividend, distribution or other amount payable
in respect of any of the Collateral and to give full discharge for the
same; and
(iv) after the occurrence and during the continuance of an Event of
Default, to file any claims or take any action or institute any
proceedings that the Agent may deem necessary or advisable for the
collection of any of the Collateral or otherwise to enforce the rights of
the Agent with respect to any of the Collateral.
(c) The Assignor agrees that it will warrant and defend the right, title
and interest of the Secured Parties in and to the Collateral against the claims
and demands of all other Persons.
(d) If the Assignor fails to perform any covenant or agreement contained
in this Agreement or in any of the Contracts after written request to do so by
the Agent (provided that no such request shall be necessary at any time after
the occurrence and during the continuance of an Event of Default), the Agent may
itself perform, or cause the performance of, such covenant or agreement and may
take any other action that it deems
-7-
necessary and appropriate for the maintenance and preservation of the Collateral
or its security interest therein, and the reasonable expenses so incurred in
connection therewith shall be payable by the Assignor under Section 6.
9. Assignor to Remain Liable. Notwithstanding anything herein to the
contrary, the Assignor shall remain liable under each of the Contracts and shall
observe and perform all of its obligations thereunder, and shall enforce the
performance by each other party thereto of all of such party's obligations
thereunder, in accordance with the terms and conditions thereof. The exercise by
the Agent of any of its rights hereunder shall not release the Assignor from any
of its obligations under any of the Contracts, and the Agent shall not have any
obligation or liability under any of the Contracts by reason of or arising out
of the assignment thereof as provided for herein or the receipt by the Agent of
any payment relating to any of the Contracts; nor shall the Agent be obligated
to perform any of the obligations or duties of the Assignor thereunder, to make
any payment, to make any inquiry as to the nature or sufficiency of any payment
received by it or the sufficiency of any performance of any party thereunder, or
to take any action to collect or enforce any claim for payment assigned
hereunder or to which it may be entitled. The obligations of the Agent as holder
of Collateral and interests therein and with respect to the disposition thereof,
and otherwise under this Agreement and the other Loan Documents, are only those
expressly set forth in this Agreement and the other Loan Documents. The powers
conferred on the Agent hereunder are solely to protect the interests of the
Secured Parties in the Collateral and shall not impose any duty upon it to
exercise any such powers. Except for treatment of the Collateral in its
possession in a manner substantially equivalent to that which the Agent, in its
individual capacity, accords its own property of a similar nature, and the
accounting for moneys actually received by it hereunder, the Agent shall have no
duty as to any Collateral or as to the taking of any necessary steps to preserve
rights against prior parties or any other rights pertaining to the Collateral.
Neither the Agent nor any of its officers, directors, employees or agents shall
be liable for any action taken or omitted to be taken by it hereunder or in
connection herewith, except to the extent arising out of its own gross
negligence or willful misconduct.
10. Certain Actions. The Assignor will not (i) sell or otherwise dispose
of, mortgage, pledge, grant any Lien with respect to or otherwise encumber, any
Contract, any Collateral or any interest therein, except for the security
interest created by this Agreement, (ii) without the prior written consent of
the Agent (which consent shall not be unreasonably withheld or delayed), amend,
modify, supplement or waive any provision of any Contract, or compromise,
release or extend the time for payment of any obligation thereunder, (iii)
invoke or assert the benefit of any rule of law or statute now or hereafter in
effect, including, without limitation, any right to prior notice or judicial
hearing or marshalling of assets in connection with the Agent's possession,
custody or disposition of any Collateral and any appraisal, valuation, stay
(other than the automatic stay under Section 362 of the Bankruptcy Code),
extension, moratorium or redemption law, or take or fail to take any other
action, that would, or could reasonably be expected to, have the effect of
delaying, impeding or preventing the exercise of any rights and remedies in
respect of any Collateral, the absolute
-8-
sale of any Collateral or the possession thereof by any purchaser at any sale
thereof, and, to the greatest extent permitted by applicable law, the Assignor
hereby waives the benefit of all such laws, or (iv) agree to do or cause to be
done any of the foregoing.
11. Security Interest Absolute. The Assignor agrees that its obligations,
and the security interest granted to and all rights of the Agent, hereunder are
irrevocable, absolute and unconditional and shall not be discharged, limited or
otherwise affected by reason of any of the following, whether or not the
Assignor has notice or knowledge thereof:
(i) any change in the time, manner or place of payment of, or in any
other term of, any Obligations, or any amendment, modification or
supplement to, restatement of, or consent to any rescission or waiver of
or departure from, any provisions of the Credit Agreement, any other Loan
Document or any agreement or instrument delivered pursuant thereto;
(ii) the invalidity or unenforceability of any particular
Obligations or any provisions of the Credit Agreement, any other Loan
Document or any agreement or instrument delivered pursuant thereto;
(iii) the obtaining of any guaranty or other liability in respect of
any Obligations; any sale, exchange, release, substitution, compromise,
nonperfection or other action or inaction in respect of any Collateral or
other collateral pledged as direct or indirect security for any
Obligations (including the taking of a security interest in any property
as security for the Obligations or for any guaranty or other liability in
respect thereof); or any discharge, modification, settlement, compromise,
extension or other action or inaction in respect of any guaranty or other
direct or indirect liability for any Obligations;
(iv) the proceeding against or resorting to the Collateral for
payment on any Obligations, whether or not the Agent shall have proceeded
against or resorted to any other collateral pledged as direct or indirect
security for any Obligations or shall have proceeded against any other
Person primarily or secondarily liable with respect to the Obligations; or
(v) any other circumstance that might otherwise constitute a legal
or equitable discharge of, or a defense, set-off or counterclaim available
to, the Assignor, other than the indefeasible payment in full of the
Obligations.
12. No Waiver. The rights and remedies of the Secured Parties expressly
set forth in this Agreement and the other Loan Documents are cumulative and in
addition to, and not exclusive of, all other rights and remedies available at
law, in equity or otherwise. No delay or failure to take action on the part of
any Secured Party in exercising any right, power or privilege shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or privilege preclude other or further exercise thereof or the
-9-
exercise of any other right, power or privilege or be construed to be a waiver
of any Default or Event of Default. No course of dealing between the Assignor
and the Secured Parties or their agents or employees shall be effective to
change, modify or discharge any provision of this Agreement or any other Loan
Document or to constitute a waiver of any Default or Event of Default. No notice
to or demand upon the Assignor in any case shall entitle the Assignor to any
other or further notice or demand in similar or other circumstances or
constitute a waiver of the right of any Secured Party to exercise any right or
remedy or take any other or further action in any circumstances without notice
or demand.
13. Amendments, Waivers, etc. No amendment, modification, waiver,
discharge or termination of, or consent to any departure by the Assignor from,
any provision of this Agreement, shall be effective unless in a writing signed
by the Agent and executed and delivered in accordance with Section 9.6 of the
Credit Agreement, and then the same shall be effective only in the specific
instance and for the specific purpose for which given.
14. Continuing Security Interest; Term; Successors and Assigns;
Assignment; Termination; Survival. This Agreement shall create a continuing
security interest in the Collateral and shall secure the payment and performance
of all of the Obligations as the same may arise and be outstanding at any time
and from time to time from and after the date hereof, and shall (i) remain in
full force and effect until the indefeasible payment in full of the Obligations,
(ii) be binding upon and enforceable against the Assignor and its successors and
assigns (provided, however, that the Assignor may not sell, assign or transfer
any of its rights, interests, duties or obligations hereunder without the prior
written consent of the Lenders) and (iii) inure to the benefit of and be
enforceable by each Secured Party and its successors and assigns. Upon the
indefeasible payment in full of the Obligations, this Agreement shall terminate,
and the Agent, at the request and expense of the Assignor, will execute and
deliver to the Assignor such documents and instruments evidencing such
termination as the Assignor may reasonably request and will assign, transfer and
deliver to the Assignor, without recourse and without representation or warranty
(other than that the Collateral is free and clear of Liens incurred by the Agent
or Lenders), such of the Collateral as may then be in the possession of the
Agent together with any moneys then held by the Agent hereunder. All
representations, warranties, covenants and agreements herein shall survive the
execution and delivery of this Agreement.
15. Notices. All notices and other communications provided for hereunder
shall be given to the parties in the manner, at the addresses and subject to the
other notice provisions set forth in the Credit Agreement.
16. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of North Carolina (without
regard to the conflicts of law provisions thereof).
17. Severability. To the extent any provision of this Agreement is
prohibited by or invalid under the applicable law of any jurisdiction, such
provision shall be
-10-
ineffective only to the extent of such prohibition or invalidity and only in any
such jurisdiction, without prohibiting or invalidating such provision in any
other jurisdiction or the remaining provisions of this Agreement in any
jurisdiction.
18. Construction. The headings of the various sections and subsections of
this Agreement have been inserted for convenience only and shall not in any way
affect the meaning or construction of any of the provisions hereof. Unless the
context otherwise requires, words in the singular include the plural and words
in the plural include the singular. For purposes of this Agreement, in addition
to the terms defined elsewhere herein, all terms used herein without definition
shall have the meanings accorded to them by the Uniform Commercial Code to the
extent the same are used or defined therein.
19. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto on separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the Assignor has caused this Agreement to be executed
under seal by its duly authorized officer as of the date first above written.
FRONT ROYAL, INC.
By:_________________________________
Title:_______________________________
Accepted and agreed to:
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA, as Agent
By:___________________________
Title:_____________________
-11-
Schedule 1 to Collateral Assignment
of Agreements (Front Royal, Inc.)
First Union National Bank
of North Carolina, as Agent
Front Royal, Inc.
December 18, 1996 / $38,000,000
-----------------------------------
CONTRACTS
1.
2.
3.
Schedule 2 to Collateral Assignment
of Agreements (Front Royal, Inc.)
First Union National Bank
of North Carolina, as Agent
Front Royal, Inc.
December 18, 1996 / $38,000,000
-----------------------------------
FILING LOCATIONS
1. Secretary of State of North Carolina
2. Wake County, North Carolina Register of Deeds
Exhibit F-2 to Credit Agreement
First Union National Bank
of North Carolina, as Agent
Front Royal, Inc.
December 18, 1996/ $38,000,000
-----------------------------------
COLLATERAL ASSIGNMENT OF AGREEMENTS
(Non-Insurance Subsidiaries)
THIS COLLATERAL ASSIGNMENT OF AGREEMENTS, dated as of the ________ day of
December, 1996 (this "Agreement"), is made by each of the undersigned
non-insurance subsidiaries (the "Assignors") of Front Royal, Inc., a North
Carolina corporation, (the "Borrower"), in favor of FIRST UNION NATIONAL BANK OF
NORTH CAROLINA ("First Union"), as agent (in such capacity, the "Agent") for the
Lenders (as hereinafter defined) under the Credit Agreement referred to below,
for the benefit of the Agent and the Lenders (collectively, the "Secured
Parties"). Capitalized terms used herein and not defined elsewhere herein shall
have the meanings given to them in the Credit Agreement referred to below.
RECITALS
A. The Borrower, certain banks and other financial institutions (the
"Lenders") and the Agent are parties to a Credit Agreement, dated as of December
18, 1996 (as amended, modified, supplemented or restated from time to time, the
"Credit Agreement"), pursuant to which the Lenders have agreed to make Loans to
the Borrower upon the terms and conditions set forth therein.
B. Each of the Assignors is a Non-Insurance Subsidiary of the Borrower and
is a party to a Subsidiaries Guaranty, dated as of the date hereof (as amended,
modified, supplemented or restated from time to time, the "Guaranty"), pursuant
to which the Assignor, together with all other Non-Insurance Subsidiaries of the
Borrower, has unconditionally guaranteed all of the Obligations of the Borrower
under the Loan Documents.
C. It is a condition to the making of the Loans to the Borrower under the
Credit Agreement that each of the Assignors shall have agreed, by executing and
delivering this Agreement, to secure the payment in full of its obligations to
the Agent and Lenders under the Guaranty. The Lenders are relying on this
Agreement in their decisions to make the Loans to the Borrower under the Credit
Agreement, and would not enter into the Credit Agreement without this Agreement.
D. Each Assignor will obtain benefits as a result of the making of the
Loans to the Borrower under the Credit Agreement, which benefits are hereby
acknowledged, and, accordingly, desires to execute and deliver this Agreement.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, to induce the Agent and the Lenders to enter into the Credit
Agreement and to induce the Lenders to makes the Loans to the Borrower
thereunder, each Assignor hereby agrees as follows:
1. Assignment and Security Interest. Each Assignor hereby pledges and
assigns to the Agent, for the ratable benefit of the Secured Parties, and grants
to the Agent, for the ratable benefit of the Secured Parties, a security
interest in, all of the Assignor's right, title and interest in and to the
agreements and contracts listed on Schedule 1, together with any and all
amendments, modifications, renewals, extensions and restatements thereof and
supplements thereto (collectively, the "Contracts"), all records relating
thereto, and any and all proceeds of the foregoing (collectively, the
"Collateral"). For purposes of this Agreement, the term "proceeds" shall mean
and include all cash, securities and other property of any nature received or
receivable upon the sale, exchange or other disposition of or realization upon
any Collateral, together with all distributions in respect of any Collateral,
including pursuant to any liquidation, reorganization or similar proceeding with
respect to any Assignor.
2. Security for Obligations. This Agreement and the Collateral secure the
full and prompt payment, at any time and from time to time as and when due
(whether at the stated maturity, by acceleration or otherwise), of the Total
Obligations (as defined in the Guaranty) and all fees, expenses, indemnities and
other amounts payable by any Assignor hereunder, (including interest accruing
after the filing of a petition or commencement of a case by or with respect to
any Assignor seeking relief under any bankruptcy or insolvency laws, whether or
not the claim for such interest is allowed in such proceeding), and all
obligations that, but for the operation of the automatic stay under Section
362(a) of the Bankruptcy Code, would become due, in each case whether now
existing or hereafter created or arising and whether direct or indirect,
absolute or contingent, due or to become due (all obligations described in this
Section, collectively, the "Secured Obligations").
3. Representations and Warranties. Each Assignor represents and warrants
as follows, which representations and warranties shall be true and correct as of
the date hereof with respect to each of the Contracts listed on Schedule 1 and
shall be true and correct, and are hereby remade and reaffirmed, as of the date
of any new Service Agreement with respect to such Service Agreement:
(a) Each Assignor has heretofore delivered to the Agent a true,
complete and correct copy of each of the Contracts currently in effect,
together with all schedules and exhibits thereto and amendments and
modifications thereof. Each such Contract sets forth the entire agreement
and understanding of the parties thereto relating to the subject matter
thereof, and there are no other agreements, arrangements or
understandings, written or oral, relating to the matters covered thereby.
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(b) Each Assignor's right, title and interest in and to each
Contract is free and clear of any Lien whatsoever other than the security
interest created by this Agreement (and other than the Liens in favor of
First Union with respect to the Existing Senior Debt).
(c) Each of the Contracts has been duly authorized, executed and
delivered and is the legal, valid and binding obligation of the Assignor
(and, to the knowledge of the Assignor, each other party thereto),
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally or by general equitable
principles, and no defense, offset, deduction or counterclaim exists
thereunder in favor of any party.
(d) No Assignor is in breach of or default under any of the
Contracts, and, to the knowledge of the Assignors, no other party to any
of the Contracts is in breach thereof or default thereunder.
(e) Except as specifically provided by the transactions contemplated
by the Credit Agreement and the other Loan Documents, no Assignor has
performed any act that might prevent such Assignor from performing its
undertakings hereunder or that might prevent the Agent from operating
under or enforcing any of the terms and conditions hereof or that would
limit the Agent in such operation or enforcement.
(f) No consent, approval, authorization, exemption or other action
by, notice to, or filing with, any Governmental Authority or other Person
is required in connection with the due execution, delivery and performance
by each Assignor of this Agreement, the pledge of the Collateral hereunder
or the exercise by the Agent of the rights and remedies in respect of the
Collateral provided for herein, except for the financing statements
described in subsection (g) below and except for such consents of parties
to the Contracts as have been obtained and true and complete copies of
which have been delivered to the Agent, on behalf of the Secured Parties.
(g) Assuming proper filing of appropriately completed financing
statements in the locations listed on Schedule 2 and termination by First
Union of its Liens with respect to the Existing Senior Debt, the
assignment of the Collateral pursuant to this Agreement is effective to
create in favor of the Secured Parties a valid and perfected first
priority security interest in and Lien upon the Collateral, securing the
payment and performance of the Secured Obligations and subject only to
Permitted Liens.
4. Covenants of the Assignors. (a) Each Assignor will, for so long as this
Agreement shall be in effect, (i) observe and perform all of its obligations
under each of the Contracts and enforce the performance by each other party
thereto of all of such party's obligations thereunder, in accordance with the
terms and conditions thereof, (ii) keep original copies of all of its Contracts
and all records relating thereto at its principal offices, and (iii) notify the
Agent in writing promptly upon obtaining knowledge of the occurrence of any
breach or violation of or default under any of the Contracts by any party
thereto.
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(b) In the event any Assignor shall, at any time and from time to time
after the date hereof, enter into any new Service Agreement, all of such
Assignor's right, title and interest in and to such new Contract, all records
relating thereto and any and all proceeds of the foregoing shall, immediately
and automatically upon the Assignor's execution thereof, and without the
necessity of any further action by the Assignor or the Agent, be pledged to the
Agent as additional Collateral hereunder and shall be subject to the security
interest created hereby, and in such event the Assignor will forthwith (and in
any event within fifteen (15) days after its execution of any such new Service
Agreement) notify the Agent and furnish to the Agent true, correct and complete
copies thereof, and such Assignor will take any and all such further action that
the Agent may reasonably deem necessary and advisable to perfect the security
interest of the Agent created hereby as to such additional Collateral,
including, without limitation, the obtaining, in form and substance satisfactory
to the Agent, of any necessary consents of third parties to the pledge and
assignment hereunder. In the event that any such new Contract or the assignment
thereof as contemplated herein would, absent any such consent, be violable by
any party as a result of such assignment, such assignment shall be void ab
initio, and in such event the Assignor will exercise all of its rights and
remedies under such Contract at the direction of and for the benefit of the
Secured Parties and will be deemed to hold all such rights and remedies in trust
for the Secured Parties until such time as such consent shall have been
obtained, at which time the pledge and assignment of such Contract provided for
hereinabove shall automatically be remade and reaffirmed.
5. Remedies. If an Event of Default shall have occurred and be continuing,
the Agent may:
(i) notify the parties obligated on any of the Contracts to make
payment to the Agent of any amount due or to become due thereunder and
receive all such amounts (and each of such parties, upon written notice
from the Agent of the occurrence of an Event of Default, shall be and is
hereby authorized by each Assignor to perform the relevant Contracts for
the benefit of the Secured Parties in accordance with the terms and
conditions thereof, without any obligation to determine whether an Event
of Default has in fact occurred);
(ii) transfer to or register in its name or the name of any of its
agents or nominees all or any part of the Collateral, without notice to
any Assignor and with or without disclosing that such Collateral is
subject to the security interest created hereunder; and
(iii) exercise in respect of the Collateral, in addition to all
other rights and remedies provided for herein (including, without
limitation, under clauses (i) and (ii) above and Sections 8(b) and (d)) or
otherwise available to it (whether under any other Loan Document, by law,
in equity or otherwise), all rights and remedies of a secured party under
the Uniform
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Commercial Code as in effect in each relevant jurisdiction, and may,
without limitation of the foregoing, set off and apply to the payment of
any or all of the Secured Obligations, any or all of the Contracts, in
such manner as the Agent shall in its sole discretion determine, enforce
payment of any of the Contracts, settle, compromise or release, in whole
or in part, any amounts owing on the Contracts, prosecute any action, suit
or proceeding with respect to the Contracts, extend the time of payment
under any of the Contracts, make allowances and adjustment with respect
thereto, and enforce any and all of the terms and provisions thereof in
the place and stead of each of the Assignors, and may sell, resell, assign
and deliver, in its sole discretion, all or any of the Collateral, in one
or more parcels, at public or private sale, for cash, upon credit or for
future delivery, at such time or times and at such price or prices and
upon such other terms as the Agent may deem satisfactory. If any of the
Collateral is sold by the Agent upon credit or for future delivery, the
Agent shall not be liable for the failure of the purchaser to purchase or
pay for the same and, in the event of any such failure, the Agent may
resell such Collateral. In no event shall any Assignor be credited with
any part of the proceeds of sale of any Collateral until and to the extent
cash payment in respect thereof has actually been received by the Agent.
Each purchaser at any such sale shall hold the property sold absolutely,
free from any claim or right of whatsoever kind, including any equity or
right of redemption of the Assignor, and, to the greatest extent permitted
by applicable law, each Assignor hereby expressly waives all rights of
redemption, stay (other than the automatic stay under Section 362 of the
Bankruptcy Code) or appraisal that it has or may have under any rule of
law or statute now existing or hereafter adopted. No demand, advertisement
or notice, all of which are hereby expressly waived by each Assignor to
the greatest extent permitted by applicable law, shall be required in
connection with any sale or other disposition of any part of the
Collateral that threatens to decline speedily in value or that is of a
type customarily sold in a recognized market; otherwise, the Agent shall
give the relevant Assignor at least ten (10) days' prior notice of the
time and place of any public sale and of the time after which any private
sale or other disposition is to be made, which notice each Assignor agrees
is commercially reasonable, each Assignor hereby expressly waiving all
other demands, advertisements and notices. The Agent shall not be
obligated to make any sale of Collateral if it shall determine not to do
so, regardless of the fact that notice of sale may have been given. The
Agent may, without notice or publication, adjourn any public or private
sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for sale, and such sale may, without further
notice, be made at the time and place to which the same was so adjourned.
The Agent shall promptly notify the relevant Assignor (in advance if
reasonably possible) of the adjournment of any public or private sale;
provided, however, that the failure of the Agent to provide such Assignor
with any such notice shall neither affect any obligations
-5-
of the Assignors hereunder or under any of the Loan Documents nor result
in any liability of the Agent to any Assignor or any Secured Party. Upon
each private sale of Collateral of a type customarily sold in a recognized
market and upon each public sale, the Agent may purchase all or any of the
Collateral being sold, free from any equity, right of redemption or other
claim or demand, and may make payment therefor by endorsement and
application (without recourse) of the Secured Obligations in lieu of cash
as a credit on account of the purchase price for such Collateral.
6. Indemnity and Expenses. Each Assignor agrees:
(a) To indemnify and hold harmless the Agent and each Lender from
and against any and all claims, demands, losses, judgments and liabilities
in any way arising out of or in connection with this Agreement and the
transactions contemplated hereby, except to the extent the same shall
arise as a result of the gross negligence or willful misconduct of the
Agent or such Lender as finally determined by a court of competent
jurisdiction and not subject to any further appeal or pursuant to
arbitration as provided in Section 14 of the Guaranty; and
(b) To pay and reimburse the Agent upon demand for all reasonable
costs and expenses (including, without limitation, reasonable attorneys'
fees and expenses) that the Agent may incur in connection with (i) the
administration of this Agreement, (ii) the custody, use or preservation
of, or the sale of, collection from or other realization upon, any of the
Collateral, (iii) the exercise or enforcement of any rights or remedies
granted hereunder (including, without limitation, under Sections 8(b) and
(d)) or under the other Loan Documents, or otherwise available to it
(whether at law, in equity or otherwise), or (iv) the failure by any
Assignor to perform or observe any of the provisions hereof.
7. Application of Proceeds. (a) All proceeds collected by the Agent upon
any sale, other disposition of or realization upon any of the Collateral,
together with all other moneys received by the Agent hereunder, shall be applied
as follows:
(i) first, to the payment of all costs and expenses of such sale,
disposition or other realization, including the reasonable costs and
expenses of the Agent and the reasonable fees and expenses of its agents
and counsel, all amounts advanced by the Agent for the account of any
Assignor, and all other amounts payable under Section 6;
(ii) second, after payment in full of the amounts specified in
clause (i) above, to the ratable payment of all other Secured Obligations
owing to the Secured Parties, in such order and manner as the Agent may
elect; and
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(iii) third, after payment in full of the amounts specified in
clauses (i) and (ii) above, and following the termination of this
Agreement, to the Assignors or any other Person lawfully entitled to
receive such surplus.
(b) Each Assignor shall remain liable to the extent of any deficiency
between the amount of all proceeds of the Collateral and the aggregate amount of
the sums referred to in clauses (i) and (ii) of subsection (a) above.
8. Further Assurances, etc. (a) Each Assignor agrees that it will, at any
time and from time to time and at its own expense, file and maintain in effect
under each applicable Uniform Commercial Code such financing statements,
continuation statements and other documents and instruments as the Agent may
reasonably deem necessary or advisable in order to perfect and preserve the
Agent's security interest in the Collateral granted or purported to be granted
hereby, and agrees to do such further acts and things and to execute and deliver
to the Agent such additional conveyances, assignments, proxies, agreements and
instruments as the Agent may reasonably deem necessary or advisable to carry out
the purposes of this Agreement or to further assure and confirm unto the Agent
its rights, powers and remedies hereunder, including, without limitation, to use
its best efforts to obtain any approvals and consents of Governmental
Authorities that may be necessary in order to permit the Agent to exercise any
of its rights and remedies hereunder.
(b) Each Assignor hereby irrevocably appoints the Agent its lawful
attorney-in-fact, with full authority in the place and stead of the Assignor and
in the name of the Assignor, the Agent or otherwise, and with full power of
substitution in the premises (which power of attorney, being coupled with an
interest, is irrevocable for so long as this Agreement shall be in effect), from
time to time in the Agent's reasonable discretion to take any action and to
execute any instruments that the Agent may deem necessary or advisable to
accomplish the purpose of this Agreement, including, without limitation:
(i) to sign the name of the Assignor on any financing statement,
continuation statement, notice or other similar document that, in the
Agent's opinion, should be made or filed in order to perfect or continue
perfected the security interest granted under this Agreement;
(ii) after the occurrence and during the continuance of an Event of
Default, to ask, demand, collect, xxx for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(iii) after the occurrence and during the continuance of an Event of
Default, to receive, endorse and collect any checks, drafts, instruments
and other orders for the payment of money made payable to the Assignor
representing any interest, dividend, distribution or other amount
-7-
payable in respect of any of the Collateral and to give full discharge for
the same; and
(iv) after the occurrence and during the continuance of an Event of
Default, to file any claims or take any action or institute any
proceedings that the Agent may deem necessary or advisable for the
collection of any of the Collateral or otherwise to enforce the rights of
the Agent with respect to any of the Collateral.
(c) Each Assignor agrees that it will warrant and defend the right, title
and interest of the Secured Parties in and to the Collateral against the claims
and demands of all other Persons.
(d) If any Assignor fails to perform any covenant or agreement contained
in this Agreement or in any of the Contracts after written request to do so by
the Agent (provided that no such request shall be necessary at any time after
the occurrence and during the continuance of an Event of Default), the Agent may
itself perform, or cause the performance of, such covenant or agreement and may
take any other action that it deems necessary and appropriate for the
maintenance and preservation of the Collateral or its security interest therein,
and the reasonable expenses so incurred in connection therewith shall be payable
by the Assignors under Section 6.
9. Assignors to Remain Liable. Notwithstanding anything herein to the
contrary, each Assignor shall remain liable under each of the Contracts and
shall observe and perform all of its obligations thereunder, and shall enforce
the performance by each other party thereto of all of such party's obligations
thereunder, in accordance with the terms and conditions thereof. The exercise by
the Agent of any of its rights hereunder shall not release any Assignor from any
of its obligations under any of the Contracts, and the Agent shall not have any
obligation or liability under any of the Contracts by reason of or arising out
of the assignment thereof as provided for herein or the receipt by the Agent of
any payment relating to any of the Contracts; nor shall the Agent be obligated
to perform any of the obligations or duties of any Assignor thereunder, to make
any payment, to make any inquiry as to the nature or sufficiency of any payment
received by it or the sufficiency of any performance of any party thereunder, or
to take any action to collect or enforce any claim for payment assigned
hereunder or to which it may be entitled. The obligations of the Agent as holder
of Collateral and interests therein and with respect to the disposition thereof,
and otherwise under this Agreement and the other Loan Documents, are only those
expressly set forth in this Agreement and the other Loan Documents. The powers
conferred on the Agent hereunder are solely to protect the interests of the
Secured Parties in the Collateral and shall not impose any duty upon it to
exercise any such powers. Except for treatment of the Collateral in its
possession in a manner substantially equivalent to that which the Agent, in its
individual capacity, accords its own property of a similar nature, and the
accounting for moneys actually received by it hereunder, the Agent shall have no
duty as to any Collateral or as to the taking of any necessary steps to preserve
rights against prior parties or any other
-8-
rights pertaining to the Collateral. Neither the Agent nor any of its officers,
directors, employees or agents shall be liable for any action taken or omitted
to be taken by it hereunder or in connection herewith, except to the extent
arising out of its own gross negligence or willful misconduct.
10. Certain Actions. Each Assignor agrees that it will not (i) sell or
otherwise dispose of, mortgage, pledge, grant any Lien with respect to or
otherwise encumber, any Contract, any Collateral or any interest therein, except
for the security interest created by this Agreement, (ii) without the prior
written consent of the Agent (which consent shall not be unreasonably withheld
or delayed), amend, modify, supplement or waive any provision of any Contract,
or compromise, release or extend the time for payment of any obligation
thereunder, (iii) invoke or assert the benefit of any rule of law or statute now
or hereafter in effect, including, without limitation, any right to prior notice
or judicial hearing or marshalling of assets in connection with the Agent's
possession, custody or disposition of any Collateral and any appraisal,
valuation, stay (other than the automatic stay under Section 362 of the
Bankruptcy Code), extension, moratorium or redemption law, or take or fail to
take any other action, that would, or could reasonably be expected to, have the
effect of delaying, impeding or preventing the exercise of any rights and
remedies in respect of any Collateral, the absolute sale of any Collateral or
the possession thereof by any purchaser at any sale thereof, and, to the
greatest extent permitted by applicable law, the Assignor hereby waives the
benefit of all such laws, or (iv) agree to do or cause to be done any of the
foregoing.
11. Security Interest Absolute. Each Assignor agrees that its obligations,
and the security interest granted to and all rights of the Agent, hereunder are
irrevocable, absolute and unconditional and shall not be discharged, limited or
otherwise affected by reason of any of the following, whether or not the
Assignor has notice or knowledge thereof:
(i) any change in the time, manner or place of payment of, or in any
other term of, any Obligations or Secured Obligations, or any amendment,
modification or supplement to, restatement of, or consent to any
rescission or waiver of or departure from, any provisions of the Credit
Agreement, any other Loan Document or any agreement or instrument
delivered pursuant thereto;
(ii) the invalidity or unenforceability of any particular
Obligations or Secured Obligations or any provisions of the Credit
Agreement, any other Loan Document or any agreement or instrument
delivered pursuant thereto;
(iii) the obtaining of any guaranty or other liability in respect of
any Secured Obligations; any sale, exchange, release, substitution,
compromise, nonperfection or other action or inaction in respect of any
Collateral or other collateral pledged as direct or indirect security for
any Secured Obligations (including the taking of a security interest in
any property
-9-
as security for the Secured Obligations or for any guaranty or other
liability in respect thereof); or any discharge, modification, settlement,
compromise, extension or other action or inaction in respect of any
guaranty or other direct or indirect liability for any Secured
Obligations;
(iv) the proceeding against or resorting to the Collateral for
payment on any Secured Obligations, whether or not the Agent shall have
proceeded against or resorted to any other collateral pledged as direct or
indirect security for any Secured Obligations or shall have proceeded
against any other Person primarily or secondarily liable with respect to
the Secured Obligations; or
(v) any other circumstance that might otherwise constitute a legal
or equitable discharge of, or a defense, set-off or counterclaim available
to, the Assignor, other than the indefeasible payment in full of the
Secured Obligations.
12. No Waiver. The rights and remedies of the Secured Parties expressly
set forth in this Agreement and the other Loan Documents are cumulative and in
addition to, and not exclusive of, all other rights and remedies available at
law, in equity or otherwise. No delay or failure to take action on the part of
any Secured Party in exercising any right, power or privilege shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or privilege preclude other or further exercise thereof or the exercise of
any other right, power or privilege or be construed to be a waiver of any
Default or Event of Default. No course of dealing between any Assignor and the
Secured Parties or their agents or employees shall be effective to change,
modify or discharge any provision of this Agreement or any other Loan Document
or to constitute a waiver of any Default or Event of Default. No notice to or
demand upon any Assignor in any case shall entitle the Assignors to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the right of any Secured Party to exercise any right or remedy or take
any other or further action in any circumstances without notice or demand.
13. Amendments, Waivers, etc. No amendment, modification, waiver,
discharge or termination of, or consent to any departure by any Assignor from,
any provision of this Agreement, shall be effective unless in a writing signed
by the Agent and executed and delivered in accordance with Section 15 of the
Guaranty, and then the same shall be effective only in the specific instance and
for the specific purpose for which given.
14. Continuing Security Interest; Term; Successors and Assigns;
Assignment; Termination; Survival. This Agreement shall create a continuing
security interest in the Collateral and shall secure the payment and performance
of all of the Secured Obligations as the same may arise and be outstanding at
any time and from time to time from and after the date hereof, and shall (i)
remain in full force and effect until the indefeasible payment in full of the
Secured Obligations, (ii) be binding upon and enforceable against the Assignors
and
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their successors and assigns (provided, however, that the Assignors may not
sell, assign or transfer any of their rights, interests, duties or obligations
hereunder without the prior written consent of the Lenders) and (iii) inure to
the benefit of and be enforceable by each Secured Party and its successors and
assigns. Upon the indefeasible payment in full of the Secured Obligations, this
Agreement shall terminate, and the Agent, at the request and expense of the
Assignors, will execute and deliver to the Assignors such documents and
instruments evidencing such termination as the Assignors may reasonably request
and will assign, transfer and deliver to the Assignors, without recourse and
without representation or warranty (other than that the Collateral is free and
clear of any Liens incurred by the Agent or Lenders), such of the Collateral as
may then be in the possession of the Agent together with any moneys then held by
the Agent hereunder. All representations, warranties, covenants and agreements
herein shall survive the execution and delivery of this Agreement.
15. Notices. All notices and other communications provided for hereunder
shall be given to the parties in the manner, at the addresses and subject to the
other notice provisions set forth in the Guaranty.
16. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of North Carolina (without
regard to the conflicts of law provisions thereof).
17. Severability. To the extent any provision of this Agreement is
prohibited by or invalid under the applicable law of any jurisdiction, such
provision shall be ineffective only to the extent of such prohibition or
invalidity and only in any such jurisdiction, without prohibiting or
invalidating such provision in any other jurisdiction or the remaining
provisions of this Agreement in any jurisdiction.
18. Construction. The headings of the various sections and subsections of
this Agreement have been inserted for convenience only and shall not in any way
affect the meaning or construction of any of the provisions hereof. Unless the
context otherwise requires, words in the singular include the plural and words
in the plural include the singular. For purposes of this Agreement, in addition
to the terms defined elsewhere herein, all terms used herein without definition
shall have the meanings accorded to them by the Uniform Commercial Code to the
extent the same are used or defined therein.
19. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto on separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
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IN WITNESS WHEREOF, the Assignors have caused this Agreement to be
executed under seal by its duly authorized officer as of the date first above
written.
COLONY MANAGEMENT SERVICES, INC.
By:__________________________________
Title:_______________________________
FRONT ROYAL ENVIRONMENTAL
SERVICES, INC.
By:__________________________________
Title:_______________________________
Accepted and agreed to:
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA, as Agent
By:_______________________________
Title:____________________________
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Schedule 1 to Collateral Assignment
of Agreements (Subsidiaries)
First Union National Bank
of North Carolina, as Agent
Front Royal, Inc.
December 18, 1996 / $38,000,000
-----------------------------------
CONTRACTS
1.
2.
3.
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Schedule 2 to Collateral Assignment
of Agreements (Subsidiaries)
First Union National Bank
of North Carolina, as Agent
Front Royal, Inc.
December 18, 1996 / $38,000,000
-----------------------------------
FILING LOCATIONS
1. Secretary of State of North Carolina
2. Wake County, North Carolina Register of Deeds
3. [Virginia and other filing locations]
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Exhibit G to Credit Agreement
First Union National Bank
of North Carolina, as Agent
Front Royal, Inc.
December 18, 1996 / $38,000,000
-----------------------------------
ESCROW AGREEMENT
THIS ESCROW AGREEMENT, dated as of the ___ day of December, 1996 (this
"Agreement"), is made among FIRST UNION NATIONAL BANK OF NORTH CAROLINA, as
agent (in such capacity, the "Agent") for the Lenders (as hereinafter defined)
under the Credit Agreement referred to below, FRONT ROYAL, INC., a North
Carolina corporation (the "Borrower"), and FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, as escrow agent hereunder (in such capacity, the "Escrow Agent").
Capitalized terms used herein and not defined elsewhere herein shall have the
meanings given to them in the Credit Agreement referred to below.
RECITALS
A. The Borrower, certain banks and other financial institutions (the
"Lenders") and the Agent are parties to a Credit Agreement, dated as of December
18, 1996 (as amended, modified, supplemented or restated from time to time, the
"Credit Agreement"), pursuant to which the Lenders have agreed to make Loans to
the Borrower upon the terms and conditions set forth therein.
B. The Borrower and the Agent have, as of the date hereof, entered into
the Pledge and Security Agreement, whereby the Borrower has granted to the
Agent, as security for its Obligations under the Credit Agreement and the other
Loan Documents, a first priority security interest in and Lien upon, among other
things, the funds to be maintained and held from time to time in the Cash
Collateral Account (as hereinafter defined).
C. It is a condition to the making of the Loans to the Borrower under the
Credit Agreement that the Borrower shall have agreed, by executing and
delivering this Agreement, to establish the Cash Collateral Account.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, the payment by the
Borrower to the Escrow Agent of $1.00 and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, and to induce the
Lenders and the Agent to enter into the Credit Agreement and to induce the
Lenders to make the Loans to the Borrower thereunder, the parties hereby agree
as follows:
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1. Appointment of Escrow Agent. The Borrower and the Agent hereby
appoint the Escrow Agent to serve as escrow agent hereunder. The Escrow
Agent accepts such appointment and agrees to hold, invest and disburse the
funds maintained in the Cash Collateral Account in accordance with this
Agreement and as agent for the benefit of the Agent and the Lenders so
that the Agent shall have, pursuant to the Pledge and Security Agreement,
a valid and perfected first priority security interest in and Lien upon
all funds maintained and held in the Cash Collateral Account.
2. Creation of Cash Collateral Account; Initial Deposit. The
Borrower and the Agent hereby establish an escrow account to be maintained
from and after the date hereof by and in the name of the Escrow Agent and
designated the "Front Royal Cash Collateral Account" (the "Cash Collateral
Account"). Concurrently with the execution of this Agreement, the Borrower
is delivering to the Escrow Agent, for deposit into the Cash Collateral
Account as required under Section 3.01(k) of the Credit Agreement, cash in
the amount of $6,000,000, by wire transfer to First Union National Bank of
North Carolina, ABA # 000000000, Account No. 465946, Re: Front Royal,
Inc., Attention: Xxxxx Xxxxxxxx, which delivery and receipt of which
amount is hereby confirmed by the Escrow Agent. All deposits of funds
into, investment of funds held in, and disbursements of funds from the
Cash Collateral Account shall be made on the terms and conditions set
forth herein.
3. Withdrawals; Disbursements; Deficits. (a) The Borrower shall not
be permitted to withdraw any funds from the Cash Collateral Account for
any purpose except as expressly provided in Sections 4 and 10 hereof.
(b) In the event the Borrower shall fail to pay any principal of or
interest on the Loans, any fees or any other Obligations when due (whether
at maturity, by acceleration or otherwise), the Agent shall have the right
immediately to instruct the Escrow Agent to disburse to the Agent, and the
Escrow Agent will disburse to the Agent upon receipt of such instructions,
funds held in the Cash Collateral Account (including any undisbursed
interest and income) in an amount sufficient to pay in full the
Obligations then due and owing; provided that, in the event such funds in
the Cash Collateral Account shall be insufficient to pay in full the
Obligations then due and owing, the Agent may instruct the Escrow Agent to
disburse to the Agent, and the Escrow Agent will so disburse to the Agent,
all of the funds then held in the Cash Collateral Account.
(c) The Borrower may, at any time and from time to time, by written
instruction or pursuant to telephone instruction confirmed promptly in
writing, direct the Escrow Agent to disburse to the Agent any amount of
the funds held in the Cash Collateral Account, subject to its obligations
under subsection (d) below.
(d) In the event that, as a result of a disbursement of funds from
the Cash Collateral Account pursuant to subsection (b) or (c) above, the
aggregate principal balance of funds (including investments, which shall
for purposes of this Section be valued on a cost basis) held in the Cash
Collateral Account (exclusive of any undisbursed interest and income
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not applied as provided in the following sentence) shall at any time be
less than $6,000,000 (a "Deficit"), the Borrower will, within thirty (30)
days after such disbursement, deliver to the Escrow Agent, for deposit
into the Cash Collateral Account, cash in an amount sufficient, together
with all interest and income applied from time to time as provided in the
following sentence, to eliminate such Deficit. At all times during which
any Deficit shall exist, all undisbursed interest and income on the funds
held in the Cash Collateral Account shall be deemed added, as and when
accrued, to the principal balance of such funds, to the maximum extent
possible or necessary to eliminate such Deficit, whereupon the same shall
be deemed part of such principal balance and shall constitute at all times
thereafter Collateral secured under the Borrower Pledge and Security
Agreement, all without affecting the Borrower's obligation to deposit any
additional amounts necessary to eliminate such Deficit within the 30-day
period described above. The failure of the Borrower to eliminate a Deficit
within the 30-day period described above shall constitute an Event of
Default under the Credit Agreement.
(e) Funds held in the Cash Collateral Account shall be disbursed in
same day available funds by the Escrow Agent on the Business Day next
following its receipt of instructions therefor as provided herein;
provided, however, that if such instructions are received by the Escrow
Agent on a day that is not a Business Day or after 1:00 p.m., Charlotte
time, on a Business Day, such funds shall be disbursed on the second
Business Day following receipt of such notice.
(f) In addition to disbursements permitted or required under
subsections (b) and (c) above, the Escrow Agent will disburse funds held
in the Cash Collateral Account at any time and from time to time in
accordance with the joint written directions of the Borrower and the
Agent.
4. Interest and Income. Except to the extent disbursed to the Agent at its
request pursuant to Section 3(b) or retained in the Cash Collateral Account and
applied to any Deficit pursuant to Section 3(d), interest and income earned
during any calendar quarter on funds maintained in the Cash Collateral Account
shall be disbursed by the Escrow Agent to the Borrower within thirty (30) days
after the end of such quarter, beginning with the quarter ending March 31, 1997.
5. Investment of Funds. The Escrow Agent shall invest and reinvest the
funds held in the Cash Collateral Account as the Borrower shall direct in
writing or pursuant to telephone instruction confirmed promptly in writing;
provided, however, that no investment or reinvestment may be made except in the
following:
(i) securities issued or unconditionally guaranteed by the United
States of America or any agency or instrumentality thereof, backed by the
full faith and credit of the United States of America and maturing within
five years from the date of acquisition;
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(ii) securities issued by any state of the United States of America
or any political subdivision or public instrumentality thereof, maturing
within five years from the date of acquisition and, at the time of
acquisition, having the highest rating obtainable from Standard & Poor's
Ratings Group and Xxxxx'x Investors Service, Inc.;
(iii) commercial paper issued by any Person organized under the laws
of the United States of America, maturing no more than five years from the
date of acquisition and, at the time of acquisition, having a rating of at
least A-1 or the equivalent thereof by Standard & Poor's Ratings Group and
at least P-1 or the equivalent thereof by Xxxxx'x Investors Service, Inc.;
(iv) time deposits and certificates of deposit that are insured by
the Federal Deposit Insurance Corporation (the "FDIC") or any successor
instrumentality of the government of the United States of America up to
the applicable limit on insurance granted by the FDIC or such other
instrumentality with respect to such instruments (it being understood that
the amount invested in such instrument may not exceed the limit on such
insurance), maturing within five years from the date of issuance and
issued by a bank or trust company organized under the laws of the United
States of America or any state thereof and having combined capital and
surplus of at least $500,000,000 (including First Union National Bank of
North Carolina and its Affiliates);
(v) repurchase obligations with a term not exceeding seven (7) days
with respect to underlying securities of the types described in clause (i)
above entered into with any bank or trust company meeting the
qualifications specified in clause (iv) above (including First Union
National Bank of North Carolina and its Affiliates); and
(vi) money market funds substantially all of whose assets are
comprised of securities of the types described in clauses (i) through (v)
above.
Each of the foregoing investments shall be made in the name of the Escrow
Agent. If the Escrow Agent has not received investment direction from the
Borrower at any time at which an investment decision must be made, the Escrow
Agent shall invest the funds held in the Cash Collateral Account, or such
portion thereof as to which no direction has been received, in investments
described in clause (vi) above. Funds in the Cash Collateral Account in an
aggregate amount equal to or greater than the mandatory repayments of the Loans
required pursuant to Section 2.6(a) of the Credit Agreement for the 12 month
period following any date shall be maintained at all times in investments with
current maturities of less than one year. Notwithstanding anything to the
contrary contained herein, the Escrow Agent may, without notice to the Borrower,
sell or liquidate any of the foregoing investments at any time if the proceeds
thereof are required for any release of funds permitted or required
-18-
hereunder, and the Escrow Agent shall not be liable or responsible for any loss,
expense or penalty resulting from any such sale or liquidation.
6. Resignation of Escrow Agent. The Escrow Agent may resign from the
performance of its duties hereunder at any time by giving thirty (30) days'
prior written notice to the Borrower and the Agent. Such resignation shall take
effect upon the appointment of a successor Escrow Agent as provided hereinbelow.
Upon any such notice of resignation, the Agent shall, with the consent of the
Borrower (which consent shall not be unreasonably withheld), appoint a successor
Escrow Agent hereunder, which shall be a commercial bank, trust company or other
financial institution with a combined capital and surplus in excess of
$100,000,000. Upon the acceptance of any appointment as Escrow Agent hereunder
by a successor Escrow Agent, such successor Escrow Agent shall thereupon succeed
to and become vested with all the rights, powers, privileges and duties of the
retiring Escrow Agent, and the retiring Escrow Agent shall be discharged from
its duties and obligations under this Agreement. After any retiring Escrow
Agent's resignation hereunder as Escrow Agent, the provisions of this Agreement
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Escrow Agent under this Agreement.
7. Liability of Escrow Agent. The Escrow Agent shall have no liability or
obligation with respect to the Cash Collateral Account except for the Escrow
Agent's willful misconduct or gross negligence. The Escrow Agent's sole
responsibility shall be for the safekeeping, investment and disbursement of the
funds maintained in the Cash Collateral Account in accordance with the terms of
this Agreement. The Escrow Agent shall have no implied duties or obligations and
shall not be charged with knowledge or notice of any fact or circumstance not
specifically set forth herein. The Escrow Agent may rely upon any instrument,
not only as to its due execution, validity and effectiveness, but also as to the
truth and accuracy of any information contained therein, that the Escrow Agent
shall in good faith believe to be genuine, to have been signed or presented by
the person or parties purporting to sign the same and to conform to the
provisions of this Agreement. In no event shall the Escrow Agent be liable for
incidental, indirect, special, consequential or punitive damages. The Escrow
Agent shall not be obligated to take any legal action or commence any proceeding
in connection with the Cash Collateral Account or the funds therein, this
Agreement or any other Loan Document, or to appear in, prosecute or defend any
such legal action or proceeding. The Escrow Agent may consult legal counsel
selected by it in the event of any dispute or question as to the construction of
any of the provisions hereof or of any other agreement or of its duties
hereunder, and shall incur no liability and shall be fully protected in acting
in accordance with the opinion or instruction of such counsel.
8. Indemnification. From and at all times after the date of this
Agreement, and in addition to the fees, costs and expenses payable under Section
9, the Borrower agrees to indemnify and hold harmless the Escrow Agent and each
of its directors, officers, employees, agents and Affiliates (each, an
"Indemnified Person") against any and all claims, losses, damages, liabilities,
costs and expenses of any kind or nature whatsoever, including, without
limitation, reasonable attorneys' fees and expenses (collectively, "Indemnified
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Costs"), incurred by or asserted against any such Indemnified Person from and
after the date hereof, whether direct, indirect or consequential, as a result of
or arising from or in any way relating to any action, suit or proceeding
(including any inquiry or investigation) by any Person, whether threatened or
initiated, arising from or in connection with the negotiation, preparation,
execution, performance or enforcement of this Agreement or any of the
transactions contemplated herein, in any case whether or not any such
Indemnified Person is a party to any such action, suit or proceeding or a
subject of any such inquiry or investigation; provided, however, that no
Indemnified Person shall have the right to be indemnified hereunder for any
Indemnified Costs to the extent resulting from the gross negligence or willful
misconduct of such Indemnified Person as finally determined by a court of
competent jurisdiction and not subject to any appeal. If any such action or
claim shall be brought or asserted against any Indemnified Party, such
Indemnified Party shall promptly notify the Borrower in writing, and the
Borrower shall assume the defense thereof, including the employment of counsel
and the payment of all expenses. Such Indemnified Party shall, in its sole
discretion, have the right to employ separate counsel (who may be selected by
such Indemnified Party in its sole discretion) in any such action and to
participate in the defense thereof, and the fees and expenses of such counsel
shall be paid by such Indemnified Party unless (a) the Borrower agrees to pay
such fees and expenses, (b) the Borrower shall fail to assume the defense of
such action or proceeding or shall fail, in the reasonable discretion of such
Indemnified Party, to employ counsel satisfactory to the Indemnified Party in
any such action or proceeding, or (c) the named parties to any such action or
proceeding (including any impleaded parties) include both such Indemnified Party
and the Borrower or any other Indemnified Party, and such Indemnified Party
shall have been advised by counsel that there may be one or more legal defenses
available to it that are different from or additional to those available to the
Borrower or such other Indemnified Party. All of the foregoing Indemnified Costs
of any Indemnified Person shall be paid or reimbursed by the Borrower, as and
when incurred and upon demand.
9. Fees and Expenses of Escrow Agent. The Borrower (a) will pay to the
Escrow Agent an annual escrow fee of $1,500, payable in advance on the Closing
Date and on each anniversary of the Closing Date, (b) will pay the Escrow Agent
a handling fee of $25 per transaction associated with investments and $10 per
transaction associated with deposits and disbursements, for which handling fees
the Borrower shall be billed monthly with payment due within ten (10) days of
such invoice, and (c) will promptly reimburse the Escrow Agent upon demand for
all reasonable out-of-pocket costs and expenses incurred by the Escrow Agent.
10. Termination of Escrow. Upon the indefeasible payment in full of the
Obligations and receipt by the Escrow Agent of notice thereof from the Agent
(which notice the Agent agrees to give promptly thereupon), this Agreement shall
terminate, and the Escrow Agent shall forthwith disburse all funds held in the
Cash Collateral Account to the Borrower; provided, however, that the provisions
of Sections 7, 8 and 9 shall survive such termination.
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11. Disbursement Into Court. If, at any time, there shall exist any
dispute between the Borrower and the Agent with respect to the holding or
disposition of any portion of the funds held in the Cash Collateral Account or
any other obligations of the Escrow Agent hereunder, or if at any time the
Escrow Agent is unable to determine, to its sole satisfaction, the proper
disposition of any portion of such funds or Escrow Agent's proper actions with
respect to its obligations hereunder, or if the Agent has not, within thirty
(30) days of the furnishing by the Escrow Agent of a notice of resignation
pursuant to Section 6, appointed a successor Escrow Agent to act hereunder, then
the Escrow Agent may, in its sole discretion, take either or both or the
following actions:
(i) suspend the performance of any of its obligations under this
Agreement until such dispute or uncertainty shall be resolved to the sole
satisfaction of the Escrow Agent or until a successor Escrow Agent shall
have been appointed (as the case may be); provided, however, that the
Escrow Agent shall continue to invest the Escrow Funds in accordance with
Section 5; and/or
(ii) petition (by means of an interpleader action or any other
appropriate method) any court of competent jurisdiction in Charlotte,
North Carolina, for instructions with respect to such dispute or
uncertainty, and pay into such court all funds held by it in the Cash
Collateral Account for holding and disposition in accordance with the
instructions of such court.
The Escrow Agent shall have no liability to the Borrower or any other Person
with respect to any such suspension of performance or disbursement into court,
specifically including any liability or claimed liability that may arise, or be
alleged to have arisen, out of or as a result of any delay in the disbursement
of funds held in the Cash Collateral Account or any delay in or with respect to
any other action required or requested of the Escrow Agent.
12. Tax Reporting. The Escrow Agent will provide to the Borrower a
statement of investment income and such other statements with respect to the
Cash Collateral Account as the Borrower may reasonably request from time to
time. The Borrower shall be responsible for all tax reporting with respect to
the Cash Collateral Account and the income therefrom.
13. Notices. All notices and other communications provided for hereunder
shall be in writing (including facsimile transmission) and mailed, telecopied or
delivered to the party to be notified at the following addresses:
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If to the Borrower: Front Royal, Inc.
0000 Xxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxx Xxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
If to the Agent: First Union National Bank
of North Carolina
Specialized Industries/Financial
Institutions Lending Group
Xxx Xxxxx Xxxxx Xxxxxx, 0xx Xxxxx
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000-0000
Attention: Xxx X. Xxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
If to the Escrow Agent: First Union National Bank
of North Carolina
000 Xxxxx Xxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000-0000
Attention: Xxxxx Xxxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
or to such other address as any party may designate for itself by like notice to
all other parties hereto. All such notices and communications shall be deemed to
have been given (i) if mailed by first class, registered or certified mail,
postage prepaid, on the fifth Business Day after deposit in the mails, (ii) if
telecopied, when transmitted by telecopier, or (iii) if delivered by overnight
courier or by hand, upon delivery.
14. Amendments, Waivers, etc. No amendment, modification, waiver,
discharge or termination of, or consent to any departure by the Borrower from,
any provision of this Agreement, shall be effective unless in a writing signed
by the Agent and executed and delivered in accordance with Section 9.6 of the
Credit Agreement (and, in the event the same shall affect the rights or
obligations of the Escrow Agent under Sections 7, 8 or 9, the Escrow Agent), and
then the same shall be effective only in the specific instance and for the
specific purpose for which given.
15. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of North Carolina (without
regard to the conflicts of law provisions thereof).
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16. Severability. To the extent any provision of this Agreement is
prohibited by or invalid under the applicable law of any jurisdiction, such
provision shall be ineffective only to the extent of such prohibition or
invalidity and only in any such jurisdiction, without prohibiting or
invalidating such provision in any other jurisdiction or the remaining
provisions of this Agreement in any jurisdiction.
17. Construction. The headings of the various sections and subsections of
this Agreement have been inserted for convenience only and shall not in any way
affect the meaning or construction of any of the provisions hereof. Unless the
context otherwise requires, words in the singular include the plural and words
in the plural include the singular.
18. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto on separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
19. Entire Agreement. This Agreement and the other documents and
instruments executed contemporaneously herewith constitute the entire agreement
between the parties hereto relating to the subject matter hereof.
20. Successors and Assigns. The provisions of this Agreement shall be
binding upon, inure to the benefit of and be enforceable by the respective
successors and assigns of the Borrower, the Escrow Agent and the Agent.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized corporate officers as of the date first above
written.
FRONT ROYAL, INC.
By:_______________________________________
Title:____________________________________
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, as Agent
By:______________________________________
Title:____________________________________
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA, as Escrow Agent
By:______________________________________
Title:____________________________________
-24-
Exhibit H to Credit Agreement
First Union National Bank
of North Carolina, as Agent
Front Royal, Inc.
December 18, 1996 / $38,000,000
-----------------------------
Matters for Legal Opinion of Borrower's Counsel
All opinions should be addressed to the Agent, the Lenders under the
Credit Agreement and all Assignees pursuant to Section 9.7(a) of the Credit
Agreement. The preamble to the following opinions should include a recitation of
the documents reviewed. The term "Relevant Subsidiaries" shall include FRESI,
FREIM, FRETS, CMS, Colony, Hamilton, FRIC, and, except where specifically
excluded, Rockwood. Other capitalized terms shall have the meanings ascribed
thereto in the Credit Agreement.
1. Each of the Borrower and the Relevant Subsidiaries is a corporation
duly incorporated, validly existing and in good standing under the laws of its
state of incorporation, and is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction listed on Schedule _ to
the opinion. "Comment: With respect to qualification and good standing, reliance
on good standing certificates is permitted. This opinion need not cover Rockwood
and its subsidiaries since those opinions will be given by Sellers' counsel, it
being understood that the Agent and Lenders will receive reliance letters from
such counsel.]
Loan Document-related Opinions.
2. Each of the Borrower and the Relevant Subsidiaries has the full
corporate power and authority to execute, deliver and perform its obligations
under the Loan Documents to which it is a party. Each of the Borrower and the
Relevant Subsidiaries has taken all necessary corporate action to execute,
deliver and perform each Loan Document to which it is a party, and each such
Loan Document has been validly executed and delivered by, and constitutes the
legal, valid and binding obligation of, each of the Borrower and its
Subsidiaries to the extent a party thereto, enforceable against it in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally or by general equitable principles. [Borrower's
counsel to give New York and Virginia enforceability opinion, Agent's counsel to
give North Carolina enforceability opinion.]
3. No consent, approval, authorization, exemption or other action by,
notice to, or declaration or fling with, any Governmental Authority or other
Person is required in connection with the due execution, delivery and
performance by each of the Borrower and its Subsidiaries of the Transaction
Documents to which it is a party, the legality, validity or enforceability
thereof or the consummation of the Loans, other than [set forth copies of such
consents, approvals and filings that have been obtained or made], which
approval(s) has/have been obtained and is/are in full force and effect.
4. The execution, delivery and performance by each of the Borrower and the
Relevant Subsidiaries of the Loan Documents to which it is a party, and
compliance by it
therewith, do not and will not (i) violate any provision of its articles or
certificate of incorporation or bylaws, (ii) contravene any provisions of any
applicable law, rule or regulation or, to the best of our knowledge, any
judgment, order, writ, injunction or decree to which it is subject, (iii)
conflict with, result in a breach of or constitute (with notice, lapse of time
or both) a default under any indenture, loan agreement, mortgage, deed of trust,
lease or other agreement or instrument known to us and to which it is a party,
by which it or any of its properties is bound or to which it may be subject, or
(iv) result in the creation or imposition of any Lien (other than the Liens
created pursuant to the Loan Documents) arising under any of the documents or
instruments referred to in clause (iii), upon any property or assets of the
Borrower or any of the Relevant Subsidiaries.
5. To the best of our knowledge, except as may be identified on Schedule
4.5 to the Credit Agreement, there are no actions, investigations, suits or
proceedings pending or threatened in writing, at law, in equity or in
arbitration, before any court, other Governmental Authority or other Person, (i)
against or affecting the Borrower and its Subsidiaries or any of their
respective properties seeking damages in the aggregate in excess of $250,000
(other than normal claims made in the ordinary course of business pursuant to
written policies) or that would otherwise, if adversely determined, be
reasonably likely, individually or in the aggregate, to have a Material Adverse
Effect, or (ii) with respect to any of the Transaction Documents or any of the
Transactions.
6. The authorized capital stock of each of the Relevant Subsidiaries, the
par value per share, the number of shares issued and outstanding, and the owner
of such shares are as follows:
CMS: __________ shares of Common Stock, par value $_________ per share,
_____________ shares of which are issued and outstanding; the owner of all
issued and outstanding shares is the Borrower;
FREIM: __________ shares of Common Stock, par value $_________ per share,
________ shares of which are issued and outstanding; the owner of all issued and
outstanding shares is the Borrower;
FRESI: _________ shares of Common Stock, par value $_________ per share,
________ shares of which are issued and outstanding; the owner of all issued and
outstanding shares is the Borrower;
FRETS: __________ shares of Common Stock, par value $_________ per share,
________ shares of which are issued and outstanding; the owner of all issued and
outstanding shares is the Borrower:
Colony: __________ shares of Common Stock, par value $_________ per share,
________ shares of which are issued and outstanding; the owner of all issued and
outstanding shares is the Borrower;
-2-
FRIC: ___________ shares of Common Stock, par value $_________ per share,
_________ shares of which are issued and outstanding; the owner of all issued
and outstanding shares is Colony;
Xxxxxxxx: ___________ shares of Common Stock, par value $_________ per
share, _________ shares of which are issued and outstanding; the owner of all
issued and outstanding shares is Colony;
Rockwood: __________ shares of Common Stock, par value $_________ per
share, _________ shares of which are issued and outstanding; the owners of all
issued and outstanding shares immediately prior to the Transactions are Trirock
and PIC [Borrower's counsel may rely upon seller's counsel's opinion] and
immediately after the Transactions will be the Borrower.
7. All of the issued and outstanding shares of capital stock of CMS,
FREIM, FRESI, FRETS, Colony, FRIC, Xxxxxxxx and Xxxxxxxx [Borrower's counsel may
rely upon seller's counsel's opinion on Rockwood] are duly authorized, validly
issued, fully paid and nonassessable and are owned of record and, to the best of
our knowledge, beneficially by the party set forth in opinion 6 above, to the
best of our knowledge, free and clear of any Liens or other adverse claims or
restrictions on transfer, other than the pledge of the shares of CMS, FREIM,
FRESI, and Colony to First Union to secure the Existing Senior Debt.
8. The Pledge and Security Agreement creates in favor of the Agent, for
the benefit of the Lenders, a valid security interest in all right, title and
interest of the Borrower in and to the Collateral (as defined therein). Upon (a)
the making of the Loans under the Credit Agreement, (b) delivery to the Escrow
Agent of cash for deposit in the Cash Collateral Account and (c) delivery to the
Agent of the certificates set forth on Part I of Annex A of the Pledge and
Security Agreement and evidencing the shares described in opinion 6 above, other
than the shares of FRIC and Xxxxxxxx (collectively, the "Pledged Shares"),
accompanied by undated stock powers and endorsements duly executed in blank, and
assuming continued possession of funds in the Cash Collateral Account by the
Escrow Agent pursuant to the Escrow Agreement and continued possession of the
Pledged Shares by the Agent, such security interest will constitute a fully
perfected security interest in all right, title and interest of the Borrower in
and to such Collateral. No filings or recordings are required in order to
perfect the security interest created in favor of the Lender under the Pledge
and Security Agreement.
9. The Borrower Collateral Assignment of Agreements creates in favor of
the Agent, for the benefit of the Lenders, a valid security interest in all
right, title and interest of the Borrower in and to the Collateral (as defined
therein), and upon the due recordation and indexing in the offices of the North
Carolina Secretary of State and the Wake County, North Carolina Register of
Deeds of Uniform Commercial Code financing statements in the form attached as
Exhibit __ hereto, such security interest will constitute a fully perfected
security interest in all right, title and interest of the Borrower in and to
such Collateral.
-3-
10. The Subsidiaries Collateral Assignment of Agreements creates in favor
of the Agent, for the benefit of the Lenders, a valid security interest in all
right, title and interest of CMS and FRESI in and to the Collateral (as defined
therein), and upon the due recordation and indexing in the offices of the
Virginia Secretary of State and the __________ County, Virginia Register of
Deeds of Uniform Commercial Code financing statements in the form attached as
Exhibit __ hereto, such security interest will constitute a fully perfected
security interest in all right, title and interest of CMS and FRESI in and to
such Collateral.
11. Neither the Borrower nor any of its Subsidiaries is an "investment
company," a company "controlled" by an "investment company," or an "investment
advisor," within the meaning of the Investment Company Act of 1940, as amended.
12. Neither the Borrower nor any of its Subsidiaries is engaged in the
business of extending credit for the purpose of purchasing or carrying Margin
Stock, and the consummation of the transactions contemplated by the Credit
Agreement will not violate Regulations G, T, U or X of the Board of Governors of
the Federal Reserve System.
13. With respect to each Loan Document to which the Borrower or its
Subsidiaries is a party, the courts of the States of Virginia and New York, if
properly presented with the question, will give effect to the choice of law
provisions contained in such Loan Documents, which by their terms are governed
by the laws of the State of North Carolina.
14. Such other matters reasonably requested by the Lender as a result of
its due diligence or negotiation of the Loan Documents.
Acquisition- and Equity-related Opinions.
[We expect the following opinions, among others, to be covered to our
satisfaction in opinions provided by buyer's or seller's counsel in connection
with the Acquisition, along with reliance letters in favor of the Agent and the
Lenders, including permitted assignees in accordance with Section 9.7(a) of the
Credit Agreement.]
15. Each of the [Borrower and its Subsidiaries/Sellers] has the full
corporate power and authority to execute, deliver and perform the Transaction
Documents to which it is a party, to own or lease its property and to operate
its business as presently conducted. Each of the [Borrower and its
Subsidiaries/Sellers] has taken all necessary corporate action to execute,
deliver and perform each Transaction Document to which it is a party, and each
such Transaction Document has been validly executed and delivered by, and
constitutes the legal, valid and binding obligation of, each of the [Borrower
and its Subsidiaries/Sellers] to the extent a party thereto, enforceable against
it in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally or by general equitable
principles.
-4-
16. The execution, delivery and performance by each of the [Borrower and
its Subsidiaries/Sellers] of the Transaction Documents to which it is a party,
and compliance by it therewith, do not and will not (i) violate any provision of
its articles or certificate of incorporation or bylaws, (ii) contravene any
provisions of any applicable law, rule or regulation or, to the best of our
knowledge, any judgment, order, writ, injunction or decree to which it is
subject, (iii) conflict with, result in a breach of or constitute (with notice,
lapse of time or both) a default under any indenture, loan agreement, mortgage,
deed of trust, lease or other agreement or instrument known to us and to which
it is a party, by which it or any of its properties is bound or to which it may
be subject, or (iv) result in the creation or imposition of any Lien (other than
the Liens created pursuant to the Loan Documents) arising under any of the
documents or instruments referred to in clause (iii), upon any property or
assets of the Borrower, Rockwood or any of their Subsidiaries.
17. To the best of our knowledge, there are no actions, investigations,
suits or proceedings pending or threatened, at law, in equity or in arbitration,
before any court, other Governmental Authority or other Person, (i) against or
affecting the Borrower, Rockwood and their Subsidiaries or any of their
respective properties that would, if adversely determined, be reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect, or (ii)
with respect to any of the Transaction Documents or any of the Transactions.
-5-
Exhibit I to Credit Agreement
First Union National Bank
of North Carolina, as Agent
Front Royal, Inc.
December 18, 1996 / $38,000,000
-----------------------------
FINANCIAL CONDITION CERTIFICATE
THIS FINANCIAL CONDITION CERTIFICATE is delivered pursuant to Section
3.1(r) of the Credit Agreement, dated as of December 18, 1996 (the "Credit
Agreement"), among FRONT ROYAL, INC. (the "Borrower"), certain banks and
financial institutions from time to time parties thereto (the "Lenders") and
First Union National Bank of North Carolina as agent for the Lenders (in such
capacity, the "Agent"). Capitalized terms used herein without definition shall
have the meanings assigned to them in the Credit Agreement.
The undersigned, Xxxxx Xxxxx, in his capacity as Chief Financial Officer
of the Borrower, hereby certifies that:
1. The undersigned is, and at all pertinent times mentioned herein has
been, the duly qualified and acting chief financial officer of the Borrower, and
in such capacity has responsibility for the oversight of the financial affairs
of the Borrower and its Subsidiaries. The undersigned has, together with other
officers of the Borrower, acted on behalf of the Borrower in connection with the
negotiation of the Credit Agreement and the consummation of the Transactions.
2. The undersigned has carefully reviewed the contents of this certificate
and has conferred with counsel for the Borrower for the purpose of discussing
the meaning of its contents. The statements made herein by the undersigned are
based upon the personal knowledge of the undersigned, or upon reports and other
information given to the undersigned by supervisory personnel of the Borrower
and its Subsidiaries having responsibility for the reports and information
given, and who in the opinion of the undersigned are reliable and entitled to be
relied upon. The statements are made in good faith and, to the best of the
knowledge and belief of the undersigned, and subject to the assumptions set
forth in Annexes A and B, are reasonable in all material respects.
3. In connection with preparation for the consummation of the
Transactions, the undersigned has caused or supervised the preparation of and
has reviewed projected financial statements consisting of balance sheets and
statements of income of the Borrower and its Subsidiaries, on a consolidated
basis, after giving effect to the Transactions, together with appropriate
supporting details and a statement of underlying assumptions, ranges and
limitations (collectively, the "Projections"). The Projections cover the period
from January 1, 1997 through December 31, 2003, and are attached hereto as Annex
A.
4. In the preparation of the Projections, the undersigned has relied on
historical financial and other information and upon information with respect to
operating revenues, costs and other data obtained in discussions with executive
officers of the Borrower and its Subsidiaries, and other officers and
supervisory personnel directly responsible for the various
-1-
operations involved. The assumptions upon which the Projections are based are
deemed by the undersigned to be reasonable. Based thereon, the undersigned
believes that the Projections, taken as a whole, are reasonably attainable
although they cannot be guaranteed.
5. Attached hereto as Annex B is a true, correct and complete copy of a
pro forma balance sheet of the Borrower and its Subsidiaries, on a consolidated
basis, as of December 31, 1996, giving effect to the Transactions as if they
occurred on such date (the "Pro Forma Balance Sheet"). The Pro Forma Balance
Sheet sets forth on a pro forma basis the unaudited financial condition of the
Borrower and its Subsidiaries, on a consolidated basis, as of December 31, 1996,
and reflects on a pro forma basis the effect of the Transactions, including all
material fees and expenses in connection therewith.
6. All material accounts and other liabilities of the Borrower and its
Subsidiaries are current and not past due.
Based upon the foregoing, the undersigned has reached the following
conclusions:
1. Neither the Borrower nor any of its Subsidiaries is, nor will the
consummation of the Transactions and the incurrence by the Borrower and its
Subsidiaries of their respective obligations pursuant to the Credit Agreement
and the other Loan Documents render the Borrower or any of its Subsidiaries,
"insolvent" as defined below. The undersigned understands that, in this context,
"insolvent" means that the present fair value of assets is less than the amount
that will be required to pay the probable liability on existing debts as they
become absolute and matured. The undersigned understands that the term "debts"
includes any legal liability, whether matured or unmatured, liquidated or
unliquidated, absolute, fixed or contingent, including any guaranty obligation.
In making this statement, the undersigned has included the value of intangible
assets that would not be assigned any value except as part of a going concern.
2. Neither the Borrower nor any of its Subsidiaries will, as a result of
the incurrence of its respective obligations pursuant to the Credit Agreement
and the other Loan Documents, incur debts beyond its ability to pay as they
mature. The foregoing conclusion is based in part on the Projections, which
demonstrate that the Borrower and its Subsidiaries will have positive cash flow
after paying all scheduled anticipated indebtedness (including scheduled
payments under the Credit Agreement).
3. The consummation of the Transactions will not leave the Borrower or any
of its Subsidiaries with "unreasonably small capital" within the meaning of
Section 548(a) of the Bankruptcy Code, or with remaining assets that are
unreasonably small. In reaching this conclusion, the undersigned understands
that "unreasonably small capital" depends upon the nature of the particular
business or businesses conducted or to be conducted, and he has reached this
conclusion based on the needs and anticipated needs for capital of the
businesses conducted or anticipated to be conducted by the Borrower and its
Subsidiaries in light of the Projections and the available credit capacity of
the Borrower and its Subsidiaries.
-2-
4. Neither the Borrower nor, to the best knowledge of the undersigned, any
of its Subsidiaries, has executed any Credit Document, or made any transfer or
incurred any obligations thereunder, with intent to hinder, delay or defraud
either present or future creditors.
The undersigned understands that the Agent and Lenders have performed
their own review and analysis of the financial condition of the Borrower and its
Subsidiaries, but that the Agent and Lenders are relying on the foregoing
statements in connection with the extension of credit to the Borrower pursuant
to the Credit Agreement.
Executed this ___ day of December, 1996.
-------------------------------------
Chief Financial Officer,
Front Royal, Inc.
-3-
Annex A to Financial Condition
Certificate
First Union National Bank
of North Carolina, as Agent
Front Royal, Inc.
December 18, 1996 / $38,000,000
-----------------------------
FRONT ROYAL, INC. AND SUBSIDIARIES
Projections
[TO BE PROVIDED]
-1-
Annex B to Financial Condition
Certificate
First Union National Bank
of North Carolina, as Agent
Front Royal, Inc.
December 18, 1996 / $38,000,000
-----------------------------
FRONT ROYAL, INC. AND SUBSIDIARIES
Pro Forma Balance Sheet
[TO BE PROVIDED]
-1-
Exhibit J-1 to Credit Agreement
First Union National Bank
of North Carolina, as Agent
Front Royal, Inc.
December 18, 1996 / $38,000,000
-----------------------------
COMPLIANCE CERTIFICATE
(GAAP Financial Statements)
THIS CERTIFICATE is given pursuant to Section S.3(a) of the Credit
Agreement, dated as of December 18, 1996 (as amended, modified, supplemented or
restated from time to time, the "Credit Agreement"), among Front Royal, Inc.
(the "Borrower"), certain banks and financial institutions from time to time
parties thereto (the "Lenders"), and First Union National Bank of North
Carolina, as Agent for the Lenders (in such capacity, the "Agent"). Capitalized
terms used herein without definition shall have the meanings given to them in
the Credit Agreement.
The undersigned hereby certifies that:
1. He is the duly elected Chief Financial Officer of the Borrower.
2. Enclosed with this Certificate are copies of the financial statements
of the Borrower and its Subsidiaries as of __________, and for the [___-month
period] [year] then ended, required to be delivered under Section [5.1(a)]
[5.1(b)] of the Credit Agreement. Such financial statements have been prepared
in accordance with Generally Accepted Accounting Principles [(subject to the
absence of notes required by Generally Accepted Accounting Principles and
subject to normal year-end audit adjustments)]1 and fairly present the financial
condition of the Borrower and its Subsidiaries on a consolidated or
consolidating basis, as applicable, as of the date indicated and the results of
operations of the Borrower and its Subsidiaries on a consolidated or
consolidating basis, as applicable, for the period covered thereby.
3. The undersigned has reviewed the terms of the Credit Agreement and has
made, or caused to be made under the supervision of the undersigned, a review in
reasonable detail of the transactions and condition of the Borrower and its
Subsidiaries during the accounting period covered by such financial statements.
4. The examination described in paragraph 3 above did not disclose, and
the undersigned has no knowledge of the existence of, any Default or Event of
Default during or
----------
1 Insert in the case of quarterly financial statements.
-1-
at the end of the accounting period covered by such financial statements or as
of the date of this Certificate. [, except as set forth below.
Describe here or in a separate attachment any exceptions to paragraph 4
above by listing, in reasonable detail, the nature of the Default or Event of
Default, the period during which it existed and the action that the Borrower has
taken or proposes to take with respect thereto.]
5. Attached to this Certificate as Attachment A is a Covenant Compliance
Worksheet reflecting the computation of the financial covenants subject to
Generally Accepted Accounting Principles set forth in Article VI of the Credit
Agreement as of the last day of the period covered by the financial statements
enclosed herewith.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Certificate as of the _______ day of ______________, ____.
[Signature of CFO]
Name:________________________
Chief Financial Officer
-2-
***** ATTACHMENT A
COVENANT COMPLIANCE WORKSHEET
Ratio of Consolidated Indebtedness to Total Capitalization
(Section 6.2 of the Credit Agreement); Not greater than 0.5 to 1.0
(1) Consolidated Indebtedness as of the measurement date $
======
(2) Total Capitalization:
(a) Consolidated Indebtedness as of the measurement date $
------
(b) Consolidated Net Work as of the measurement date $
------
(c) Total Capitalization: Add Lines 2(a) and 2(b) $
======
(3) Ratio of Consolidated Indebtedness to Total Capitalization:
Divide Line 1 by Line 2(c)
======
-i-
Fixed Charge Coverage Ratio
(Section 6.4 of the Credit Agreement): Not less than:
1.25 to 1.0 through
12/31/98,
1.3 to 1.0 thereafter.
(1) Earnings:
(a) Available Dividend Amount with
Respect to the Measurement Period $
------
(b) Extraordinary Dividend Amount as of
the measurement date $
------
(c) Net Tax Payments of the Borrower
during the Measurement Period $
------
(d) Minus Projected Net Overhead for the four
fiscal quarters following
the measurement date $
------
(e) Combined Net Cash Flow of the Non-Insurance
Subsidiaries (other than CMS) for the
Measurement Period $
------
(f) Minus Excess Cash Flow prepayment required to
be made in respect of the Measurement Period1 ($ )
------
(g) Add Lines 1(a), 1(b), 1(c) and 1(e)
and subtract Lines 1(d) and 1(f) $
======
(2) Fixed Charges:
(a) Projected Debt Service for the four fiscal
quarters following the measurement date $
------
(b) Cash dividends or cash payments projected to be
paid in respect of the Series A Preferred Stock,
Class C Common Stock or rights for the four fiscal
quarters following the Measurement Period $
------
(c) Add Lines 2(a) and 2(b) $
======
----------
1 To be deducted only for Measurement Periods ending on December 31st of any
fiscal year.
-ii-
(3) Fixed Charge Coverage Ratio:
Divide Line 1(g) by Line 2(c)
======
3
-iii-
Earnings Coverage Ratio
(Section 6.5 of the Credit Agreement): Not less than:
1.15 to 1.0 through
12/31/98,
1.3 to 1.0 thereafter.
(1) Statutory Net Income of the Insurance
Subsidiaries for the fiscal period2 $
------
(2) Aggregate Net Income of the Non-Insurance
Subsidiaries (other than CMS) for the fiscal
period $
------
(3) Add Lines (l) and (2) $
======
(4) Debt Service for the fiscal period $
------
(5) Net Overhead for the fiscal period $
------
(6) Add Lines (4) and (5) $
======
(7) Earnings Coverage Ratio:
Divide Line (3) by Line (6)
======
Capital Expenditures
(Section 6.7 of the Credit Agreement): Not more than:
$1,500,000 for fiscal year
ending 12/31/97.
$1,000,000 for fiscal years
thereafter.
(1) Actual aggregate amount of Capital Expenditures
for fiscal year as of the measurement date $
======
--------
2 The relevant fiscal period for the fiscal quarters ending 3/31/97, 6/30/97 and
9/30/97 are the periods of one, two and three fiscal quarters, respectively,
ending on such dates and, thereafter, the period of four fiscal quarters ending
on such date.
-iv-
Exhibit J-2 to Credit Agreement
First Union National Bank
of North Carolina, as Agent
Front Royal, Inc.
December 18, 1996 / $38,000,000
-----------------------------
COMPLIANCE CERTIFICATE
(Statutory Financial Statements)
THIS CERTIFICATE is given pursuant to Section 5.3(a) of the Credit
Agreement, dated as of December 18, 1996 (as amended, modified, supplemented or
restated from time to time, the "Credit Agreement"), among Front Royal, Inc.
(the "Borrower"), certain banks and financial institutions from time to time
parties thereto (the "Lenders") and First Union National Bank of North Carolina,
as agent for the Lenders (in such capacity, the "Agent"). Capitalized terms used
herein without definition shall have the meanings given to them in the Credit
Agreement.
The undersigned hereby certifies that:
1. He is the duly elected Chief Financial Officer of the Borrower.
2. Enclosed with this Certificate are copies of the statutory financial
statements of each Insurance Subsidiary as of ____________, and for the
[__________-month period] [year] then ended, required to be delivered under
Section [5.2(a)] [5.2(b)] of the Credit Agreement. Such statutory financial
statements have been prepared in accordance with Statutory Accounting Principles
and fairly present the financial condition of each Insurance Subsidiary as of
the date indicated and the results of operations, changes in capital and surplus
and cash flow of each Insurance Subsidiary for the period covered thereby.
3. The undersigned has reviewed the terms of the Credit Agreement and has
made, or caused to be made under the supervision of the undersigned, a review in
reasonable detail of the transactions and condition of the Borrower and its
Subsidiaries during the accounting period covered by such financial statements.
4. The examination described in paragraph 3 above did not disclose, and
the undersigned has no knowledge of the existence of, any Default or Event of
Default during or at the end of the accounting period covered by such financial
statements or as of the date of this Certificate. [, except as set forth below.
Describe here or in a separate attachment any exceptions to paragraph 4
above by listing, in reasonable detail, the nature of the Default or Event of
Default, the period during which it existed and the action that the Borrower has
taken or proposes to take with respect thereto.]
5. Attached to this Certificate as Attachment A is a Covenant Compliance
Worksheet reflecting the computation of the financial covenants subject to
Statutory Accounting Principles
-1-
set forth in Article VI of the Credit Agreement as of the last day of the period
covered by the financial statements enclosed herewith.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Certificate as of the ______ day of ______________, ____.
Name:__________________________
Chief Financial Officer
-2-
ATTACHMENT A
COVENANT COMPLIANCE WORKSHEET
Consolidated Statutory Surplus
(Section 6.1 of the Credit Agreement): Not less than the following:
(1) Required Consolidated Statutory Surplus as of $60,000,000
the measurement date ==========
(2) Actual Consolidated Statutory Surplus as of $
the measurement date ==========
Operating Leverage Ratios
(Section 6.3 of the Credit Agreement): Not greater than the following:
1. Consolidated New Written Premiums to Not greater than 2.5 to 1.0
Consolidated Statutory Surplus
(a) Consolidated Net Written Premiums
as of the measurement date: $
==========
(b) Consolidated Statutory Surplus as of
the measurement date: $
==========
(c) Operating Leverage Ratio: Divide Line
1(a) by Line 1(b)
==========
2. Consolidated Gross Written Premiums to Consolidated
Statutory Surplus Not greater than 5.0 to 1.0
(a) Consolidated Gross Written Premiums as of
the measurement date $
==========
(b) Consolidated Statutory Surplus as of the
measurement date $
==========
(c) Operating Leverage Ratio:
Divide Line 2(a) by Line 2(b) $
==========
-3-
Risk - Based Capital
(Section 6.6 of the Credit Agreement): Not less than the following:
(1) Required minimum level of "total adjusted
capital"1
(a) Colony $
==========
(b) Xxxxxxxx $
==========
(c) FRIC $
==========
(d) Rockwood $
==========
(2) Actual "total adjusted capital" as of the measurement date
(a) Colony $
==========
(b) Xxxxxxxx $
==========
(c) FRIC $
==========
(d) Rockwood $
==========
--------
1 (a) As of the last day of the fiscal year ending December 31, 1996, and as of
the last day of any fiscal year ending thereafter up to and including the fiscal
year ending December 31, 1998, 135% of the applicable Company Action Level RBC
for such Insurance Subsidiary at such time; and (b) as of the last day of any
fiscal year ending thereafter, 150% of the applicable Company Action Level RBC
for such subsidiary at such time.
-4-
Insurance Subsidiary Investments Complete for each
(Section 6.11(ix) of the Credit Agreement): Insurance Subsidiary
Name of Insurance Subsidiary:___________________
(1) Investment Grade Securities
rated "A-" or lower as of the
measurement date
(a) Permitted amount: 10% of Admitted Assets $
==========
(b) Actual amount $
==========
(2) Investments in Non-Investment
Grade Securities1 as of the measurement
date
(a) Permitted amount: 2% of Admitted Assets $
==========
(b) Actual amount $
==========
(3) Investments in Equity Securities as of
the measurement date
(a) Permitted amount: 7% of Admitted Assets $
==========
(b) Actual amount $
==========
(4) Investments in Securities of any Issuer Group as of the measurement date
(a) Permitted amount: ____2 of Admitted Assets $
==========
(b) Investments in any Issuer Group in excess
of permitted amount? Yes __ No __
(Continued on Next Page)
--------
1 Limited to non-equity securities rated no lower than "B" by Standard & Poor's,
Fitch or Duff & Xxxxxx, "B3" by Xxxxx'x or "4" by the NAIC. 2 Fill in 2% for all
periods through December 31, 1998 and 1.5% for all periods thereafter.
-5-
(c) If yes, identify the Issuer Group(s) and
the amount of investments.________________________________________
(5) Investments in any single equity security
as of the measurement date
(a) Permitted amount: ____3 of Admitted Assets $
==========
(b) Investment in any equity security in excess
of permitted amount? Yes __ No __
(c) If yes, identify the equity security(ies) and
the amount of investments.________________________________________
--------
3 Fill in 1.25% for all periods through December 31, 1998 and 1.0% for all
periods thereafter.
-6-
Exhibit K to Credit Agreement
First Union National Bank
of North Carolina, as Agent
Front Royal, Inc.
December 18, 1996 / $38,000,000
-------------------------------
ASSIGNMENT AND ACCEPTANCE
THIS ASSIGNMENT AND ACCEPTANCE (this "Assignment and Acceptance") is made
this _____ day of __________, ____, by and between (the "Assignor") and
_____________________ (the "Assignee"). Reference is made to the Credit
Agreement, dated as of December 18, 1996 (as amended, modified or supplemented
from time to time, the "Credit Agreement"), among Front Royal, Inc. (the
"Borrower"), certain banks and other financial institutions from time to time
parties thereto (the "Lenders"), and First Union National Bank of North
Carolina, as agent for the Lenders (in such capacity, the "Agent"). Capitalized
terms used herein without definition shall have the meanings given to them in
the Credit Agreement.
The Assignor and the Assignee hereby agree as follows:
1. Assignment and Assumption. Subject to the terms and conditions hereof,
the Assignor hereby sells and assigns to the Assignee, and the Assignee hereby
purchases and assumes from the Assignor, without recourse to the Assignor and,
except as expressly provided herein, without representation or warranty by the
Assignor, the interest as of the Effective Date (as hereinafter defined) in and
to all of the Assignor's rights and obligations under the Credit Agreement and
the other Loan Documents (in its capacity as a Lender thereunder) represented by
the percentage interest specified in Item 4 of Annex I (the "Assigned Share"),
including, without limitation, the Assigned Share of all rights and obligations
of the Assignor with respect to its Commitment (unless terminated), Term Note
and Loans.
2. The Assignor. The Assignor (i) represents and warrants that it is the
legal and beneficial owner of the interest being assigned by it hereunder, that
such interest is free and clear of any adverse claim, and that as of the date
hereof the amount of its Commitment (unless terminated) and outstanding Loans is
as set forth in Item 4 of Annex I, (ii) except as set forth in clause (i) above,
makes no representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in connection with
the Credit Agreement, any other Loan Document or any other instrument or
document furnished pursuant thereto or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Credit Agreement, any
other Loan Document or any other instrument or document furnished pursuant
thereto, and (iii) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or any of
its Subsidiaries or the performance or observance by the Borrower or any of its
Subsidiaries of any of their respective obligations under the Credit Agreement,
any other Loan Document or any other instrument or document furnished pursuant
thereto.
-1-
3. The Assignee. The Assignee (i) represents and warrants that it is
legally authorized to enter into this Assignment and Acceptance, (ii) confirms
that it has received a copy of the Credit Agreement, together with copies of the
financial statements most recently required to have been delivered under
Sections 5.1 and 5.2 of the Credit Agreement and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Acceptance, (iii) agrees that it
will, independently and without reliance upon the Agent, the Assignor or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Credit Agreement, (iv) confirms that it is an
Eligible Assignee, (v) appoints and authorizes the Agent to take such actions as
agent on its behalf under the Credit Agreement and the other Loan Documents, and
to exercise such powers and to perform such duties, as are specifically
delegated to the Agent by the terms thereof, together with such other powers and
duties as are reasonably incidental thereto, and (vi) agrees that it will
perform in accordance with their respective terms all of the obligations that by
the terms of the Credit Agreement are required to be performed by it as a
Lender. [To the extent legally entitled to do so, the Assignee will deliver to
the Agent, as and when required to be delivered under the Credit Agreement, duly
completed and executed originals of the applicable tax withholding forms
described in Section 2.17(d) of the Credit Agreement].1
4. Effective Date. Following the execution of this Assignment and
Acceptance by the Assignor and the Assignee, an executed original hereof,
together with all attachments hereto, shall be delivered to each of the Agent
and the Borrower (and also to the Agent, the processing fee referred to in
Section 9.7(a) of the Credit Agreement). The effective date of this Assignment
and Acceptance (the "Effective Date") shall be the earlier of (i) the date of
acceptance hereof by the Agent and the Borrower or (ii) the date, if any,
designated as the Effective Date in Item 5 of Annex I (which date shall be not
less than five (5) Business Days after the date of execution hereof by the
Assignor and the Assignee). As of the Effective Date, and subject to the receipt
of the consents required pursuant to Section 9.7(a)(i) of the Credit Agreement,
(y) the Assignee shall be a party to the Credit Agreement and, to the extent
provided in this Assignment and Acceptance, shall have the rights and
obligations of a Lender thereunder and under the other Loan Documents, and (z)
the Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights (other than rights under the provisions of the Credit
Agreement and the other Loan Documents relating to indemnification or payment of
fees, costs and expenses, to the extent such rights relate to the time prior to
the Effective Date) and be released from its obligations under the Credit
Agreement and the other Loan Documents.
5. Payments; Settlement. On or prior to the Effective Date, in
consideration of the sale and assignment provided for herein and as a condition
to the effectiveness of this Assignment and Acceptance, the Assignee will pay to
the Assignor an amount (to be confirmed between the Assignor and the Assignee)
that represents the Assigned Share of the principal amount of the Loans of the
Assignor outstanding on the Effective Date (together, if and to the extent the
Assignor and the Assignee so elect, with the Assigned Share of any related
accrued but unpaid interest, fees and other amounts). From and after the
Effective Date, the Agent will
--------
1 Insert if the Assignee is organized under the laws of a jurisdiction outside
the United States.
-2-
make all payments required to be made by it under the Credit Agreement in
respect of the interest assigned hereunder (including, without limitation, all
payments of principal, interest and fees in respect of the Assigned Share of the
Assignor's Loans assigned hereunder) directly to the Assignee. The Assignor and
the Assignee shall be responsible for making between themselves all appropriate
adjustments in payments due under the Credit Agreement in respect of the period
prior to the Effective Date. All payments required to be made hereunder or in
connection herewith shall be made in Dollars by wire transfer of immediately
available funds to the appropriate party at its address for payments designated
in Annex I.
6. Governing Law. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the internal laws of the State of North Carolina
(without regard to the conflicts of laws principles thereof).
7. Entire Agreement. This Assignment and Acceptance, together with the
Credit Agreement and the other Loan Documents, embody the entire agreement and
understanding between the parties hereto and supersede all prior agreements and
understandings of the parties, verbal or written, relating to the subject matter
hereof.
8. Successors and Assigns. This Assignment and Acceptance shall be binding
upon, inure to the benefit of and be enforceable by the parties hereto and their
respective successors and assigns.
9. Counterparts. This Assignment and Acceptance may be executed in any
number of counterparts and by different parties hereto on separate counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Assignment and Acceptance
to be executed by their duly authorized officers as of the date first above
written.
ASSIGNOR:
____________________________________
By: ________________________________
Title: _____________________________
ASSIGNEE:
____________________________________
By: ________________________________
-3-
Title: _____________________________
Accepted this __ day of
_____________, 19__:
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, as Agent
By: ________________________________
Title: _____________________________
Consented and agreed to:
FRONT ROYAL, INC.
By: ________________________________
Title: _____________________________
-4-
ANNEX I
1. Borrower: Front Royal, Inc.
2. Name and Date of Credit Agreement:
Credit Agreement, dated as of December 18, 1996, among Front Royal, Inc.,
certain Lenders from time to time parties thereto, and First Union
National Bank of North Carolina, as Agent.
3. Date of Assignment and Acceptance: _____________ , 19 __
4. Amounts:
Amount of
Aggregate for Assigned Assigned
Assignor Share2 Share
-------- ------ -----
(a) Commitment3 $ % $
---------- ------- ------
(b) Loans $ % $
---------- ------- ------
5. Effective Date: _____________________4
6. Addresses for Payments:
Assignor: _________________________________
_________________________________
_________________________________
Attention: ______________________
Telephone: ______________________
Telecopy: ______________________
Reference: ______________________
--------
2 Percentage taken to up to ten decimal places, if necessary.
3 Applicable only to assignments made prior to the Closing Date.
4 Shall be a date not less than five Business Days after the date of the
Assignment and Acceptance.
-5-
Assignee: _________________________________
_________________________________
_________________________________
Attention: ______________________
Telephone: ______________________
Telecopy: ______________________
Reference: ______________________
7. Addresses for Notices:
Assignor: _________________________________
_________________________________
_________________________________
Attention: ______________________
Telephone: ______________________
Telecopy: ______________________
Reference: ______________________
Assignee: _________________________________
_________________________________
_________________________________
Attention: ______________________
Telephone: ______________________
Telecopy: ______________________
Reference: ______________________
8. Lending Office of Assignee:
_________________________________
_________________________________
_________________________________
Attention: ______________________
Telephone: ______________________
Telecopy: ______________________
-6-
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT, dated as of December 30, 1996
(this "First Amendment"), is made in respect of the Credit Agreement dated
December 18, 1996 (as amended hereby, the "Credit Agreement"), by and between
FRONT ROYAL, INC., a North Carolina corporation (the "Borrower"), the financial
institutions listed on the signature pages thereof or that become parties
thereto after the date thereof (collectively the "Lenders"), and FIRST UNION
NATIONAL BANK OF NORTH CAROLINA, as agent for the Lenders (in such capacity, the
"Agent"). Capitalized terms used but not defined herein shall have the meanings
given to such terms in the Credit Agreement.
RECITALS
A. The parties agree to amend Section 6.13 of the Credit Agreement to
permit the Borrower to pay accrued dividends on the Series A Preferred Stock out
of the proceeds of an IPO in accordance with the Amended Charter under certain
conditions specified in this First Amendment.
STATEMENT OF AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower, the Agent and the
Lenders, for themselves and their successors and assigns, agree as follows:
ARTICLE I
AMENDMENTS TO CREDIT AGREEMENT
1.1 Amendment to Section 6.13(a). Section 6.13(a) of the Credit Agreement
shall be amended by inserting the following subsection (iii) and renumbering
existing clauses (iii) and (iv) as new clauses (iv) and (v):
(iii) for so long as no Default shall have occurred and be
continuing or would result immediately following a payment otherwise
permitted under this clause (iii), the Borrower may, upon the occurrence
of an IPO in accordance with Section 6.24, make cash dividend payments in
respect of the Series A Preferred Stock in an amount equal to the accrued
and unpaid dividends on the Series A Preferred Stock in accordance with
the terms of the Amended Charter, provided that (y) no such dividend
payments shall be made unless prior thereto the Borrower shall have made a
prepayment of the Loans to the extent required under Section 2.6(d) and
(z) such dividend payments shall be made out of the net proceeds of the
IPO.
1.2. Amendment to add Section 6.24. Article VI of the Credit Agreement
shall be amended to add the following Section 6.24 at the end thereof:
-1-
6.24. Restriction on IPO. The Borrower shall not undertake or
consummate an IPO unless, immediately upon the closing of the IPO, the
Borrower is able to comply with both the terms of this Agreement and the
terms of the Amended Charter.
ARTICLE II
GENERAL
2.1. Full Force and Effect. Except as expressly amended hereby, the Credit
Agreement shall continue in full force and effect in accordance with the
provisions thereof on the date hereof. As used in the Credit Agreement,
"hereinafter," "hereto," "hereof," and words of similar import shall, unless the
context otherwise requires, mean the Credit Agreement after amendment by this
First Amendment. Any reference to the Credit Agreement or any of the other
Credit Documents herein or in any such documents shall refer to the Credit
Agreement and Credit Documents as amended hereby.
2.2. Applicable Law. This First Amendment shall be governed by and
construed in accordance with the internal laws and judicial decisions of the
State of North Carolina.
2.3. Counterparts. This First Amendment may be executed in two or more
counterparts, each of which shall constitute an original, but all of which when
taken together shall constitute but one instrument.
2.4. Headings. The headings of this First Amendment are for the purposes
of reference only and shall not affect the construction of this First Amendment.
2.5. Effectiveness. This First Amendment shall be deemed fully executed
and effective when executed by the Borrower, the Agent and the Lenders.
-2-
IN WITNESS WHEREOF, the Borrower, the Agent and the Lenders have caused
this First Amendment to be executed by their duly authorized officers all as of
the day and year first above written.
FRONT ROYAL, INC.
By: ___________________________________
Name: _________________________________
Title: ________________________________
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, as Agent
and as a Lender
By: ___________________________________
Name: _________________________________
Title: ________________________________
-3-
SECOND AMENDMENT TO CREDIT AGREEMENT,
FIRST AMENDMENT TO PLEDGE AND SECURITY AGREEMENT
AND LIMITED WAIVER
THIS SECOND AMENDMENT TO CREDIT AGREEMENT, FIRST AMENDMENT TO PLEDGE AND
SECURITY AGREEMENT AND LIMITED WAIVER, dated as of April 11, 1997 (this
"Amendment"), is made in respect of (i) the Credit Agreement dated December 18,
1996 (as amended by the First Amendment to Credit Agreement, dated December 30,
1996 and as further amended hereby, the "Credit Agreement"), by and between
FRONT ROYAL, INC., a North Carolina corporation ("Front Royal"), as Borrower,
the financial institutions listed on the signature pages thereof or that become
parties thereto after the date thereof (collectively the "Lenders"), and FIRST
UNION NATIONAL BANK OF NORTH CAROLINA ("First Union"), as agent for the Lenders
(in such capacity, the "Agent") and (ii) the Pledge and Security Agreement dated
December 31, 1996 (as amended hereby, the "Pledge Agreement"), by and between
Front Royal, as Pledgor, and the Agent for the benefit of the Agent and the
Lenders. Capitalized terms used but not defined herein shall have the meanings
given to such terms in the Credit Agreement.
RECITALS
A. With respect to the Credit Agreement, the parties desire (i) to allow
Rockwood to retain as Investments certain Asset Backed Derivative Securities,
subject to the conditions set forth herein, and (ii) to amend the definition of
"Earnings Coverage Ratio" and (iii) to clarify the meaning of the term "equity
security" as used in Section 6.11 thereof.
B. With respect to the Credit Agreement, First Union, as the sole Lender
and as Agent, desires to grant to Borrower a limited waiver of certain
violations of the Credit Agreement that have occurred prior to the effective
date of this Amendment.
C. With respect to the Pledge Agreement, the parties agree that the
purported pledge of the capital stock of Front Royal ETS, Inc. ("FRETS")
pursuant to the Pledge Agreement was invalid in that such stock is owned of
record by Front Royal Environmental Services, Inc. ("FRESI") and not by Front
Royal (the Pledgor). Accordingly, the parties desire to amend the Pledge
Agreement to delete the purported pledge of FRETS stock and to provide for the
prompt dissolution of FRETS.
STATEMENT OF AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Front Royal, the Agent and the
Lenders, for themselves and their successors and assigns, agree as follows:
ARTICLE I
-1-
AMENDMENT TO CREDIT AGREEMENT
1.1. Amendments relating to Asset Backed Derivative Securities.
a. Section 1.1 of the Credit Agreement shall be amended by adding
the following definition in appropriate alphabetical order:
"Adjusted Statutory Surplus" shall mean, at any time,
Consolidated Statutory Surplus at such time, less the net amount, if
any, by which the carrying value attributed to any Asset Backed
Derivative Securities in the determination of Consolidated Statutory
Surplus exceeds the market value (as provided by a reputable
investment dealer reasonably satisfactory to the Agent) of such
Asset Backed Derivative Securities at such time; provided that the
foregoing definition shall not be deemed to imply that the ownership
of Asset Backed Derivative Securities is permitted other than as
expressly permitted pursuant to this Agreement. "
b. Section 1.1 of the Credit Agreement shall be amended by adding
the following clauses to the definition of "Consolidated Net Worth"
immediately prior to the period at the end thereof:
", less the net amount, if any, by which the carrying value
attributed to any Asset Backed Derivative Securities in the
determination of such net worth exceeds the market value (as
provided by a reputable investment dealer reasonably satisfactory to
the Agent) of such Asset Backed Derivative Securities at such time;
provided that the foregoing definition shall not be deemed to imply
that the ownership of Asset Backed Derivative Securities is
permitted other than as expressly permitted pursuant to this
Agreement."
c. Section 6.1 of the Credit Agreement shall be amended by deleting
such section in its entirety and substituting in lieu thereof the
following:
"6.1 Adjusted Statutory Surplus. The Borrower will not permit
Adjusted Statutory Surplus to be less than $60,000,000 at any time
from and after the Closing Date."
d. Section 6.3 of the Credit Agreement shall be amended by deleting
the term "Consolidated Statutory Surplus" in each place where it appears
in such section and substituting in lieu thereof the term "Adjusted
Statutory Surplus. "
e. Section 6.11(i) of the Credit Agreement shall be amended by
adding the following parenthetical phrase immediately prior to the
semicolon at the end thereof:
"(except as expressly permitted by the provisions of clause
(ix)(h) below)"
-2-
f. Section 6.11(ix) of the Credit Agreement shall be amended by
adding the following clause (h) immediately following clause (g) thereof:
"(h) The Investments by Rockwood in the Asset Backed
Derivative Securities described in Schedule 6.11; provided that (A)
such Asset Backed Derivative Securities may not be sold or
transferred to any other Insurance Subsidiary and (B) Rockwood shall
not acquire or own any other Asset Backed Derivative Securities."
g. Section 6.22(b) of the Credit Agreement shall be amended by
deleting the term "Consolidated Statutory Surplus" from clause (x) in the
proviso to such section and substituting in lieu thereof the term
"Adjusted Statutory Surplus."
h. The Covenant Compliance Worksheets shall be amended to reflect
the foregoing amendments to Sections 6.1 and 6.3 of the Credit Agreement
and to reflect the foregoing amendment to the definition of "Consolidated
Net Worth" as it affects the determination of the Capitalization Ratio as
required by Section 6.3 of the Credit Agreement, in each case as shown in
the Covenant Compliance Worksheets attached to this Amendment.
i. The Schedules of the Credit Agreement shall be amended by adding
thereto Schedule 6.11 as attached to this Amendment.
1.2. Amendment to definition of "Earnings Coverage Ratio". Section 1.1 of
the Credit Agreement shall be amended by deleting phrase (i)(A) in the
definition of Earnings Coverage Ratio and substituting in lieu thereof the
following:
"the aggregate Statutory Net Income of the Insurance Subsidiaries,
without duplication, and"
1.3. Amendment relating to the use of the term "equity securities".
Section 6.11(ix)(d) of the Credit Agreement shall be amended by deleting the
phrase following the final comma in such Section and substituting in lieu
thereof the following:
"in either case shall not be considered equity securities for
purposes of subsections (d), (e) or (f) of this Section 6.11(ix)."
ARTICLE II
AMENDMENT TO PLEDGE AGREEMENT
2.1. Amendment to Annex A. Annex A of the Pledge Agreement shall be
amended by replacing such annex with the amended Annex A ("Amended Annex A")
attached hereto. Amended Annex A is identical to Annex A except for the deletion
of the description of any capital stock of FRETS.
-3-
ARTICLE III
LIMITED WAIVER
3.1. Events of Default. The Borrower has informed First Union of the
occurrence of certain Events of Default, as of December 31, 1996 and beyond the
60-day grace period allowed in the proviso to Section 6.11 of the Credit
Agreement, resulting from (i) Investments of Rockwood consisting of Asset Backed
Derivative Securities and (ii) Investments of Colony in a single equity security
in excess of 1.25% of Colony's Admitted Assets.
3.2. Limited Waiver. Subject to the compliance by the Borrower and
Insurance Subsidiaries with the provisions of Section 6.11 of the Credit
Agreement, as amended hereby, and the accuracy of the representations and
warranties of the Borrower in Section 4.1 below, First Union, as Agent and sole
Lender, hereby waives the Events of Default described in Section 3.1 above. This
Waiver is limited as specified and shall not constitute or be deemed to
constitute an amendment, modification or waiver of any provision of the Credit
Agreement or of any Default or Event of Default except as expressly set forth
herein.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
4.1. Representations and Warranties of Front Royal. Front Royal, as
Borrower and Pledgor, hereby represents and warrants to the Agent and Lenders
that:
a. Front Royal has the requisite corporate power and authority, and
has been duly authorized, to execute, deliver and perform this Amendment;
b. Front Royal has no claims, counterclaims, offsets, or defenses to
the Loan Documents and the performance of its obligations thereunder;
c. The representations and warranties made by Front Royal in the
Credit Agreement and in the Pledge Agreement are true and correct on and
as of the date hereof as though made on and as of such date (except for
those that expressly relate to an earlier date), provided, that all
references to Annex A in the representations and warranties of the Pledge
Agreement shall be deemed to be references to Amended Annex A;
d. Except as expressly provided in Section 3.1 above, no Default or
Event of Default has occurred or is continuing under the Loan Documents;
e. Prior to the date hereof, Front Royal has caused Colony to divest
at least that portion of equity securities that caused the Event of
Default described in Section 3.1(ii) above and Colony is currently in full
compliance with Section 6.11 of the Credit Agreement;
-4-
f. The Asset Backed Derivative Securities described on Schedule 6.11
attached hereto constitute all of the Asset Backed Derivative Securities
owned by the Borrower and its Subsidiaries; and
g. The assets of FRETS are de minimis.
4.2. Covenants of Front Royal. Front Royal, as Borrower and Pledgor,
hereby covenants and agrees that:
a. Within 60 days of the date hereof, it shall have caused FRETS to
be dissolved and shall provide the Agent with a filed copy of the articles
of dissolution of FRETS or equivalent documentation; and
b. At all times prior to the dissolution of FRETS its assets shall
be de minimis.
4.3. Covenant of Agent. Agent hereby covenants and agrees that promptly
upon the Borrower providing the documentation required by Section 4.2(a) above,
the Agent shall forward the original FRETS stock certificate and accompanying
stock power to Front Royal.
ARTICLE V
GENERAL
5.1. Acknowledgement of Guarantors. The Guarantors (as defined in the
Subsidiaries Guaranty, dated as of December 31, 1996, made by each of the
Non-Insurance Subsidiaries of the Borrower in favor of the Lenders and the Agent
(the "Guaranty")) acknowledge and consent to all of the terms and conditions of
this Amendment and agree that this Amendment, including the limited waiver, do
not operate to reduce or discharge the Guarantors' obligations under the
Guaranty.
5.2. Full Force and Effect. Except as expressly amended hereby, the Credit
Agreement and the Pledge Agreement shall continue in full force and effect in
accordance with the provisions thereof on the date hereof. As used in the Credit
Agreement and Pledge Agreement, "hereinafter," "hereto," "hereof," and words of
similar import shall, unless the context otherwise requires, mean the Credit
Agreement and Pledge Agreement, respectively, after amendment by this Amendment.
5.3. Applicable Law. This Amendment shall be governed by and construed in
accordance with the internal laws and judicial decisions of the State of North
Carolina.
5.4. Counterparts. This Amendment may be executed in two or more
counterparts, each of which shall constitute an original, but all of which when
taken together shall constitute but one instrument.
-5-
5.5. Headings. The headings of this Amendment are for the purposes of
reference only and shall not affect the construction of this Amendment.
5.6. Effectiveness. This Amendment shall be deemed fully executed and
effective when executed by Front Royal, the Guarantors, the Agent and the sole
Lender.
IN WITNESS WHEREOF, Front Royal, the Agent and the Lenders have caused
this Amendment to be executed by their duly authorized officers all as of the
day and year first above written.
FRONT ROYAL, INC., as Borrower and Pledgor
By: ___________________________________
Name: _________________________________
Title: ________________________________
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, as Agent
and as sole Lender
By: ___________________________________
Xxxx X. Xxxxxxxxx,
Senior Vice President
-6-
Acknowledged and consented to
pursuant to Section 5.1, as of
the day and year first above written.
FRONT ROYAL ENVIRONMENTAL SERVICES, INC.,
as Guarantor
By: _____________________________________
Title: __________________________________
FRONT ROYAL ENVIRONMENTAL INSURANCE
MANAGEMENT, INC., as Guarantor
By: _____________________________________
Title: __________________________________
COLONY MANAGEMENT SERVICES, INC.,
as Guarantor
By: _____________________________________
Title: __________________________________
-0-
Xxxxx Xxxxx Xxxxxxxx Xxxx
xx Xxxxx Xxxxxxxx, as Agent
Front Royal, Inc.
December 18, 1996 (as amended to
April 11, 997)/$38,000,000
Asset Backed Derivative Securities Owned By
Rockwood as of April 11, 1997
Statement
Cusip # Description Estimated Value
Maturity @ 12/31/96
--------------------------------------------------------------------------------
1. 31359FNBO FEDERAL NATL MTG ASSN 227-S 11/25/2000 1,002,850.71
2. 74434TUGO PRUDENTIAL HOME MTG SECS
SER 43 A-16 04/25/2009 123,672.22
3. 3133TOG24 FHLMC REMIC SER 1576-SB 08/15/2001 984,398.37
4. 00000XXX0 XXXXXXXXXX HOME MTG SECS
SER 43 A-12 04/25/2009 125,877.73
5. 00000XXX0 XXXXXXX XXXX XXX ASSN CL 25-SI 05/25/2010 919,939.75
6. 00000XXX0 XXXXXXX NATL MTG ASSN 1993-88 S 04/25/2000 916,883.86
7. 000000XX0 FHLMC PARTN CTF SER 1386CL-H 07/15/2002 988,506.42
8. 000000XX0 FEDERAL HOME LOAN XXX 0000-X 10/15/2016 361,068.64
Total 5,423,197.70
------------
-8-
ATTACHMENT A TO
COMPLIANCE CERTIFICATE (GAAP FINANCIAL STATEMENTS)
COVENANT COMPLIANCE WORKSHEET
(As amended by Second Amendment to Credit Agreement,
dated as of April 11, 1997)
Ratio of Consolidated Indebtedness to Total Capitalization
(Section 6.2 of the Credit Agreement): Not greater than 0.5 to 1.0
(1) Consolidated Indebtedness as of the measurement date $
======
(2) Total Capitalization:
(a) Consolidated Indebtedness as of
the measurement date $
------
(b) Consolidated Net Worth:
(i) consolidated net worth of Borrower
and Subsidiaries as of the measurement date $
------
(ii) Minus net amount by which carrying
value of Asset Backed Derivative Securities
exceeds market value as of the measurement
date (see attached Asset Backed Derivative
Securities Worksheet) $
------
(iii) Consolidated Net Worth as of
the measurement date $
------
(c) Total Capitalization: Add Lines 2(a) and 2(b)(iii) $
======
(3) Ratio of Consolidated Indebtedness to Total Capitalization:
Divide Line 1 by Line 2(c)
======
Fixed Charge Coverage Ratio
(Section 6.4 of the Credit Agreement): Not less than:
1.25 to 1.0 through
12/31/98,
1.3 to 1.0 thereafter.
(1) Earnings:
(a) Available Dividend Amount with
respect to the Measurement Period $
------
(b) Extraordinary Dividend Amount as of
the measurement date $
------
(c) Net Tax Payments of the Borrower
during the Measurement Period $
------
(d) Minus Projected Net Overhead for the four
fiscal quarters following the measurement date $
------
(e) Combined Net Cash Flow of the Non-Insurance
Subsidiaries (other than CMS) for the
Measurement Period $
------
(f) Minus Excess Cash Flow prepayment required
to be made in respect of the Measurement Period1 $
------
(g) Add Lines 1(a), 1(b), 1(c) and 1(e)
and subtract Lines 1(d) and 1(f) $
======
(2) Fixed Charges:
(a) Projected Debt Service for the four fiscal
quarters following the measurement date $
------
(b) Cash dividends or cash payments projected to be
paid in respect of the Series A Preferred Stock,
Class C Common Stock or Rights for the four
fiscal quarters following the Measurement Period $
------
(c) Add Lines 2(a) and 2(b) $
======
(3) Fixed Charge Coverage Ratio:
Divide Line l(g) by Line 2(c)
======
----------
1 To be deducted only for Measurement Periods ending on December 31st of any
fiscal year
Earnings Coverage Ratio
(Section 6.5 of the Credit Agreement): Not less than:
1.15 to 1.0 through
12/31/98,
1.3 to 1.0 thereafter.
(1) Statutory Net Income of the Insurance
Subsidiaries for the fiscal period2 $
------
(2) Aggregate Net Income of the Non-Insurance
Subsidiaries (other than CMS) for the fiscal
period $
------
(3) Add Lines (1) and (2) $
======
(4) Debt Service for the fiscal period $
------
(5) Net Overhead for the fiscal period $
------
(6) Add Lines (4) and (5) $
======
(7) Earnings Coverage Ratio:
Divide Line (3) by Line (6) $
======
Capital Expenditures
(Section 6.7 of the Credit Agreement): Not more than:
$1,500,000 for fiscal year ending
12/31/97.
$1,000,000 for fiscal years thereafter.
(1) Actual aggregate amount of Capital Expenditures
for fiscal year as of the measurement date $
======
----------
2 The relevant fiscal period for the fiscal quarters ending 3/31/97, 6/30/97
and 9/30/97 are the periods of one, two and three fiscal quarters,
respectively, ending on such dates and, thereafter, the period of four
fiscal quarters ending on such date.
ATTACHMENT A TO
COMPLIANCE CERTIFICATE (STATUTORY FINANCIAL STATEMENTS)
COVENANT COMPLIANCE WORKSHEET
(As amended by Second Amendment to Credit Agreement,
dated as of April 11, 1997)
Adjusted Statutory Surplus
(Section 6.1 of the Credit Agreement): Not less than the following:
(1) Required Adjusted Statutory Surplus as of $60,000,000
the measurement date ===========
(2) Actual Adjusted Statutory Surplus:
(a) Consolidated Statutory Surplus
as of the measurement date $
---------
(b) Minus net amount by which carrying value
of Asset Backed Derivative Securities exceeds
market value as of the measurement date
(see attached Asset Backed Derivative
Securities Worksheet) $
---------
(c) Adjusted Statutory Surplus as of
the measurement date $
===========
Operating Leverage Ratios
(Section 6.3 of the Credit Agreement): Not greater thana the following:
1. Consolidated Net Written Premiums to Not greater than 2.5 to 1.0
Adjusted Statutory Surplus
(a) Consolidated Net Written Premiums
as of the measurement date: $
=========
(b) Adjusted Statutory Surplus as of
the measurement date: $
=========
(c) Operating Leverage Ratio: Divide Line
1(a) by Line 1(b)
===========
2. Consolidated Gross Written Premiums to Adjusted
Statutory Surplus Not greater than 5.0 to 1.0
(a) Consolidated Gross Written Premiums as of
the measurement date $
=========
(b) Adjusted Statutory Surplus as of the
measurement date $
=========
(c) Operating Leverage Ratio:
Divide Line 2(a) by Line 2(b)
===========
Risk - Based Capital
(Section 6.6 of the Credit Agreement Not less than the following:
(1) Required minimum level of "total adjusted
capital"1
(a) Colony $
=========
(b) Xxxxxxxx $
=========
(c) FRIC $
=========
(d) Rockwood $
=========
(2) Actual "total adjusted capital" as of the
measurement date
(a) Colony $
=========
(b) Xxxxxxxx $
=========
(c) FRIC $
=========
(d) Rockwood $
=========
----------
1 (a) As of the last day of the fiscal year ending December 31, 1996, and as of
the last day of any fiscal year ending thereafter up to and including the fiscal
year ending December 31, 1998, 135% of the applicable Company Action Level RBC
for such Insurance Subsidiary at such time; and (b) as of the last day of any
fiscal year ending thereafter, 150% of the applicable Company Action Level RBC
for such subsidiary at such time.
Insurance Subsidiary Investments Complete for each
(Section 6.11(ix) of the Credit Agreement Insurance Subsidiary
Name of Insurance Subsidiary: __________________________
(1) Investment Grade Securities
rated "A-" or lower as of the
measurement date
(a) Permitted amount: 10% of Admitted Assets $
=========
(b) Actual amount $
=========
(2) Investments in Non-Investment
Grade Securities1 as of the measurement
date
(a) Permitted amount: 2% of Admitted Assets $
=========
(b) Actual amount $
=========
(3) Investments in Equity Securities as of the
measurement date
(a) Permitted amount: 7% of Admitted Assets $
=========
(b) Actual amount $
=========
(4) Investments in Securities of any
Issuer Group as of the measurement date
(a) Permitted amount: ___2 of Admitted Assets $
=========
(b) Investments in any Issuer Group in excess
of permitted amount? Yes __ No __
(Continued on Next Page)
--------
1 Limited to non-equity securities rated no lower than "B" by Standard & Poor's,
Fitch or Duff & Xxxxxx, "B3" by Xxxxx'x or "4" by the NAIC.
2 Fill in 2% for all periods through December 31, 1998 and 1.5% for all periods
thereafter.
(c) If yes, identify the Issuer Group(s) and
the amount of investments._________________________________________
(5) Investments in any single equity security
as of the measurement date
(a) Permitted amount: ___3 of Admitted Assets $
=========
(b) Investment in any equity security in excess
of permitted amount? Yes __ No __
(c) If yes, identify the equity security(ies) and
the amount of investments._________________________________________
----------
3 Fill in 1.25% for all periods through December 31, 1998 and 1.0% for all
periods thereafter.
Annex A to Pledge and Security
Agreement
First Union National Bank
of North Carolina, as Agent
Front Royal, Inc.
December 18, 1996/$38,000,000
-----------------------------
AS AMENDED BY SECOND AMENDMENT TO CREDIT AGREEMENT, FIRST AMENDMENT TO PLEDGE
AND SECURITY AGREEMENT AND LIMITED WAIVER, DATED AS OF APRIL 11, 1997.
Part I. Pledged Stock
Percentage of
Outstanding
Name of Type of Number of Certificate Shares of
Issuing Corporation Shares Shares Number Capital Stock
------------------- ------ ------ ------ -------------
Colony Management
Services, Inc. Common 100 1 100%
Front Royal Environmental
Insurance Management, Inc. Common 60,000 1 100%
Front Royal Environmental
Services, Inc. Common 11,875 1 100%
Colony Insurance Company Common 200,000 6 100%
Rockwood Insurance Company Class A Common 500,000 13 100%
Class B Common 571,961 2 100%
Part II. Pledged Notes
Original
Principal
Date Lender Borrower Amount
---- ------ -------- ------
ASSET BACKED DERIVATIVE SECURITIES WORKSHEET
Attach to
Covenant Compliance Worksheets for
GAAP and Statutory Financial Statement Compliance Certificates
(As amended by Second Amendment to Credit Agreement,
dated as of April 11, 1997)
Measurement Date:_______________
A B C D
Carrying Value Attributed
In Determining Column B Minus
Asset Backed Consolidated Statutory Column C
Derivative Surplus and Consolidated (Positive and
Securities Net Worth Market Value1 Negative values)
------------------------------------------------------------------------
1.
2.
3.
4.
5.
6.
7.
8.
Net amount by which carrying value attributed
to Asset Backed Derivative Securities exceeds
market value as of measurement date. (add numbers
in Column D).
===========
Schedule 6.11 to Credit Agreement
First Union National Bank
----------
1 Indicate source of market value determination:_______________________________