EXHIBIT 10.28
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CREDIT AGREEMENT
between
RADIAN GROUP INC.
and
FIRST UNION NATIONAL BANK,
as Lender
$50,000,000 364-Day Revolving Credit Facility
Dated as of February 8, 2002
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
1.1 Defined Terms .................................................... 1
1.2 Accounting Terms ................................................. 14
1.3 Other Terms; Construction ........................................ 14
ARTICLE II
AMOUNT AND TERMS OF THE LOANS
2.1 Commitment ....................................................... 14
2.2 Borrowings ....................................................... 14
2.3 Disbursements .................................................... 15
2.4 Note ............................................................. 16
2.5 Termination of Commitment ........................................ 16
2.6 Mandatory Payments and Prepayments ............................... 16
2.7 Voluntary Prepayments ............................................ 17
2.8 Interest ......................................................... 17
2.9 Fees ............................................................. 18
2.10 Interest Periods ................................................. 19
2.11 Conversions and Continuations .................................... 20
2.12 Method of Payments; Computations ................................. 20
2.13 Recovery of Payments ............................................. 21
2.14 Use of Proceeds .................................................. 21
2.15 Increased Costs; Change in Circumstances; Illegality; etc ........ 21
2.16 Taxes ............................................................ 23
2.17 Compensation ..................................................... 24
ARTICLE III
CONDITIONS OF BORROWING
3.1 Conditions of Initial Borrowing .................................. 24
3.2 Conditions of All Borrowings ..................................... 27
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Corporate Organization and Power ................................. 27
4.2 Authorization; Enforceability .................................... 28
4.3 No Violation ..................................................... 28
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4.4 Governmental and Third-Party Authorization; Permits .............. 28
4.5 Litigation ....................................................... 29
4.6 Taxes ............................................................ 29
4.7 Subsidiaries ..................................................... 29
4.8 Full Disclosure .................................................. 29
4.9 Margin Regulations ............................................... 30
4.10 No Material Adverse Change ....................................... 30
4.11 Financial Matters ................................................ 30
4.12 Ownership of Properties .......................................... 31
4.13 ERISA ............................................................ 31
4.14 Environmental Matters ............................................ 32
4.15 Compliance With Laws ............................................. 33
4.16 Regulated Industries ............................................. 33
4.17 Insurance ........................................................ 33
4.18 Material Contracts ............................................... 33
4.19 Reinsurance Agreements ........................................... 33
ARTICLE V
AFFIRMATIVE COVENANTS
5.1 Financial Statements ............................................. 34
5.2 Statutory Financial Statements ................................... 35
5.3 Other Business and Financial Information ......................... 35
5.4 Corporate Existence; Franchises; Maintenance of Properties ....... 38
5.5 Compliance with Laws ............................................. 38
5.6 Payment of Obligations ........................................... 38
5.7 Insurance ........................................................ 38
5.8 Maintenance of Books and Records; Inspection ..................... 38
5.9 Permitted Acquisitions ........................................... 39
5.10 Dividends ........................................................ 39
5.11 Further Assurances ............................................... 39
ARTICLE VI
FINANCIAL COVENANTS
6.1 Maximum Consolidated Debt to Consolidated Total Capitalization ... 39
ARTICLE VII
NEGATIVE COVENANTS
7.1 Merger; Consolidation ............................................ 40
7.2 Indebtedness ..................................................... 40
7.3 Liens ............................................................ 41
7.4 Disposition of Assets ............................................ 43
7.5 Investments and Acquisitions ..................................... 43
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7.6 Restricted Payments .............................................. 44
7.7 Transactions with Affiliates ..................................... 44
7.8 Certain Amendments ............................................... 44
7.9 Limitation on Certain Restrictions ............................... 45
7.10 Fiscal Year ...................................................... 45
7.11 Accounting Changes ............................................... 45
7.12 Ratings .......................................................... 45
ARTICLE VIII
EVENTS OF DEFAULT
8.1 Events of Default ................................................ 45
8.2 Remedies: Termination of Commitment, Acceleration, etc ........... 47
8.3 Remedies: Set-Off ................................................ 48
ARTICLE IX
MISCELLANEOUS
9.1 Fees and Expenses ................................................ 48
9.2 Indemnification .................................................. 49
9.3 Governing Law; Consent to Jurisdiction ........................... 49
9.4 Waiver of Trial by Jury .......................................... 50
9.5 Notices .......................................................... 51
9.6 Amendments, Waivers, etc ......................................... 51
9.7 Assignments, Participations ...................................... 51
9.8 No Waiver ........................................................ 52
9.9 Successors and Assigns ........................................... 52
9.10 Survival ......................................................... 52
9.11 Severability ..................................................... 53
9.12 Construction ..................................................... 53
9.13 Confidentiality .................................................. 53
9.14 Counterparts; Effectiveness ...................................... 53
9.15 Disclosure of Information ........................................ 53
9.16 Entire Agreement ................................................. 54
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EXHIBITS
Exhibit A Form of Note
Exhibit B-1 Form of Notice of Borrowing
Exhibit B-2 Form of Notice of Conversion/Continuation
Exhibit C-1 Form of GAAP Compliance Certificate
Exhibit C-2 Form of SAP Compliance Certificate
Exhibit D Form of Legal Opinion
SCHEDULES
Schedule 4.4 Consents and Filings
Schedule 4.5 Litigation
Schedule 4.6 Taxes
Schedule 4.7 Subsidiaries
Schedule 4.18 Material Contracts
Schedule 4.19 Reinsurance Agreements
Schedule 7.2 Indebtedness
Schedule 7.3 Liens
Schedule 7.5 Investments
Schedule 7.7 Transactions With Affiliates
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of the 8th day of February, 2002 (this
"Agreement"), is made between RADIAN GROUP INC., a Delaware corporation with its
principal offices in Philadelphia, Pennsylvania (the "Borrower"), and FIRST
UNION NATIONAL BANK ("First Union" or "Lender").
RECITALS
A. The Borrower has requested that the Lender make available to the
Borrower a revolving credit facility in the aggregate principal amount of
$50,000,000. The Borrower will use the proceeds of this facility to provide for
the working capital and general corporate requirements of the Borrower and its
subsidiaries, to pay certain transaction fees and expenses in connection
herewith and to finance permitted acquisitions by the Borrower or any of its
subsidiaries.
B. The Lender is willing to make available to the Borrower the credit
facility described herein subject to and on the terms and conditions set forth
in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual provisions, covenants and
agreements herein contained, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. For purposes of this Agreement, in addition to the
terms defined elsewhere herein, the following terms shall have the meanings set
forth below (such meanings to be equally applicable to the singular and plural
forms thereof):
"Account Designation Letter" shall mean a letter from the Borrower to the
Lender, duly completed and signed by an Authorized Officer and in form and
substance satisfactory to the Lender, listing any one or more accounts to which
the Borrower may from time to time request the Lender to forward the proceeds of
any Loans made hereunder.
"Acquisition" shall mean any transaction or series of related
transactions, consummated on or after the date hereof, by which the Borrower
directly, or indirectly through one or more Subsidiaries, (i) acquires any going
business, or all or substantially all of the assets, of any Person, whether
through purchase of assets, merger or otherwise, or (ii) acquires securities or
other ownership interests of any Person having at least a majority of combined
voting power of the then outstanding securities or other ownership interests of
such Person.
"Adjusted LIBOR Rate" shall mean, at any time with respect to any Loan, a
rate per annum equal to the LIBOR Rate as in effect at such time plus the
Applicable Margin Percentage.
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"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. For purposes of this
definition, with respect to any Person "control" shall mean (i) the possession,
direct or indirect, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise, or (ii) the beneficial ownership of
securities or other ownership interests of such Person having 10% or more of the
combined voting power of the then outstanding securities or other ownership
interests of such Person ordinarily (and apart from rights accruing under
special circumstances) having the right to vote in the election of directors or
other governing body of such Person. Notwithstanding the foregoing, (x) no
individual shall be an "Affiliate" of any Person or of any of its Subsidiaries
solely by reason of such individual being a director, officer or employee of
such Person or any of its Subsidiaries; and (y) the Lender shall not be an
Affiliate of the Borrower or any of its Subsidiaries.
"Agreement" shall mean this Credit Agreement, as amended, modified or
supplemented from time to time.
"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 Insurance Regulatory Authority of
its jurisdiction of domicile and in accordance with the laws of such
jurisdiction, together with all exhibits, schedules, certificates and actuarial
opinions required to be filed or delivered therewith.
"Applicable Margin Percentage" shall mean, at any time from and after the
Closing Date, (a) for purposes of determining the Adjusted LIBOR Rate, (i) 0.55%
if the ratio of Consolidated Indebtedness to Consolidated Total Capitalization
is equal to or less than .2 : 1.0 and (ii) 0.625% if the ratio of Consolidated
Indebtedness to Consolidate Total Capitalization is greater than .2 : 1.0; and
(b) for purposes of calculating the commitment fee payable pursuant to SECTION
2.9(b), (i) 0.125% if the ratio of Consolidated Indebtedness to Consolidated
Total Capitalization is equal to or less than .2 : 1.0 and (ii) 0.15% if the
ratio of Consolidated Indebtedness to Consolidated Total Capitalization is
greater than .2 : 1.0. On each Adjustment Date (as hereinafter defined), the
Applicable Margin Percentage for LIBOR Loans and the commitment fee payable
pursuant to SECTION 2.9(b) shall be adjusted effective as of such date (based
upon the calculation of the ratio of Consolidated Indebtedness to Consolidated
Total Capitalization as of the last day of the fiscal period to which such
Adjustment Date relates) in accordance with this definition; provided, however,
that, notwithstanding the foregoing or anything else herein to the contrary, if
at any time the Borrower shall have failed to deliver the financial statements
and a Compliance Certificate as required by SECTION 5.1(a) or SECTION 5.1(b), as
the case may be, and SECTION 5.3(a), or if at any time an Event of Default shall
have occurred and be continuing, then at the election of the Lender, at all
times from and including the date on which such statements and Compliance
Certificate are required to have been delivered (or the date of occurrence of
such Event of Default, as the case may be) to the date on which the same shall
have been delivered (or such Event of Default cured or waived, as the case may
be), each Applicable Margin Percentage shall be determined in accordance with
this definition as if the ratio of Consolidated Indebtedness to Consolidated
Total Capitalization was greater than .2 : 1.0 (notwithstanding the actual
ratio). For purposes of this definition, "Adjustment Date" shall mean, with
respect to any fiscal period of the Borrower beginning with the fiscal quarter
ending March 31, 2002, the fifth
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(5th) day (or, if such day is not a Business Day, the next succeeding Business
Day) after delivery by the Borrower in accordance with SECTION 5.1(a) or SECTION
5.1(b), as the case may be, of (i) financial statements as of the end of and for
such fiscal period and (ii) a duly completed Compliance Certificate with respect
to such fiscal period. Until the first Adjustment Date, each Applicable Margin
Percentage shall be determined in accordance with this definition based upon a
ratio of Consolidated Indebtedness to Consolidated Total Capitalization as set
forth in the pro forma Covenant Compliance Worksheet required to be delivered
pursuant to SECTION 3.1(k).
"Authorized Officer" shall mean, with respect to any action specified
herein, any officer of the Borrower duly authorized by resolution of the board
of directors of the Borrower to take such action on its behalf, and whose
signature and incumbency shall have been certified to the Lender by the
secretary or an assistant secretary of the Borrower.
"Bankruptcy Code" shall mean 11 U.S.C. Sections 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 commercial lending rate (which may not necessarily be
its best lending rate), as adjusted to conform to changes as of the opening of
business on the date of any such change in such prime rate, and (ii) the Federal
Funds Rate plus 0.5% (50 basis points) per annum, as adjusted to conform to
changes as of the opening of business on the date of any such change in the
Federal Funds Rate.
"Base Rate Loan" shall mean, at any time, any Loan that bears interest at
such time at the Base Rate.
"Borrower" shall mean Radian Group Inc.
"Borrower Margin Stock" shall mean shares of capital stock of the Borrower
that are held by the Borrower or any of its Subsidiaries and that constitute
Margin Stock.
"Borrowing" shall mean the incurrence by the Borrower (including as a
result of conversions and continuations of outstanding Loans pursuant to SECTION
2.11) on a single date of a group of Loans of a single Type and, in the case of
LIBOR Loans, as to which a single Interest Period is in effect.
"Borrowing Date" shall mean, with respect to any Borrowing, the date upon
which such Borrowing is made.
"Business Day" shall mean (i) any day other than a Saturday or Sunday, a
legal holiday or a day on which commercial banks in Charlotte, North Carolina or
Philadelphia, Pennsylvania are required by law to be closed and (ii) in respect
of any determination relevant to a LIBOR Loan, any such day that is also a day
on which tradings are conducted in the London interbank Eurodollar market.
"Capital Stock" shall mean (i) with respect to any Person that is a
corporation, any and all shares, interests or equivalents in capital stock
(whether voting or nonvoting, and whether common or preferred) of such
corporation, and (ii) with respect to any Person that is not a
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corporation, any and all partnership, membership, limited liability company or
other equity interests of such Person; and in each case, any and all warrants,
rights or options to purchase any of the foregoing.
"Cash Equivalents" shall mean (i) securities issued or unconditionally
guaranteed by the United States of America or any agency or instrumentality
thereof, backed by the full faith and credit of the United States of America and
maturing within ninety (90) days from the date of acquisition, (ii) commercial
paper issued by any Person organized under the laws of the United States of
America, maturing within ninety (90) days from the date of acquisition and, at
the time of acquisition, having a rating of at least A-1 or the equivalent
thereof by Standard & Poor's or at least P-1 or the equivalent thereof by
Moody's, (iii) time deposits and certificates of deposit maturing within ninety
(90) days from the date of issuance and issued by a bank or trust company
organized under the laws of the United States of America or any state thereof
that has combined capital and surplus of at least $500,000,000 and that has (or
is a subsidiary of a bank holding company that has) a long-term unsecured debt
rating of at least A or the equivalent thereof by Standard & Poor's or at least
A2 or the equivalent thereof by Moody's, (iv) repurchase obligations with a term
not exceeding seven (7) days with respect to underlying securities of the types
described in clause (i) above entered into with any bank or trust company
meeting the qualifications specified in clause (iii) above, and (v) money market
funds at least 95% of the assets of which are continuously invested in
securities of the type described in clause (i) above.
"Closing Date" shall mean February 8, 2002, the date on which this
Agreement has become effective.
"Commitment" shall mean $50,000,000, as such amount may be reduced
pursuant to the terms hereof.
"Compliance Certificate" shall mean a fully completed and duly executed
certificate in the form of EXHIBIT C-1 or EXHIBIT C-2, together, for purposes of
EXHIBIT C-1, with a Covenant Compliance Worksheet.
"Consolidated Indebtedness" shall mean, as of any date of determination,
the aggregate (without duplication) of all Indebtedness (whether or not
reflected on the Borrower's or any Subsidiary's balance sheet) of the Borrower
and its Subsidiaries as of such date, determined on a consolidated basis in
accordance with GAAP, excluding reimbursement obligations in respect of letters
of credit issued for the benefit of any Insurance Subsidiary or the Borrower in
the ordinary course of its business to support the payment of obligations
arising under insurance and reinsurance contracts and weather and similar swap
agreements, but only in each case to the extent such letters of credit (i) are
not drawn upon and (ii) are collateralized by cash or Cash Equivalents.
"Consolidated Net Worth" shall mean, as of any date of determination, the
net worth of the Borrower and its Subsidiaries as of such date, determined on a
consolidated basis in accordance with GAAP but excluding any Disqualified
Capital Stock and without regard to the requirements of Statement of Financial
Accounting Standards No. 115 issued by the Financial Accounting Standards Board
of the American Institute of Certified Public Accountants.
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"Consolidated Total Capitalization" shall mean, as of any date of
determination, Consolidated Net Worth as of such date plus Consolidated
Indebtedness as of such date.
"Contingent Obligation" shall mean, with respect to any Person, any direct
or indirect liability of such Person with respect to any Indebtedness, liability
or other obligation (the "primary obligation") of another Person (the "primary
obligor"), whether or not contingent, (a) to purchase, repurchase or otherwise
acquire such primary obligation or any property constituting direct or indirect
security therefor, (b) to advance or provide funds (i) for the payment or
discharge of any such primary obligation or (ii) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet item, level of income or financial condition of
the primary obligor, (c) to purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor in respect thereof to make payment of such
primary obligation or (d) otherwise to assure or hold harmless the owner of any
such primary obligation against loss or failure or inability to perform in
respect thereof; provided, however, that, with respect to the Borrower and its
Subsidiaries, the term Contingent Obligation shall not include insurance
policies, financial guarantees or surety bonds issued by the Borrower or any of
its Subsidiaries in the ordinary course of their respective businesses or
endorsements for collection or deposit in the ordinary course of business;
provided further, that any Contingent Obligation with respect to a Person and a
primary obligor which are the Borrower or any of its Subsidiaries, shall only be
counted one time with respect to the Borrower and its Subsidiaries taken as a
whole.
"Covenant Compliance Worksheet" shall mean a fully completed worksheet in
the form of Attachment A to EXHIBIT C-1.
"Credit Documents" shall mean this Agreement, the Note, the Fee Letter,
any Hedge Agreement to which the Borrower and Lender are parties, and all other
agreements, instruments, documents and certificates now or hereafter executed
and delivered to the Lender by or on behalf of the Borrower or any of its
Subsidiaries with respect to this Agreement and the transactions contemplated
hereby, in each case as amended, modified, supplemented or restated from time to
time.
"Default" shall mean any event or condition that, with the passage of time
or giving of notice, or both, would constitute an Event of Default.
"Disqualified Capital Stock" shall mean, with respect to any Person, any
Capital Stock of such Person that, by its terms (or by the terms of any security
into which it is convertible or for which it is exchangeable), or upon the
happening of any event or otherwise, (i) matures or is mandatorily redeemable or
subject to any mandatory repurchase requirement, pursuant to a sinking fund
obligation or otherwise, (ii) is redeemable or subject to any mandatory
repurchase requirement at the sole option of the holder thereof, or (iii) is
convertible into or exchangeable for (whether at the option of the issuer or the
holder thereof) (a) debt securities or (b) any Capital Stock referred to in (i)
or (ii) above, in each case under (i), (ii) or (iii) above at any time on or
prior to the first anniversary of the Maturity Date; provided, however, that
only the portion of Capital Stock that so matures or is mandatorily redeemable,
is so redeemable at the option of the
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holder thereof, or is so convertible or exchangeable on or prior to such date
shall be deemed to be Disqualified Capital Stock.
"Dollars" or "$" shall mean dollars of the United States of America.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute, and all rules and
regulations from time to time promulgated thereunder.
"ERISA Affiliate" shall mean any Person (including any trade or business,
whether or not incorporated) that would be deemed to be under "common control"
with, or a member of the same "controlled group" as the Borrower or any of its
Subsidiaries, within the meaning of Sections 414(b), (c), (m) or (o) of the
Internal Revenue Code or Section 4001 of ERISA.
"ERISA Event" shall mean any of the following with respect to a Plan or
Multiemployer Plan, as applicable: (i) a Reportable Event with respect to a Plan
or a Multiemployer Plan, (ii) a complete or partial withdrawal by the Borrower
or any ERISA Affiliate from a Multiemployer Plan that results in liability under
Section 4201 or 4204 of ERISA, or the receipt by the Borrower or any ERISA
Affiliate of notice from a Multiemployer Plan that it is in reorganization or
insolvency pursuant to Section 4241 or 4245 of ERISA or that it intends to
terminate or has terminated under Section 4041A of ERISA, (iii) the distribution
by the Borrower or any ERISA Affiliate under Section 4041 or 4041A of ERISA of a
notice of intent to terminate any Plan or the taking of any action to terminate
any Plan, (iv) the commencement of proceedings by the PBGC under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Plan, or the receipt by the Borrower or any ERISA Affiliate of a notice from any
Multiemployer Plan that such action has been taken by the PBGC with respect to
such Multiemployer Plan, (v) the institution of a proceeding by any fiduciary of
any Multiemployer Plan against the Borrower or any ERISA Affiliate to enforce
Section 515 of ERISA, which is not dismissed within thirty (30) days, (vi) the
imposition upon the Borrower or any ERISA Affiliate of any liability under Title
IV of ERISA, other than for PBGC premiums due but not delinquent under Section
4007 of ERISA, or the imposition or threatened imposition of any Lien upon any
assets of the Borrower or any ERISA Affiliate as a result of any alleged failure
to comply with the Internal Revenue Code or ERISA in respect of any Plan, (vii)
the engaging in or otherwise becoming liable for a nonexempt Prohibited
Transaction by the Borrower or any ERISA Affiliate, (viii) a violation of the
applicable requirements of Section 404 or 405 of ERISA or the exclusive benefit
rule under Section 401(a) of the Internal Revenue Code by any fiduciary of any
Plan for which the Borrower or any of its ERISA Affiliates may be directly or
indirectly liable or (ix) the adoption of an amendment to any Plan that,
pursuant to Section 401(a)(29) of the Internal Revenue Code or Section 307 of
ERISA, would result in the loss of tax-exempt status of the trust of which such
Plan is a part if the Borrower or an ERISA Affiliate fails to timely provide
security to such Plan in accordance with the provisions of such sections.
"Environmental Claims" shall mean any and all administrative, regulatory
or judicial actions, suits, demands, demand letters, claims, liens, accusations,
allegations, notices of noncompliance or violation, investigations (other than
internal reports prepared by any Person in the ordinary course of its business
and not in response to any third party action or request of any kind) or
proceedings relating in any way to any actual or alleged violation of or
liability under
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any Environmental Law or relating to any permit issued, or any approval given,
under any such Environmental Law (collectively, "Claims"), including, without
limitation, (i) any and all Claims by Governmental Authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages pursuant to any
applicable Environmental Law and (ii) any and all Claims by any third party
seeking damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Substances or arising from alleged
injury or threat of injury to human health or the environment.
"Environmental Laws" shall mean any and all federal, state and local laws,
statutes, ordinances, rules, regulations, permits, licenses, approvals, rules of
common law and orders of courts or Governmental Authorities, relating to the
protection of human health or occupational safety or the environment, now or
hereafter in effect and in each case as amended from time to time, including,
without limitation, requirements pertaining to the manufacture, processing,
distribution, use, treatment, storage, disposal, transportation, handling,
reporting, licensing, permitting, investigation or remediation of Hazardous
Substances.
"Event of Default" shall have the meaning given to such term in SECTION
8.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time, and any successor statute, and all rules and regulations from
time to time promulgated thereunder.
"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 Lender from three federal funds brokers of
recognized standing selected by the Lender.
"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 the Lender to the Borrower, dated
November 7, 2001, 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 Officer" shall mean, with respect to the Borrower, the chief
financial officer, the chief executive officer, any vice president - finance,
the principal accounting officer, controller or treasurer of the Borrower.
"First Union" shall mean First Union National Bank, and its successors and
assigns.
"Fitch" shall mean Fitch, Inc., and its successors and assigns.
"GAAP" shall mean generally accepted accounting principles, as set forth
in the statements, opinions and pronouncements of the Accounting Principles
Board, the American
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Institute of Certified Public Accountants and the Financial Accounting Standards
Board, consistently applied and maintained, as in effect from time to time
(subject to the provisions of SECTION 1.2).
"Governmental Authority" shall mean any nation or government, any state or
other political subdivision thereof and any central bank thereof, any municipal,
local, city or county government, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Hazardous Substances" shall mean any substances or materials (i) that are
or become defined as hazardous wastes, hazardous substances, pollutants,
contaminants or toxic substances under any Environmental Law, (ii) that are
defined by any Environmental Law as toxic, explosive, corrosive, ignitable,
infectious, radioactive, mutagenic or otherwise hazardous, (iii) the presence of
which require investigation or response under any Environmental Law, (iv) that
constitute a nuisance, trespass or health or safety hazard to Persons or
neighboring properties, (iv) that consist of underground or aboveground storage
tanks, whether empty, filled or partially filled with any substance, or (v) that
contain, without limitation, asbestos, polychlorinated biphenyls, urea
formaldehyde foam insulation, petroleum hydrocarbons, petroleum derived
substances or wastes, crude oil, nuclear fuel, natural gas or synthetic gas.
"Hedge Agreement" shall mean any interest or foreign currency rate swap,
cap, collar, option, hedge, forward rate or other similar agreement or
arrangement designed to protect against fluctuations in interest rates or
currency exchange rates, including any swap agreements (as defined in 11 U.S.C.
Section 101).
"Historical Statutory Statements" shall have the meaning given to such
term in SECTION 4.11(c).
"Indebtedness" shall mean, with respect to any Person (without
duplication), (i) all indebtedness and obligations of such Person for borrowed
money or in respect of loans or advances of any kind, (ii) all obligations of
such Person evidenced by notes, bonds, debentures or similar instruments, (iii)
all reimbursement obligations of such Person with respect to surety bonds,
letters of credit and bankers' acceptances (in each case, whether or not drawn
or matured and in the stated amount thereof), (iv) all obligations of such
Person to pay the deferred purchase price of property or services, other than
trade accounts payable arising and accrued expenses incurred, in the ordinary
course of business, (v) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person, (vi) all obligations of such Person as lessee under
leases that are or are required to be, in accordance with GAAP, recorded as
capital leases, to the extent such obligations are required to be so recorded,
(vii) all Disqualified Capital Stock issued by such Person, with the amount of
Indebtedness represented by such Disqualified Capital Stock being equal to the
greater of its voluntary or involuntary liquidation preference and its maximum
fixed repurchase price, but excluding accrued dividends, if any (for purposes
hereof, the "maximum fixed repurchase price" of any Disqualified Capital Stock
that does not have a fixed repurchase price shall be calculated in accordance
with the terms of such Disqualified Capital Stock as if such Disqualified
Capital Stock were purchased on any date on which Indebtedness shall be required
to be determined
8
pursuant to this Agreement, and if such price is based upon, or measured by, the
fair market value of such Disqualified Capital Stock, such fair market value
shall be determined reasonably and in good faith by the board of directors or
other governing body of the issuer of such Disqualified Capital Stock), (viii)
the net termination obligations of such Person under any Hedge Agreements,
calculated as of any date as if such agreement or arrangement were terminated as
of such date, (ix) all Contingent Obligations of such Person and (x) all
indebtedness referred to in clauses (i) through (x) above secured by any Lien on
any property or asset owned or held by such Person regardless of whether the
indebtedness secured thereby shall have been assumed by such Person or is
nonrecourse to the credit of such Person.
"Insurance Regulatory Authority" shall mean, with respect to any Insurance
Subsidiary, the insurance department or similar Governmental Authority charged
with regulating insurance companies or insurance holding companies, in its
jurisdiction of domicile and, to the extent that it has regulatory authority
over such Insurance Subsidiary, in each other jurisdiction in which such
Insurance Subsidiary conducts business or is licensed to conduct business.
"Insurance Subsidiary" shall mean any direct or indirect Subsidiary of the
Borrower that is regulated and licensed to conduct an insurance business by an
Insurance Regulatory Authority or that is otherwise required to be regulated
thereby in accordance with the applicable Requirements of Law of its
jurisdiction of domicile.
"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 Policy" shall mean the Investment Policy of the Insurance
Subsidiaries as of the date hereof, as referenced in SCHEDULE 7.5.
"LIBOR Loan" shall mean, at any time, any Loan that bears interest at such
time at the Adjusted LIBOR Rate.
"LIBOR Rate" shall mean, with respect to each LIBOR Loan comprising part
of the same Borrowing for any Interest Period, an interest rate per annum
obtained by dividing (i) (y) the rate of interest (rounded upward, if necessary,
to the nearest 1/16 of one percentage point) appearing on Telerate Page 3750 (or
any successor page) or (z) if no such rate is available, the rate of interest
determined by the Lender to be the rate or the arithmetic mean of rates (rounded
upward, if necessary, to the nearest 1/16 of one percentage point) at which
Dollar deposits in immediately available funds are offered by First Union to
first-tier banks in the London interbank Eurodollar market, in each case under
(y) and (z) above at approximately 11:00 a.m., London time two (2) Business Days
prior to the first day of such Interest Period for a period substantially equal
to such Interest Period and in an amount substantially equal to the amount of
the LIBOR Loan comprising part of such Borrowing, by (ii) the amount equal to
1.00 minus the Reserve Requirement (expressed as a decimal) for such Interest
Period.
"Lender" shall mean First Union National Bank, and its successors and
assigns
9
"Lending Office" shall mean the office of the Lender designated as its
"Lending Office" on its signature page hereto or such other office as may be
otherwise designated in writing from time to time by the Lender to the Borrower.
The Lender may designate separate Lending Offices as provided in the foregoing
sentence for the purposes of making or maintaining different Types of Loans,
and, with respect to LIBOR Loans, such office may be a domestic or foreign
branch or Affiliate of the Lender.
"Licenses" shall mean any and all licenses (including provisional
licenses), certificates of need, accreditations, permits, franchises, rights to
conduct business, approvals (by a Governmental Authority or otherwise),
consents, qualifications, operating authority and any other authorizations.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
security interest, lien (statutory or otherwise), preference, priority, charge
or other encumbrance of any nature, whether voluntary or involuntary, including,
without limitation, the interest of any vendor or lessor under any conditional
sale agreement, title retention agreement, capital lease or any other lease or
arrangement having substantially the same effect as any of the foregoing.
"Loans" shall have the meaning given to such term in SECTION 2.1.
"Margin Stock" shall have the meaning given to such term in Regulation U.
"Material Adverse Change" shall mean a material adverse change in the
condition (financial or otherwise), operations, prospects, business, properties
or assets of the Borrower and its Subsidiaries, taken as a whole.
"Material Adverse Effect" shall mean a material adverse effect upon (i)
the condition (financial or otherwise), operations, prospects, business,
properties or assets of the Borrower or its Subsidiaries, taken as a whole, (ii)
the ability of the Borrower or any Subsidiary to perform its obligations under
this Agreement or any of the other Credit Documents to which it is a party or
(iii) the legality, validity or enforceability of this Agreement or any of the
other Credit Documents or the rights and remedies of the Lender hereunder and
thereunder.
"Material Contract" shall have the meaning given to such term in SECTION
4.18.
"Material Insurance Subsidiaries" shall mean Radian Guaranty Inc., Amerin
Guaranty Corporation, Radian Reinsurance Inc. (formerly known as Enhance
Reinsurance Company), Radian Asset Assurance Inc. (formerly known as Asset
Guaranty Insurance Company) and any other direct or indirect Insurance
Subsidiary of the Borrower whose total statutory assets exceed 10% of the
combined statutory assets (without duplication) of all Insurance Subsidiaries of
the Borrower, taken as a whole, or whose gross written premiums exceed 10% of
combined gross written premiums of all such Insurance Subsidiaries, taken as a
whole.
"Material Subsidiary" shall mean any Subsidiary of the Borrower that as of
such time either (i) is a Material Insurance Subsidiary or (ii) meets the
definition of a "significant subsidiary" contained as of the date hereof in
Regulation S-K of the Securities and Exchange Commission or any governmental
authority superseding to its principal functions.
10
"Maturity Date" shall mean February 7, 2003.
"Moody's" shall mean Moody's Investors Services, Inc., and its successors
and assigns.
"Multiemployer Plan" shall mean any "multiemployer plan" within the
meaning of Section 4001(a)(3) of ERISA to which the Borrower or any ERISA
Affiliate makes, is making or is obligated to make contributions or has made or
been obligated to make contributions.
"NAIC" shall mean the National Association of Insurance Commissioners and
any successor thereto.
"Note" shall mean the promissory note of the Borrower in substantially the
form of EXHIBIT A, together with any amendments, modifications and supplements
thereto, substitutions therefor and restatements thereof.
"Notice of Borrowing" shall have the meaning given to such term in SECTION
2.2(b).
"Notice of Conversion/Continuation" shall have the meaning given to such
term in SECTION 2.11(b).
"Obligations" shall mean all principal of and interest (including, to the
greatest extent permitted by law, post-petition interest) on the Loans, and all
fees, expenses, indemnities and other obligations owing, due or payable at any
time by the Borrower to the Lender or any other Person entitled thereto, under
this Agreement or any of the other Credit Documents, and all payment and other
obligations owing or payable at any time by the Borrower to the Lender or any
Affiliate of any Lender under or in connection with any Hedge Agreement
permitted by this Agreement.
"Participant" shall have the meaning given to such term in SECTION 9.7.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any
successor thereto.
"Permitted Acquisition" shall mean (a) any Acquisition with respect to
which all of the following conditions are satisfied: (i) any Capital Stock given
as consideration in connection therewith shall be Capital Stock of the Borrower,
(ii) in the case of an Acquisition involving the acquisition of control of
Capital Stock of any Person, immediately after giving effect to such Acquisition
such Person (or the surviving Person, if the acquisition is effected through a
merger or consolidation) shall be the Borrower or a Wholly Owned Subsidiary, and
(iii) all of the conditions and requirements of SECTION 5.9 applicable to such
Acquisition are satisfied; or (b) any other Acquisition to which the Lender
shall have given its prior written consent and with respect to which all of the
conditions and requirements set forth in this definition and in SECTION 5.9, and
in or pursuant to any such consent, have been satisfied or waived in writing by
the Lender.
"Permitted Liens" shall have the meaning given to such term in SECTION
7.3.
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"Person" shall mean any corporation, association, joint venture,
partnership, limited liability company, organization, business, individual,
trust, government or agency or political subdivision thereof or any other legal
entity.
"Plan" shall mean any "employee pension benefit plan" within the meaning
of Section 3(2) of ERISA that is subject to the provisions of Title IV of ERISA
(other than a Multiemployer Plan) and to which the Borrower or any ERISA
Affiliate may have any liability.
"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.
"Quarterly Statement" shall mean, with respect to any Insurance Subsidiary
for any fiscal quarter, the quarterly financial statements of such Insurance
Subsidiary as required to be filed with the Insurance Regulatory Authority of
its jurisdiction of domicile, together with all exhibits, schedules,
certificates and actuarial opinions required to be filed or delivered therewith.
"Regulations D, T, U and X" shall mean Regulations D, T, U and X,
respectively, of the Federal Reserve Board, and any successor regulations.
"Reinsurance Agreement" shall mean any agreement, contract, treaty,
certificate or other arrangement whereby any Insurance Subsidiary agrees to
transfer, cede or retrocede to another insurer or reinsurer (other than to an
Affiliate of such Insurance Subsidiary) all or part of the liability assumed or
assets held by such Insurance Subsidiary under a policy or policies of insurance
issued by such Insurance Subsidiary or under a reinsurance agreement assumed by
such 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 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.
"Requirement of Law" shall mean, with respect to any Person, the charter,
articles or certificate of organization or incorporation and bylaws or other
organizational or governing documents of such Person, and any statute, law,
treaty, rule, regulation, order, decree, writ, injunction or determination of
any arbitrator or court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject or otherwise pertaining to any or all of the
transactions contemplated by this Agreement and the other Credit Documents.
12
"Reserve Requirement" shall mean, with respect to any Interest Period, the
reserve percentage (expressed as a decimal) in effect from time to time during
such Interest Period, as provided by the Federal Reserve Board, applied for
determining the maximum reserve requirements (including, without limitation,
basic, supplemental, marginal and emergency reserves) applicable to First Union
under Regulation D with respect to "Eurocurrency liabilities" within the meaning
of Regulation D, or under any similar or successor regulation with respect to
Eurocurrency liabilities or Eurocurrency funding.
"Responsible Officer" shall mean, with respect to the Borrower, the
president, the chief executive officer, the chief financial officer, any
executive officer, the General Counsel (if also an officer holding a title of at
least Senior Vice President), or any other Financial Officer of the Borrower,
and any other officer or similar official thereof responsible for the
administration of the obligations of the Borrower in respect of this Agreement.
"Standard & Poor's" shall mean Standard & Poor's Ratings Services, a
division of McGraw-Hill Companies, Inc., its successors and assigns.
"Statutory Accounting Practices" or "SAP" shall mean, with respect to any
Insurance Subsidiary, the statutory accounting practices prescribed or permitted
by the relevant Insurance Regulatory Authority of its state of domicile,
consistently applied and maintained and in conformity with those used in the
preparation of the most recent statutory financial statements described in
SECTION 4.11(c) (except where changes are required by the relevant Insurance
Regulatory Authority) and the Annual Statement.
"Subsidiary" shall mean, with respect to any Person, any corporation or
other Person of which more than fifty percent (50%) of the outstanding Capital
Stock having ordinary voting power to elect a majority of the board of
directors, board of managers or other governing body of such Person, is at the
time, directly or indirectly, owned 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.
"Termination Date" shall mean the Maturity Date or such earlier date of
termination of the Commitment pursuant to SECTION 2.5 or SECTION 8.2.
"Type" shall have the meaning given to such term in SECTION 2.2(a)
"Unfunded Pension Liability" shall mean, with respect to any Plan or
Multiemployer Plan, the excess of its benefit liabilities under Section
4001(a)(16) of ERISA over the current value of its assets, determined in
accordance with the applicable assumptions used for funding under Section 412 of
the Code for the applicable plan year.
"Unutilized Commitment" shall mean, at any time, the Commitment less the
aggregate principal amount of all Loans that are outstanding at such time.
"Wholly Owned" shall mean, with respect to any Subsidiary of any Person,
that 100% of the outstanding Capital Stock of such Subsidiary is owned, directly
or indirectly, by such Person.
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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, and all financial computations
shall be made, in accordance with GAAP (or, to the extent that such terms apply
solely to any Insurance Subsidiary or if otherwise expressly required, SAP) as
in effect as of the date of this Agreement applied on a basis consistent with
the application used in preparing the most recent financial statements of the
Borrower and any such Insurance Subsidiary. Notwithstanding the foregoing, in
the event that any changes in GAAP or SAP after the date hereof are required to
be applied to the transactions described herein and would affect the computation
of the financial covenants contained in ARTICLE VI, such changes shall be
followed in the computation of such financial covenants only from and after the
date this Agreement shall have been amended to take into account any such
changes, provided the parties agree to negotiate in good faith to so amend this
Agreement as soon as practicable after such a change. 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
2000 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 Insurance Regulatory Authority after the date
hereof such that different forms of financial statements are required to be
furnished by any Insurance Subsidiary in lieu thereof, such references shall be
to information consistent with that reported in the referenced item in the 2000
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 terms defined in this Agreement shall
have the defined meanings when used in any other Credit Document or any
certificate or other document made or delivered pursuant hereto.
ARTICLE II
AMOUNT AND TERMS OF THE LOANS
2.1 Commitment. The Lender agrees, subject to and on the terms and
conditions of this Agreement, to make loans (each, a "Loan," and collectively,
the "Loans") to the Borrower, from time to time on any Business Day during the
period from and including the Closing Date to but not including the Termination
Date, in an aggregate principal amount at any time outstanding not greater than
its Commitment at such time, provided that no Borrowing shall be made if,
immediately after giving effect thereto, the aggregate principal amount of Loans
outstanding at such time would exceed the Commitment at such time. Subject to
and on the terms and conditions of this Agreement, the Borrower may borrow,
repay and reborrow Loans.
2.2 Borrowings.
(a) The Loans shall, at the option of the Borrower and subject to the
terms and conditions of this Agreement, be either (i) Base Rate Loans or (ii)
LIBOR Loans (each, a "Type" of Loan), provided that (x) all Loans comprising the
same Borrowing shall, unless otherwise
14
specifically provided herein, be of the same Type, and (y) no Borrowing of LIBOR
Loans may be made at any time prior to the third (3rd) Business Day after the
Closing Date.
(b) In order to make a Borrowing (other than Borrowings involving
continuations or conversions of outstanding Loans, which shall be made pursuant
to SECTION 2.11), the Borrower will give the Lender written notice not later
than 11:00 a.m., Charlotte time, three (3) Business Days prior to each Borrowing
to be comprised of LIBOR Loans and not later than one (1) Business Day prior to
each Borrowing to be comprised of Base Rate Loans; provided, however, that the
request for the Borrowing of the Loan to be made on the Closing Date may, at the
discretion of the Lender, be given later than the times specified hereinabove.
Each such notice (each, a "Notice of Borrowing") shall be irrevocable, shall be
given in the form of EXHIBIT B-1 and shall specify (1) the aggregate principal
amount and initial Type of the Loans to be made pursuant to such Borrowing, (2)
in the case of a Borrowing of LIBOR Loans, the initial Interest Period to be
applicable thereto, and (3) the requested date of such Borrowing (the "Borrowing
Date"), which shall be a Business Day. Notwithstanding anything to the contrary
contained herein:
(i) the aggregate principal amount of each Borrowing comprised of
Base Rate Loans shall not be less than $3,000,000 or, if greater, an
integral multiple of $1,000,000 in excess thereof (or, if less, in the
amount of the aggregate Unutilized Commitments), and the aggregate
principal amount of each Borrowing comprised of LIBOR Loans shall not be
less than $3,000,000 or, if greater, an integral multiple of $1,000,000 in
excess thereof;
(ii) if the Borrower shall have failed to designate the Type of
Loans comprising a Borrowing, the Borrower shall be deemed to have
requested a Borrowing comprised of Base Rate Loans; and
(iii) if the Borrower shall have failed to select the duration of
the Interest Period to be applicable to any Borrowing of LIBOR Loans, then
the Borrower shall be deemed to have selected an Interest Period with a
duration of one month;
(c) Not later than 1:00 p.m., Charlotte time, on the requested Borrowing
Date, the Lender will make such amounts available to the Borrower.
2.3 Disbursements.
(a) The Borrower hereby authorizes the Lender to disburse the proceeds of
each Borrowing in accordance with the terms of any written instructions from any
of the Authorized Officers, provided that the Lender shall not be obligated
under any circumstances to forward amounts to any account not listed in an
Account Designation Letter. The Borrower may at any time deliver to the Lender
an Account Designation Letter listing any additional accounts or deleting any
accounts listed in a previous Account Designation Letter.
(b) The Lender may, at its option, make and maintain any Loan at, to or
for the account of any of its Lending Offices, provided that any exercise of
such option shall not affect the obligation of the Borrower to repay such Loan
to or for the account of the Lender in accordance with the terms of this
Agreement.
15
2.4 Note.
(a) The Loans shall be evidenced by a Note appropriately completed
substantially in the form of EXHIBIT A by the Borrower.
(b) The Note shall (i) be executed by the Borrower, (ii) be payable to the
order of the Lender, (iii) be dated as of the Closing Date, (iv) be in a stated
principal amount equal to the Commitment, (v) bear interest in accordance with
the provisions of SECTION 2.8, as the same may be applicable from time to time
to the Loans made by the Lender, and (vi) be entitled to all of the benefits of
this Agreement and the other Credit Documents and subject to the provisions
hereof and thereof.
(c) The Lender will record on its internal records the amount and Type of
each Loan made by it and each payment received by it in respect thereof and
will, in the event of any transfer of its Note, either endorse on the reverse
side thereof or on a schedule attached thereto (or any continuation thereof) the
outstanding principal amount and Type of the Loans evidenced thereby as of the
date of transfer; provided, however, that the failure of the 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 Note.
2.5 Termination of Commitment.
(a) The Commitment shall be automatically and permanently terminated on
the Termination Date.
(b) At any time and from time to time after the date hereof, upon not less
than five (5) Business Days' prior written notice to the Agent, the Borrower may
terminate in whole or reduce in part the aggregate Unutilized Commitments,
provided that any such partial reduction shall be in an aggregate amount of not
less than $5,000,000 or, if greater, an integral multiple of $1,000,000 in
excess thereof. The amount of any termination or reduction made under this
subsection (b) may not thereafter be reinstated.
2.6 Mandatory Payments and Prepayments.
(a) Except to the extent due or paid sooner pursuant to the provisions of
this Agreement, the aggregate outstanding principal of the Loans shall be due
and payable in full on the Maturity Date.
(b) In the event that, at any time, the aggregate principal amount of
Loans outstanding at such time shall exceed the Commitment at such time (after
giving effect to any concurrent termination or reduction thereof), the Borrower
will immediately prepay the outstanding principal amount of the Loans in the
amount of such excess.
(c) Each payment or prepayment of a LIBOR Loan made pursuant to the
provisions of this Section on a day other than the last day of the Interest
Period applicable thereto shall be made together with all amounts required under
SECTION 2.17 to be paid as a consequence thereof.
16
2.7 Voluntary Prepayments. At any time and from time to time, the Borrower
shall have the right to prepay the Loans, in whole or in part, without premium
or penalty (except as provided in clause (iii) below), upon written notice given
to the Lender not later than 11:00 a.m., Charlotte time, three (3) Business Days
prior to each intended prepayment of LIBOR Loans and one (1) Business Day prior
to each intended prepayment of Base Rate Loans, provided that (i) each partial
prepayment shall be in an aggregate principal amount of not less than $3,000,000
or, if greater, an integral multiple of $1,000,000 in excess thereof, (ii) no
partial prepayment of a LIBOR Loan made pursuant to any single Borrowing shall
reduce the outstanding principal amount of the remaining LIBOR Loan under such
Borrowing to less than $3,000,000 or to any greater amount not an integral
multiple of $1,000,000 in excess thereof, and (iii) unless made together with
all amounts required under SECTION 2.17 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 Interest Period of the
Borrowing pursuant to which made), and shall be irrevocable and shall bind the
Borrower to make such prepayment on the terms specified therein. Loans prepaid
pursuant to this Section may be reborrowed, subject to the terms and conditions
of this Agreement.
2.8 Interest.
(a) The Borrower will pay interest in respect of the unpaid principal
amount of each Loan, from the date of Borrowing thereof until such principal
amount shall be paid in full, (i) at the 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 any default by the
Borrower in the payment of any principal of or interest on any Loan, any fees or
other amount hereunder when due (whether at maturity, pursuant to acceleration
or otherwise), and 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, at the
option of the Lender, bear interest at a rate per annum equal to the interest
applicable from time to time thereafter to such Loans (whether the Base Rate or
Adjusted LIBOR Rate) plus 2% (or, in the case of fees and other amounts, at the
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 last Business Day
of each calendar quarter, beginning with the first such day to occur after
the Closing Date; provided, that in the event the Loans are repaid or
prepaid in full and the Commitment has been terminated,
17
then accrued interest in respect of all Base Rate Loans shall be payable
together with such repayment or prepayment on the date thereof;
(ii) in respect of each LIBOR Loan (including any LIBOR Loan or
portion thereof paid or prepaid pursuant to the provisions of SECTION 2.6,
except as provided hereinbelow), in arrears (y) on the last Business Day
of the Interest Period applicable thereto (subject to the provisions of
clause (iv) in SECTION 2.10) and (z) in addition, in the case of a LIBOR
Loan with an Interest Period having a duration of six months or longer, on
each date on which interest would have been payable under clause (y) above
had successive Interest Periods of three months' duration been applicable
to such LIBOR Loan; provided, that in the event all of the LIBOR Loan made
pursuant to a single Borrowing is repaid or prepaid in full, then accrued
interest in respect of such LIBOR Loan shall be payable together with such
repayment or prepayment on the date thereof; and
(iii) in respect of any Loan, at maturity (whether pursuant to
acceleration or otherwise) and, after maturity, on demand.
(d) Nothing contained in this Agreement or in any other Credit Document
shall be deemed to establish or require the payment of interest to the Lender at
a rate in excess of the maximum rate permitted by applicable law. If the amount
of interest payable for the account of the Lender on any interest payment date
would exceed the maximum amount permitted by applicable law to be charged by the
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 the Lender, if from time to time
thereafter the amount of interest payable for the account of the Lender on any
interest payment date would be less than the maximum amount permitted by
applicable law to be charged by the 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 the 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 Lender shall promptly notify the Borrower upon determining the
interest rate for each Borrowing of LIBOR Loans after its receipt of the
relevant Notice of Borrowing or Notice of Conversion/Continuation, and upon each
change in the Base Rate; provided, however, that the failure of the Lender to
provide the Borrower with any such notice shall not affect any obligations of
the Borrower nor result in any liability on the part of the Lender to the
Borrower. 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 to the Lender:
(a) on the date of execution of this Agreement, the fees described in
paragraph (2) of the Fee Letter; and
18
(b) a commitment fee for each calendar quarter (or portion thereof) for
the period from the date of this Agreement to the Termination Date, at a per
annum rate equal to the Applicable Margin Percentage in effect for such fee from
time to time during such quarter on the Unutilized Commitment, calculated on the
basis of a 360-day year for the actual days elapsed commencing on the execution
date of this Agreement, payable in arrears (i) on the last Business Day of each
calendar quarter, beginning with the first such day to occur after the Closing
Date, and (ii) on the Termination Date.
2.10 Interest Periods. Concurrently with the giving of a Notice of
Borrowing or Notice of Conversion/Continuation in respect of any Borrowing
comprised of Base Rate Loans to be converted into, or LIBOR Loans to be
continued as, LIBOR Loans, the Borrower shall have the right to elect, pursuant
to such notice, the interest period (each, an "Interest Period") to be
applicable to such LIBOR Loans, which Interest Period shall, at the option of
the applicable Borrower be a one, two, three or six-month period; provided,
however, that:
(i) all LIBOR Loans comprising a single Borrowing shall at all times
have the same Interest Period;
(ii) the initial Interest Period for any LIBOR Loan shall commence
on the date of the Borrowing of such LIBOR Loan (including the date of any
continuation of, or conversion into, such LIBOR Loan), and each successive
Interest Period applicable to such LIBOR Loan shall commence on the day on
which the next preceding Interest Period applicable thereto expires;
(iii) LIBOR Loans may not be outstanding under more than four (4)
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 Closing Date or that expires after the Maturity Date;
(vi) if any Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month during which such
Interest Period would otherwise expire, such Interest Period shall expire
on the last Business Day of such calendar month; and
(vii) if, upon the expiration of any Interest Period applicable to a
Borrowing of LIBOR Loans, the applicable 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.
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2.11 Conversions and Continuations.
(a) The Borrower shall have the right, on any Business Day occurring on or
after the Closing Date, to elect (i) to convert all or a portion of the
outstanding principal amount of any Base Rate Loans into LIBOR Loans, or to
convert any LIBOR Loans the Interest Periods for which end on the same day into
Base Rate Loans, or (ii) upon the expiration of any Interest Period, to continue
all or a portion of the outstanding principal amount of any LIBOR Loans the
Interest Periods for which end on the same day 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 $3,000,000
or, if greater, an integral multiple of $1,000,000 in excess thereof; any such
conversion of Base Rate Loans into, or continuation of, LIBOR Loans shall
involve an aggregate principal amount of not less than $3,000,000 or, if
greater, an integral multiple of $1,000,000 in excess thereof; and no partial
conversion of LIBOR Loans made pursuant to a single Borrowing shall reduce the
outstanding principal amount of such LIBOR Loans to less than $3,000,000 or to
any greater amount not an integral multiple of $1,000,000 in excess thereof, (y)
except as otherwise provided in SECTION 2.15(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
2.17 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 Lender
written notice not later than 11:00 a.m., Charlotte time, three (3) Business
Days prior to the intended effective date of any conversion of Base Rate Loans
into, or continuation of, LIBOR Loans and one (1) Business Day prior to the
intended effective date of any conversion of LIBOR Loans into Base Rate Loans.
Each such notice (each, a "Notice of Conversion/Continuation") shall be
irrevocable, shall be given in the form of EXHIBIT B-2 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 or continued. In the event that the Borrower shall fail to
deliver a Notice of Conversion/Continuation as provided herein with respect to
any outstanding LIBOR Loans, such LIBOR Loans shall automatically be converted
to Base Rate Loans upon the expiration of the then current Interest Period
applicable thereto (unless repaid pursuant to the terms hereof). In the event
the Borrower shall have failed to select in a Notice of Conversion/Continuation
the duration of the Interest Period to be applicable to any conversion into, or
continuation of, LIBOR Loans, then the Borrower shall be deemed to have selected
an Interest Period with a duration of one month.
2.12 Method of Payments; Computations.
(a) All payments by the Borrower hereunder shall be made without setoff,
counterclaim or other defense, in Dollars and in immediately available funds to
the Lender, prior to 1:00 p.m., Charlotte time, on the date payment is due. Any
payment made as required hereinabove, but after 1:00 p.m., 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
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such due date shall be extended to the next succeeding Business Day (except that
in the case of LIBOR Loans to which the provisions of clause (iv) in SECTION
2.10 are applicable, such due date shall be the next preceding Business Day),
and such extension of time shall then be included in the computation of payment
of interest, fees or other applicable amounts.
(b) The Lender 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 the Lender (with prompt notice to such Borrower);
provided, however, that the failure to give such notice shall not affect the
validity of such debit by the Lender.
(c) All computations of interest and fees hereunder (including
computations of the Reserve Requirement) shall be made on the basis of a year
consisting of (i) in the case of interest on Base Rate Loans, 365/366 days, as
the case may be, and (ii) in all other instances, 360 days and in each case
under (i) and (ii) above, with regard to the actual number of days (including
the first day, but excluding the last day) elapsed.
2.13 Recovery of Payments. The Borrower agrees that to the extent it makes
a payment or payments to or for the account of the 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.
2.14 Use of Proceeds. The proceeds of the Loans shall be used (i) to
provide for the working capital and general corporate requirements of the
Borrower and its Subsidiaries; (ii) to pay certain transaction fees and expenses
in connection with the Credit Documents in amounts acceptable to the Lender; and
(iii) to finance Permitted Acquisitions by the Borrower or any of its
Subsidiaries.
2.15 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 the
Lender with any guideline or request from any such Governmental Authority
(whether or not having the force of law) given or made after the date hereof,
shall (i) subject the Lender to any tax or other charge, or change the basis of
taxation of payments to the Lender, in respect of any of its LIBOR Loans or any
other amounts payable hereunder or its obligation to make, fund or maintain any
LIBOR Loans (other than any change in the rate or basis of tax on the overall
net income of the Lender), (ii) impose, modify or deem applicable any reserve,
special deposit or similar requirement (but excluding any reserves to the extent
actually included within the Reserve Requirement in the calculation of the LIBOR
Rate) against assets of, deposits with or for the account of, or credit extended
by, the Lender, or (iii) impose on the Lender or its applicable Lending Office
any other condition, and the result of any of the foregoing shall be to increase
the cost to the Lender of making or maintaining any LIBOR Loans or to reduce the
amount of any sum received or receivable by the Lender hereunder, the
21
Borrower will, promptly upon demand therefor by the Lender, pay to the Lender
such additional amounts as shall compensate the Lender for such increase in
costs or reduction in return.
(b) If, at any time after the date hereof and from time to time, the
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 the Lender
with any guideline or request from any such Governmental Authority (whether or
not having the force of law) given or made after the date hereof, has or would
have the effect, as a consequence of the Lender's Commitment or Loans, of
reducing the rate of return on the capital of the Lender or any Person
controlling the Lender to a level below that which the Lender or controlling
Person could have achieved but for such introduction, change or compliance
(taking into account the Lender's or controlling Person's policies with respect
to capital adequacy), the Borrower will, promptly upon demand therefor by the
Lender therefor, pay to the Lender such additional amounts as will compensate
the Lender or controlling Person for such reduction in return.
(c) If, on or prior to the first day of any Interest Period, (y) the
Lender shall have determined that adequate and reasonable means do not exist for
ascertaining the applicable LIBOR Rate for such Interest Period or (z) the
Lender shall have determined 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 the Lender of making or maintaining LIBOR Loans
during such Interest Period, the Lender will forthwith so notify the applicable
Borrower. 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 Lender to make, to convert Base Rate Loans
into, or to continue, LIBOR Loans shall be suspended (including pursuant to the
Borrowing to which such Interest Period applies), and (iii) any Notice of
Borrowing or Notice of Conversion/Continuation given at any time thereafter with
respect to LIBOR Loans shall be deemed to be a request for Base Rate Loans, in
each case until the Lender shall have determined that the circumstances giving
rise to such suspension no longer exist and the Lender shall have so notified
the applicable Borrower.
(d) Notwithstanding any other provision in this Agreement, if, at any time
after the date hereof and from time to time, the 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 the Lender to make or to continue to make or maintain
LIBOR Loans, the Lender will forthwith so notify the applicable Borrower. Upon
such notice, (i) each of the 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 the Lender to make, to
convert Base Rate Loans into, or to continue, LIBOR Loans shall be suspended
(including pursuant to any Borrowing for which the Lender has received a Notice
of Borrowing but for which the Borrowing Date has not arrived),
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and (iii) any Notice of Borrowing or Notice of Conversion/Continuation given at
any time thereafter with respect to LIBOR Loans shall, as to the Lender, be
deemed to be a request for a Base Rate Loan, in each case until the Lender shall
have determined that the circumstances giving rise to such suspension no longer
exist and shall have so notified the applicable Borrower.
(e) Determinations by the Lender for purposes of this Section of any
increased costs, reduction in return, market contingencies, illegality or any
other matter shall, absent manifest error, be conclusive, provided that such
determinations are made in good faith. No failure by the Lender at any time to
demand payment of any amounts payable under this Section shall constitute a
waiver of its right to demand payment of any additional amounts arising at any
subsequent time. Nothing in this Section shall require or be construed to
require the Borrower to pay any interest, fees, costs or other amounts in excess
of that permitted by applicable law.
2.16 Taxes.
(a) Any and all payments by the Borrower hereunder or under any Note shall
be made, in accordance with the terms hereof and thereof, free and clear of and
without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
other than net income and franchise taxes imposed on the Lender by the United
States 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 the Note to the Lender, (i) the sum payable shall be
increased as may be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section),
the Lender receives an amount equal to the sum it would have received had no
such deductions been made, (ii) the Borrower will make such deductions, (iii)
the Borrower will pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law and (iv) the
Borrower will deliver to the Lender evidence of such payment.
(b) The Borrower will indemnify the Lender for the full amount of Taxes
(including, without limitation, any Taxes imposed by any jurisdiction on amounts
payable under this Section) paid by the Lender 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 thirty (30) days from the date the Lender
makes written demand therefor.
(c) If the Lender 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
Lender shall reimburse the Borrower to the extent of the amount of any such
recovery or permanent net tax benefit (but only to the extent of indemnity
payments made, or additional amounts paid, by or on behalf of the Borrower under
this Section with respect to the Taxes giving rise to such recovery or tax
benefit); provided, however, that the Borrower, upon the request of the Lender,
agrees to repay to the Lender the amount paid over to
23
the Borrower (together with any penalties, interest or other charges), in the
event the Lender is required to repay such amount to the relevant taxing
authority or other Governmental Authority.
2.17 Compensation. The Borrower will compensate the 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 the Lender to fund or maintain LIBOR Loans)
that the Lender may incur or sustain (i) if for any reason the Borrower does not
consummate (other than due to a default by the Lender) a Borrowing or
continuation of, or conversion into, a LIBOR Loan does not occur on a date
specified therefor in a Notice of Borrowing or Notice of
Conversion/Continuation, (ii) if any repayment, prepayment or conversion of any
LIBOR Loan occurs on a date other than the last day of an Interest Period
applicable thereto (including as a consequence of acceleration of the maturity
of the Loans pursuant to SECTION 8.2), (iii) if any prepayment of any LIBOR Loan
is not made on any date specified in a notice of prepayment given by the
Borrower or (iv) as a consequence of any other failure by the Borrower to make
any payments with respect to any LIBOR Loan when due hereunder. Calculation of
all amounts payable to the Lender under this Section shall be made as though the
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 the Lender may fund its LIBOR Loans in any
manner it sees fit and the foregoing assumption shall be utilized only for the
calculation of amounts payable under this Section. Determinations by the Lender
for purposes of this Section of any such losses, expenses or liabilities shall,
absent manifest error, be conclusive, provided that such determinations are made
in good faith.
ARTICLE III
CONDITIONS OF BORROWING
3.1 Conditions of Initial Borrowing. The obligation of the Lender to make
a Loan in connection with the initial Borrowing hereunder is subject to the
satisfaction of the following conditions precedent:
(a) The Lender shall have received the following, each dated as of the
Closing Date (unless otherwise specified):
(i) A Note in the amount of the Commitment, duly completed in
accordance with the relevant provisions of SECTION 2.4 and executed by the
Borrower; and
(ii) the favorable opinion of Howard S. Yaruss, General Counsel of
the Borrower, in substantially the form of EXHIBIT D, addressed to the
Lender and addressing such other matters as the Lender may reasonably
request, together with such opinions of local counsel as the Lender may
require.
(b) The Lender shall have received a certificate signed by the president,
the chief executive officer or the chief financial officer of the Borrower, in
form and substance
24
satisfactory to the Lender, certifying that (i) all representations and
warranties of the Borrower, contained in this Agreement and the other Credit
Documents are true and correct as of the Closing Date, both immediately before
and after giving effect to the consummation of the transactions contemplated
hereby, the making of the initial Loan hereunder and the application of the
proceeds thereof, (ii) no Default or Event of Default has occurred and is
continuing, both immediately before and after giving effect to the consummation
of the transactions contemplated hereby, the making of the initial Loan
hereunder and the application of the proceeds thereof, (iii) both immediately
before and after giving effect to the consummation of the transactions
contemplated hereby, the making of the initial Loan hereunder and the
application of the proceeds thereof, no Material Adverse Change has occurred
with respect to the Borrower, since December 31, 2000, and there exists no
event, condition or state of facts that could reasonably be expected to result
in a Material Adverse Change with respect to the Borrower, and (iv) all
conditions to the initial extensions of credit hereunder set forth in this
Section and in SECTION 3.2 have been satisfied or waived as required hereunder.
(c) The Lender shall have received a certificate of the secretary or an
assistant secretary of the Borrower, in form and substance satisfactory to the
Lender, certifying (i) that attached thereto is a true and complete copy of the
articles or certificate of incorporation and all amendments thereto of the
Borrower, certified as of a recent date by the Secretary of State (or comparable
Governmental Authority) of its jurisdiction of incorporation, and that the same
has not been amended since the date of such certification and, (ii) that
attached thereto is a true and complete copy of the bylaws of the Borrower, as
then in effect and as in effect at all times from January 1, 2001 and including
the date of such certificate, and as to the incumbency and genuineness of the
signature of each officer of the Borrower executing this Agreement or any of
such other Credit Documents, and attaching all such copies of the documents
described above.
(d) The Lender shall have received a certificate as of a recent date of
the good standing of each of the Borrower and its Material Subsidiaries under
the laws of its jurisdiction of incorporation, from the Secretary of State (or
comparable Governmental Authority) of such jurisdiction.
(e) The Lender shall have received a certificate of compliance as of a
recent date of each Material Insurance Subsidiary issued by the Insurance
Regulatory Authority of its jurisdiction of legal domicile.
(f) All legal matters, documentation, and corporate or other proceedings
incident to the transactions contemplated hereby shall be satisfactory in form
and substance to the Lender; all licenses, 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 Credit Documents and the
consummation of the transactions contemplated hereby and thereby shall have been
obtained, without the imposition of conditions that are not acceptable to the
Lender, 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 Lender 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
25
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 Credit Documents or the
consummation of the transactions contemplated hereby or thereby, or that, in the
opinion of the Lender, could reasonably be expected to have a Material Adverse
Effect.
(g) The Lender shall have received certified reports from an independent
search service satisfactory to it listing any judgment or tax lien filing or
Uniform Commercial Code financing statement that names the Borrower or any
Material Insurance Subsidiary as debtor and the results thereof shall be
satisfactory to the Lender.
(h) Since December 31, 2000, 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 with respect to the
Borrower or any of its Subsidiaries or any event, condition or state of facts
that could reasonably be expected to result in a Material Adverse Change with
respect to the Borrower or any of its Subsidiaries.
(i) The Borrower shall have paid (i) to the Lender, the unpaid balance of
the fees described in the Fee Letter and the fees described in SECTION 2.9 and
(ii) all other fees and expenses of the Lender required hereunder or under any
other Credit Document to be paid on or prior to the Closing Date (including fees
and expenses of counsel) in connection with this Agreement and the transactions
contemplated hereby.
(j) The Lender shall have received the financial statements as described
in SECTION 4.11, all of which shall be in form and substance satisfactory to the
Lender.
(k) The Lender shall have received a Covenant Compliance Worksheet, duly
completed and certified by the chief financial officer of the Borrower and in
form and substance satisfactory to the Lender, demonstrating the Borrower's
compliance with the financial covenant set forth in SECTION 6.1, determined as
of September 30, 2001.
(l) The Lender shall be satisfied with the actuarial review and valuation
statement of, and opinion as to the adequacy of, the loss and loss adjustment
expense reserve positions as of December 31, 2000 of each Insurance Subsidiary,
with respect to its insurance business then in force, prepared and given by an
independent actuarial firm acceptable to the Lender; and such review, valuation
and opinion shall not differ in any material and negative respect from any such
materials previously delivered to the Lender.
(m) The Lender shall have received satisfactory confirmation from Standard
& Poor's and Fitch that the current financial strength rating of each Material
Insurance Subsidiary is "AA-" or better and from Moody's that the current rating
of each Material Insurance Subsidiary (other than Radian Asset Assurance Inc.
which is not rated by Moody's) is "Aa3" or better.
(n) The Lender shall have received an Account Designation Letter, together
with written instructions from an Authorized Officer, including wire transfer
information, directing the payment of the proceeds of the initial Loan to be
made hereunder.
26
(o) All Indebtedness of the Borrower and its Subsidiaries not permitted
under SCHEDULE 7.2 shall have been satisfied, and all Liens and guaranties in
connection therewith shall have been released and the Lender shall have received
satisfactory evidence thereof.
(p) The Lender shall have received such other documents, certificates,
opinions and instruments in connection with the transactions contemplated hereby
as it shall have reasonably requested.
3.2 Conditions of All Borrowings. The obligation of the Lender to make any
Loans hereunder, including the initial Loan, is subject to the satisfaction of
the following conditions precedent on the relevant Borrowing Date or date of
issuance:
(a) The Lender shall have received a Notice of Borrowing in accordance
with SECTION 2.2(b);
(b) Each of the representations and warranties contained in ARTICLE IV and
in the other Credit Documents shall be true and correct on and as of such
Borrowing Date (including the Closing Date, in the case of the initial Loan made
hereunder) or date of issuance with the same effect as if made on and as of such
date, both immediately before and after giving effect to the Loans to be made
(except to the extent any such representation or warranty is expressly stated to
have been made as of a specific date, in which case such representation or
warranty shall be true and correct as of such date); and
(c) No Default or Event of Default shall have occurred and be continuing
on such date, both immediately before and after giving effect to the Loans to be
made on such date.
Each giving of a Notice of Borrowing and the consummation of each
Borrowing shall be deemed to constitute a representation by the Borrower that
the statements contained in subsections (b) and (c) above are true, both as of
the date of such notice or request and as of the relevant Borrowing Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement and to induce the Lender
to extend the credit contemplated hereby, the Borrower represents and warrants
to the Lender as follows:
4.1 Corporate Organization and Power. Each of the Borrower and its
Material 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
Credit Documents to which it is or will be a party, to own and hold its property
and to engage in its business as presently conducted, and (iii) is duly
qualified to do business as a foreign entity and is in good standing in each
jurisdiction where the nature of its business or the ownership of its properties
requires it to be so qualified, except where the failure to be so qualified
would not, individually or in the aggregate, be reasonably likely to have a
Material Adverse Effect.
27
4.2 Authorization; Enforceability. The Borrower has taken, or on the
Closing Date will have taken, all necessary corporate action to execute, deliver
and perform each of the Credit Documents to which it is or will be a party, and
has, or on the Closing Date (or any later date of execution and delivery) will
have, validly executed and delivered each of the Credit Documents to which it is
or will be a party. This Agreement constitutes, and each of the other Credit
Documents upon execution and delivery will constitute, the legal, valid and
binding obligation of the Borrower, enforceable against it in accordance with
its terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally, by general equitable principles or by principles of good faith and
fair dealing.
4.3 No Violation. The execution, delivery and performance by the Borrower
of this Agreement and each of the other Credit Documents to which it is or will
be a party, and compliance by it with the terms hereof and thereof, do not and
will not (i) violate any provision of its articles or certificate of
incorporation or bylaws or contravene any other Requirement of Law applicable to
it, (ii) conflict with, result in a breach of or constitute (with notice, lapse
of time or both) a default under any material indenture, agreement or other
instrument to which it is a party, by which it or any of its properties is bound
or to which it is subject, (iii) result in a revocation, suspension,
termination, impairment, probation, limitation, non-renewal, forfeiture,
declaration of ineligibility, loss of status of, or loss of any other rights
(each a, "License Impairment") with respect to, any Licenses applicable to the
business, operations or properties of the Borrower and its Subsidiaries, except
where such License Impairment would not, individually or in the aggregate, have
a Material Adverse Effect, or (iv) result in or require the creation or
imposition of any Lien upon any of its properties or assets. Except for the
prohibition on Radian Reinsurance Inc. and Radian Asset Assurance Inc. making
any dividend payments to the Borrower prior to February 28, 2003 without the
consent of the New York Insurance Department, no Subsidiary is a party to any
agreement or instrument or otherwise subject to any restriction or encumbrance
that restricts or limits its ability to make dividend payments or other
distributions in respect of its Capital Stock, to repay Indebtedness owed to the
Borrower or any other Subsidiary, to make loans or advances to the Borrower or
any other Subsidiary, or to transfer any of its assets or properties to the
Borrower or any other Subsidiary, in each case other than such restrictions or
encumbrances existing under or by reason of the Credit Documents or applicable
Requirements of Law.
4.4 Governmental and Third-Party Authorization; Permits.
(a) No consent, approval, authorization or other action by, notice to, or
registration or filing with, any Governmental Authority or other Person is or
will be required as a condition to or otherwise in connection with the due
execution, delivery and performance by the Borrower of this Agreement or any of
the other Credit Documents to which it is or will be a party or the legality,
validity or enforceability hereof or thereof, other than (i) consents,
authorizations and filings that have been (or on or prior to the Closing Date
will have been) made or obtained and that are (or on the Closing Date will be)
in full force and effect, which consents, authorizations and filings are listed
on SCHEDULE 4.4 and (ii) consents and filings the failure to obtain or make
which would not, individually or in the aggregate, have a Material Adverse
Effect.
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(b) The Borrower and its Subsidiaries have, and are in good standing with
respect to, all governmental approvals, Licenses, permits and authorizations
necessary to conduct its business as presently conducted and to own or lease and
operate its properties, except for those the failure to obtain which would not
be reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect.
4.5 Litigation. Except as disclosed on SCHEDULE 4.5, there are (i) no
actions, investigations, suits or proceedings pending or, to the knowledge of
the Borrower, threatened, at law, in equity or in arbitration, before any court,
other Governmental Authority, the Insurance Regulatory Authority or other
Person, against or affecting the Borrower or any of its Subsidiaries, or any of
their respective properties that would, if adversely determined, be reasonably
likely to have a Material Adverse Effect, or (ii) no actions, investigations,
suits or proceedings pending or, to the knowledge of the Borrower, threatened,
at law, in equity or in arbitration, before any court, other Governmental
Authority, or other Person, with respect to this Agreement or any of the other
Credit Documents.
4.6 Taxes. The Borrower and its Subsidiaries have timely filed all federal
tax returns, and all material state and local tax returns and reports required
to be filed by it and have paid all taxes, assessments, fees and other charges
levied upon it or upon its properties that are shown thereon as due and payable,
other than those that are being contested in good faith and by proper
proceedings and for which adequate reserves have been established in accordance
with GAAP. Such returns accurately reflect in all material respects all
liability for taxes of the Borrower and its Subsidiaries for the periods covered
thereby. There is no ongoing audit or examination or, to the knowledge of the
Borrower, other investigation by any Governmental Authority of the tax liability
of the Borrower or any of its Subsidiaries, and there is no unresolved claim by
any Governmental Authority concerning the tax liability of the Borrower or any
of its Subsidiaries for any period for which tax returns have been or were
required to have been filed, other than claims for which adequate reserves have
been established in accordance with GAAP or would not, individually or in the
aggregate, have a Material Adverse Effect. Except as set forth on SCHEDULE 4.6,
neither the Borrower nor any of its Subsidiaries has waived or extended or has
been requested to waive or extend the statute of limitations relating to the
payment of any taxes.
4.7 Subsidiaries. SCHEDULE 4.7 sets forth a list, as of the date hereof,
of all of the Subsidiaries of the Borrower and, as to each such Subsidiary, the
percentage ownership (direct and indirect) of the Borrower in each class of its
capital stock and each direct owner thereof. Except for shares of capital stock
or other ownership interests expressly indicated on SCHEDULE 4.7, there are no
shares of capital stock, ownership interests, warrants, rights, options or other
equity securities, or other Capital Stock of any Subsidiary of the Borrower
outstanding or reserved for any purpose. All outstanding shares of capital stock
or ownership interests of each Subsidiary of the Borrower are duly and validly
issued, fully paid and nonassessable.
4.8 Full Disclosure. All factual information heretofore or
contemporaneously furnished to the Lender in writing by or on behalf of the
Borrower or any of its Subsidiaries for purposes of or in connection with this
Agreement and the transactions contemplated hereby is, and all other such
factual information hereafter furnished to the Lender in writing by or on behalf
of the Borrower or any of its Subsidiaries when taken as a whole will be, true
and accurate in all material respects on the date as of which such information
is dated or certified (or, if such
29
information has been amended or supplemented, on the date as of which any such
amendment or supplement is dated or certified) and not made incomplete by
omitting to state a material fact necessary to make the statements contained
therein, in light of the circumstances under which such information was
provided, not misleading.
4.9 Margin Regulations. Neither the Borrower nor any of its Subsidiaries
is engaged principally, or as one of its important activities, in the business
of extending credit for the purpose of purchasing or carrying Margin Stock. No
proceeds of the Loans will be used, directly or indirectly, to purchase or carry
any Margin Stock, to extend credit for such purpose or for any other purpose
that would violate or be inconsistent with Regulations T, U or X or any
provision of the Exchange Act.
4.10 No Material Adverse Change. There has been no Material Adverse Change
since December 31, 2000, and there exists no event, condition or state of facts
that could reasonably be expected to result in a Material Adverse Change.
4.11 Financial Matters.
(a) The Borrower has heretofore furnished to the Lender copies of (i) the
audited consolidated balance sheets of the Borrower and its Subsidiaries as of
December 31, 2000, 1999, and 1998, and the related statements of income, cash
flows and stockholders' equity for the fiscal years then ended, together with
the opinion of Deloitte & Touche LLP thereon, and (ii) the unaudited
consolidated balance sheet of the Borrower and its Subsidiaries as of September
30, 2001, and the related statements of income, cash flows and stockholders'
equity for the nine-month period then ended. Such financial statements have been
prepared in accordance with GAAP (subject, with respect to the unaudited
financial statements, to the absence of notes required by GAAP and to normal
year-end adjustments) and present fairly the financial condition of the Borrower
and its Subsidiaries on a consolidated basis as of the respective dates thereof
and the consolidated results of operations of the Borrower and its Subsidiaries
for the respective periods then ended. Except as fully reflected in the most
recent financial statements referred to above and the notes thereto, there are
no material liabilities or obligations with respect to the Borrower or any of
its Subsidiaries of any nature whatsoever (whether absolute, contingent or
otherwise and whether or not due).
(b) Each of the Borrower and its Subsidiaries, after giving effect to the
consummation of the transactions contemplated hereby, (i) has capital sufficient
to carry on its businesses as conducted and as proposed to be conducted, (ii)
has assets with a fair saleable value, determined on a going concern basis, (y)
not less than the amount required to pay the probable liability on its existing
debts as they become absolute and matured and (z) greater than the total amount
of its liabilities (including identified contingent liabilities, valued at the
amount that can reasonably be expected to become absolute and matured), and
(iii) does not intend to, and does not believe that it will, incur debts or
liabilities beyond its ability to pay such debts and liabilities as they mature.
(c) The Borrower has heretofore furnished to the Lender copies of (i) the
Annual Statements of each of its Material Insurance Subsidiaries as of December
31, 2000, 1999 and 1998, and for the fiscal years then ended, and (ii) the
Quarterly Statements of each of its Material Insurance Subsidiaries as of the
end of the first three fiscal quarters of 2001, and for the fiscal
30
quarters then ended, each as filed with the relevant Insurance Regulatory
Authority (collectively, the statements referenced in clauses (i) and (ii)
above, 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 SAP where required
(except as may be reflected in the notes thereto and subject, with respect to
the Quarterly Statements, to the absence of notes required by SAP and to normal
year-end adjustments), were in compliance in all material respects with
applicable Requirements of Law when filed and present fairly the financial
condition of the respective Insurance Subsidiaries 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 Subsidiaries 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 Subsidiary had, as of the date of its respective
Historical Statutory Statements, any material liabilities or obligations of any
nature whatsoever (whether absolute, contingent or otherwise and whether or not
due) that, in accordance with SAP, would have been required to have been
disclosed or provided for in such Historical Statutory Statements. All books of
account of each Insurance Subsidiary fully and fairly disclose all of its
material transactions, properties, assets, investments, liabilities and
obligations, are in its possession and are true, correct and complete in all
material respects.
(d) Within the last three (3) years, neither the Borrower nor any of its
Subsidiaries has received any "management letter" from any certified public
accountants in connection with any annual, interim or special audit that
disclosed any findings that were material and adverse to the Borrower.
4.12 Ownership of Properties. Each of the Borrower and its Subsidiaries
(i) has good and marketable title to all real property owned by it, (ii) holds
interests as lessee under valid leases in full force and effect with respect to
all material leased real and personal property used in connection with its
business, (iii) possesses or has rights to use licenses, patents, copyrights,
trademarks, service marks, trade names and other assets sufficient to enable it
to continue to conduct its business substantially as heretofore conducted and
without any material conflict with the rights of others, and (iv) has good title
to all of its other properties and assets reflected in the most recent financial
statements referred to in SECTION 4.11 (except as sold or otherwise disposed of
since the date thereof in the ordinary course of business), in each case under
(i), (ii), (iii) and (iv) above free and clear of all Liens other than Permitted
Liens.
4.13 ERISA.
(a) Each of the Borrower and its ERISA Affiliates is in compliance in all
material respects with the applicable provisions of ERISA, and each Plan is and
has been administered in compliance in all material respects with all applicable
Requirements of Law, including, without limitation, the applicable provisions of
ERISA and the Internal Revenue Code. No ERISA Event (i) has occurred within the
five-year period prior to, and including, the Closing Date, or (ii) to the
knowledge of the Borrower, is reasonably expected to occur with respect to any
Plan. No Plan has any Unfunded Pension Liability as of the most recent annual
valuation date applicable
31
thereto, and neither the Borrower nor any ERISA Affiliate has engaged in a
transaction that could be subject to Section 4069 or 4212(c) of ERISA.
(b) Neither the Borrower nor any ERISA Affiliate has had a complete or
partial withdrawal from any Multiemployer Plan, and neither the Borrower nor any
ERISA Affiliate would become subject to any liability under ERISA if the
Borrower or any ERISA Affiliate were to withdraw completely from all
Multiemployer Plans as of the most recent valuation date. No Multiemployer Plan
is in "reorganization" or is "insolvent" within the meaning of such terms under
ERISA.
4.14 Environmental Matters. (a) No Hazardous Substances are or have been
generated, used, located, released, treated, disposed of or stored by the
Borrower or any of its Subsidiaries or, to the knowledge of the Borrower, by any
other Person (including any predecessor in interest) or otherwise, in, on or
under any portion of any real property, leased or owned, of the Borrower or any
of its Subsidiaries, except in material compliance with all applicable
Environmental Laws, and no portion of any such real property or, to the
knowledge of the Borrower, any other real property at any time leased, owned or
operated by the Borrower or any of its Subsidiaries has been contaminated by any
Hazardous Substance; and no portion of any real property, leased or owned, of
the Borrower or any of its Subsidiaries has been or is presently the subject of
an environmental audit, assessment or remedial action.
(b) No portion of any real property, leased or owned, of the Borrower or
any of its Subsidiaries has been used by the Borrower or any of its Subsidiaries
or, to the knowledge of the Borrower, by any other Person, as or for a mine, a
landfill, a dump or other disposal facility, a gasoline service station, or
(other than for petroleum substances stored in the ordinary course of business)
a petroleum products storage facility; no portion of such real property or any
other real property at any time leased, owned or operated by the Borrower or any
of its Subsidiaries has, pursuant to any Environmental Law, been placed on the
"National Priorities List" or "CERCLIS List" (or any similar federal, state or
local list) of sites subject to possible environmental problems; and there are
not and have never been, any underground storage tanks situated on any real
property, leased or owned, of the Borrower or any of its Subsidiaries.
(c) All activities and operations of the Borrower and its Subsidiaries are
in compliance with the requirements of all applicable Environmental Laws, except
to the extent the failure so to comply, individually or in the aggregate, would
not be reasonably likely to have a Material Adverse Effect. Each of the Borrower
and its Subsidiaries has obtained all licenses and permits under Environmental
Laws necessary to its respective operations; all such licenses and permits are
being maintained in good standing; and each of the Borrower and its Subsidiaries
is in compliance with all terms and conditions of such licenses and permits,
except for such licenses and permits the failure to obtain, maintain or comply
with which would not be reasonably likely, individually or in the aggregate, to
have a Material Adverse Effect. Neither the Borrower nor any of its Subsidiaries
is involved in any suit, action or proceeding, or has received any notice,
complaint or other request for information from any Governmental Authority or
other Person, with respect to any actual or alleged Environmental Claims that,
if adversely determined, would be reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect; and, to the knowledge of either
Borrower, there are no threatened actions, suits, proceedings or investigations
with respect to any such Environmental Claims, nor any basis therefor.
32
4.15 Compliance With Laws. Each of the Borrower and its Subsidiaries has
timely filed all material reports, documents and other materials required to be
filed by it under all applicable Requirements of Law with any Governmental
Authority and Insurance Regulatory Authority, as the case may be, has retained
all material records and documents required to be retained by it under all
applicable Requirements of Law, and is otherwise in compliance with all
applicable Requirements of Law in respect of the conduct of its business and the
ownership and operation of its properties, except for such Requirements of Law
the failure to comply with which, individually or in the aggregate, would not be
reasonably likely to have a Material Adverse Effect.
4.16 Regulated Industries. Neither the Borrower nor any of its
Subsidiaries is (i) an "investment company," a company "controlled" by an
"investment company," or an "investment advisor," within the meaning of the
Investment Company Act of 1940, as amended, or (ii) a "holding company," a
"subsidiary company" of a "holding company," or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company," within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
4.17 Insurance. The assets, properties and business of the Borrower and
its Subsidiaries are insured against such hazards and liabilities, under such
coverages and in such amounts, as are customarily maintained by prudent
companies similarly situated and under policies issued by insurers of recognized
responsibility.
4.18 Material Contracts. SCHEDULE 4.18 lists, as of the Closing Date, each
"material contract" (within the meaning of 601(b)(10) of Regulation S-K under
the Exchange Act other than, to the extent applicable, any contract involving an
employee loan in an amount less than $60,000) that is not listed in the
Borrower's most recent annual report filed on Form 10-K or any quarterly report
filed on Form 10-Q since that time and to which the Borrower or any of its
Subsidiaries is a party, by which any of them or their respective properties is
bound or to which any of them is subject (collectively, "Material Contracts"),
and also indicates the parties, subject matter and term thereof. As of the
Closing Date, (i) each Material Contract is in full force and effect and is
enforceable by the Borrower or the applicable Subsidiary in accordance with its
terms, and (ii) neither the Borrower nor any of its Subsidiaries (nor, to the
knowledge of the Borrower, any other party thereto) is in breach of or default
under any Material Contract in any material respect or has given notice of
termination or cancellation of any Material Contract.
4.19 Reinsurance Agreements. Except as set forth on Schedule F to the
Annual Statements for the Material Insurance Subsidiaries, for the fiscal year
ending December 31, 2000, and except as set forth on SCHEDULE 4.19, there were
no material liabilities outstanding as of September 30, 2001 under any
Reinsurance Agreement and since September 30, 2001, except as previously
disclosed in writing by the Borrower to the Lender pursuant to this Agreement,
and no Material Insurance Subsidiary has incurred any material liabilities under
any Reinsurance Agreement that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect. Each such Reinsurance
Agreement (except any Reinsurance Agreement that has expired by its terms in the
ordinary course) is in full force and effect; none of the Material Insurance
Subsidiaries or, to the knowledge of the Borrower, any other party thereto, is
in breach of or 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
33
default thereunder by such party could reasonably be anticipated. Each such
Reinsurance Agreement (except any Reinsurance Agreement that has expired by its
terms in the ordinary course) 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.
ARTICLE V
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that, until the termination of the
Commitment and the payment in full of all principal and interest with respect to
the Loans together with all other amounts then due and owing hereunder:
5.1 Financial Statements. The Borrower will deliver to the Lender:
(a) As soon as available and in any event within sixty (60) days after the
end of each of the first three fiscal quarters of each fiscal year, beginning
with the first such fiscal quarter ending after the date hereof, unaudited
consolidated balance sheets of the Borrower and its Subsidiaries as of the end
of such fiscal quarter and unaudited consolidated statements of income, cash
flows and stockholders' equity for the Borrower and its Subsidiaries for the
fiscal quarter then ended and for that portion of the fiscal year then ended, in
each case setting forth comparative consolidated figures as of the end of and
for the corresponding period in the preceding fiscal year, all in reasonable
detail and prepared in accordance with GAAP (subject to the absence of notes
required by GAAP and subject to normal year-end adjustments) applied on a basis
consistent with that of the preceding quarter or containing disclosure of the
effect on the financial condition or results of operations of any change in the
application of accounting principles and practices during such quarter; and
(b) As soon as available and in any event within one hundred (100) days
after the end of each fiscal year, beginning with the fiscal year ending
December 31, 2001, an audited consolidated balance sheet of the Borrower and its
Subsidiaries as of the end of such fiscal year and audited consolidated
statements of income, cash flows and stockholders' equity for the Borrower and
its Subsidiaries for the fiscal year then ended, including the notes thereto, in
each case setting forth comparative figures as of the end of and for the
preceding fiscal year, all in reasonable detail and certified by the independent
certified public accounting firm regularly retained by the Borrower or another
independent certified public accounting firm of recognized national standing
reasonably acceptable to the Lender, 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 financial statements present fairly the consolidated
financial condition and results of operations of the Borrower and its
Subsidiaries as of the dates and for the periods indicated in accordance with
GAAP applied on a basis consistent with that of the preceding year or containing
disclosure of the effect on the financial condition or results of operations of
any change in the application of accounting principles and practices during such
year.
34
5.2 Statutory Financial Statements. The Borrower will deliver to the
Lender:
(a) As soon as available and in any event within sixty (60) days after the
end of each of the first three fiscal quarters of each fiscal year, beginning
with the first fiscal quarter ending after the date hereof, 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 Insurance Regulatory Authority, prepared in accordance with SAP; and
(b) As soon as available and in any event within one hundred (100) days
after the end of each fiscal year, beginning with the fiscal year ended December
31, 2001, (i) 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 Insurance Regulatory Authority, prepared in accordance with SAP; and
(c) As soon as available and in any event within one hundred fifty (150)
days after the end of each fiscal year, beginning with the fiscal year ended
December 31, 2001, the combined Annual Statement of the Insurance Subsidiaries
as of the end of such fiscal year and for the fiscal year then ended, in the
form filed with the relevant Insurance Regulatory Authority, prepared in
accordance with SAP.
5.3 Other Business and Financial Information. The Borrower will deliver,
or cause to be delivered, to the Lender:
(a) Concurrently with each delivery of the financial statements described
in SECTIONS 5.1 and 5.2, Compliance Certificates in the form of EXHIBITS C-1 and
C-2 with respect to the period covered by the financial statements then being
delivered, executed by a Financial Officer of the Borrower, together, with
respect to the Compliance Certificate delivered with the financial statements
described in Section 5.1, with a Covenant Compliance Worksheet reflecting the
computation of the financial covenants set forth in SECTION 6.1 as of the last
day of the period covered by such financial statements;
(b) Promptly upon filing with the relevant Insurance Regulatory Authority
and in any event within one hundred (100) days after the end of each fiscal
year, beginning with the fiscal year ended December 31, 2001, a copy of each
Insurance Subsidiary's "Statement of Actuarial Opinion" (or equivalent
information should the relevant Insurance Regulatory Authority 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 laws of such Insurance Subsidiary's jurisdiction of domicile;
(c) Promptly upon the sending, filing or receipt thereof, copies of (i)
all financial statements, reports, notices and proxy statements that the
Borrower or any of its Subsidiaries shall send or make available generally to
its shareholders, (ii) all regular, periodic and special reports, registration
statements and prospectuses (other than on Form S-8) that the Borrower or any of
its Subsidiaries shall render to or file with the Securities and Exchange
Commission, the National Association of Securities Dealers, Inc. or any national
securities exchange, and (iii) all press releases and other statements made
available generally by the Borrower or any of its
35
Subsidiaries to the public concerning material developments in the business of
the Borrower or any of its Subsidiaries; (iv) all significant filings made under
applicable state insurance holding company acts by the Borrower or any of its
Subsidiaries, including, without limitation, filings seeking approval of
material transactions with Affiliates; and (vi) all material information sent to
rating agencies, including without limitation Moody's, Standard & Poor's, A.M.
Best & Company and Fitch.
(d) Promptly upon receipt thereof, copies of any "management letter"
submitted to the Borrower or any of its Subsidiaries by its certified public
accountants in connection with each annual, interim or special audit that
discloses any finding that is material and adverse to the Borrower, and promptly
upon completion thereof, any response reports from the Borrower or any such
Subsidiary in respect thereof;
(e) Promptly upon (and in any event within five (5) Business Days after)
any Responsible Officer of the Borrower obtaining knowledge thereof, written
notice of any of the following:
(i) the occurrence of any Default or Event of Default, together with
a written statement of a Responsible Officer of the Borrower specifying
the nature of such Default or Event of Default, the period of existence
thereof and the action that the Borrower has taken and proposes to take
with respect thereto;
(ii) the institution or threatened institution of any action, suit,
investigation or proceeding against or affecting the Borrower or any of
their respective Subsidiaries, including any such investigation or
proceeding by any Governmental Authority (other than routine periodic
inquiries, investigations or reviews), that would, if adversely
determined, be reasonably likely, individually or in the aggregate, to
have a Material Adverse Effect, and any material development in any
litigation or other proceeding previously reported pursuant to SECTION 4.5
or this subsection;
(iii) the receipt by the Borrower or any of its Subsidiaries from
any Governmental Authority or Insurance Regulatory Authority of (y) any
written notice asserting any failure by the Borrower or their respective
Subsidiaries to be in compliance with applicable Requirements of Law or
that threatens the taking of any action against the Borrower or its
Subsidiaries or sets forth circumstances that, if taken or adversely
determined, would be reasonably likely to have a Material Adverse Effect,
or (z) any notice of any actual or threatened suspension, limitation or
revocation of, failure to renew, or imposition of any restraining order,
escrow or impoundment of funds in connection with, any license, permit,
accreditation or authorization of the Borrower or any of its Subsidiaries,
where such action would be reasonably likely to have a Material Adverse
Effect;
(iv) the occurrence of any ERISA Event, together with (x) a written
statement of a Responsible Officer of the Borrower, specifying the details
of such ERISA Event and the action that the Borrower has taken and
proposes to take with respect thereto, (y) a copy of any notice with
respect to such ERISA Event that may be required
36
to be filed with the PBGC and (z) a copy of any notice delivered by the
PBGC to the Borrower or its ERISA Affiliate, as the case may be, with
respect to such ERISA Event;
(v) the occurrence of any material default under, or any proposed or
threatened termination or cancellation of, any Material Contract or other
material contract or agreement to which the Borrower or any of its
Subsidiaries is a party, the termination or cancellation of which would be
reasonably likely to have a Material Adverse Effect;
(vi) the occurrence of any of the following: (x) the assertion of
any Environmental Claim against or affecting the Borrower or any of its
Subsidiaries or any of their respective real property, leased or owned;
(y) the receipt by the Borrower or any of its Subsidiaries of notice of
any alleged violation of or noncompliance with any Environmental Laws; or
(z) the taking of any remedial action by the Borrower, any of its
Subsidiaries or any other Person in response to the actual or alleged
generation, storage, release, disposal or discharge of any Hazardous
Substances on, to, upon or from any real property leased or owned by the
Borrower or any of its Subsidiaries; but in each case under clauses (x),
(y) and (z) above, only to the extent the same would be reasonably likely
to have a Material Adverse Effect;
(vii) the occurrence of any actual changes in any insurance statute
or regulation governing the investment or dividend practices of any
Insurance Subsidiary that would be reasonably likely to have a Material
Adverse Effect; and
(viii) any other matter or event that has, or would be reasonably
likely to have, a Material Adverse Effect, together with a written
statement of a Responsible Officer of the Borrower setting forth the
nature and period of existence thereof and the action that the Borrower
has taken and proposes to take with respect thereto;
(f) Promptly, notice of (i) the occurrence of any material amendment or
modification (other than expiration) to any Reinsurance Agreement (whether
entered into before or after the Closing Date), including any such agreements
that are in a runoff mode on the Closing Date, which amendment or modification
would be reasonably likely to have a Material Adverse Effect, or (ii) the
receipt by the Borrower or any of its Subsidiaries of any written notice of any
denial of coverage or claim, litigation or arbitration with respect to any
Reinsurance Agreement to which it is a ceding party which would be reasonably
likely to have a Material Adverse Effect;
(g) As promptly as reasonably possible, such other information about the
business, condition (financial or otherwise), operations or properties of the
Borrower or any of its Subsidiaries (including any Plan and any information
required to be filed under ERISA) as the Lender may from time to time reasonably
request.
(h) As soon as available and in any event within ninety (90) days after
the end of each fiscal year, an actuarial review and valuation statement of, and
opinion as to the adequacy of, the loss and loss adjustment expense reserve
positions as of end of such fiscal year of each Material Insurance Subsidiary,
with respect to its insurance business then in force, prepared and given by an
independent actuarial firm acceptable to the Lender.
37
5.4 Corporate Existence; Franchises; Maintenance of Properties. The
Borrower will, and will cause each of its Subsidiaries to, (i) maintain and
preserve in full force and effect their respective organizational or corporate
existence, except as expressly permitted otherwise by SECTION 7.1, (ii) obtain,
maintain and preserve in full force and effect all other rights, Licenses,
franchises, permits, certifications, approvals, authorizations required by
Governmental Authorities or the Insurance Regulatory Authority, as the case may
be, and necessary to the ownership, occupation or use of their respective
properties or the conduct of their respective business, except to the extent the
failure to do so would not be reasonably likely to have a Material Adverse
Effect, and (iii) keep all material properties in good working order and
condition (normal wear and tear excepted) and from time to time make all
necessary repairs to and renewals and replacements of such properties, except to
the extent that any of such properties are obsolete or are being replaced.
5.5 Compliance with Laws. The Borrower will, and will cause each of its
Subsidiaries to, comply in all respects with all Requirements of Law applicable
in respect of the conduct of their respective business and the ownership and
operation of their respective properties, except to the extent the failure so to
comply would not be reasonably likely to have a Material Adverse Effect.
5.6 Payment of Obligations. The Borrower will, and will cause each of its
Subsidiaries to (i) pay all liabilities and obligations as and when due (subject
to any applicable subordination provisions), except to the extent failure to do
so would not be reasonably likely to have a Material Adverse Effect, and (ii)
pay and discharge all taxes, assessments and governmental charges or levies
imposed upon them, upon their respective income or profits or upon any of their
respective properties, prior to the date on which penalties would attach
thereto, and all lawful claims that, if unpaid, might become a Lien upon any of
the properties of the Borrower or any of its Subsidiaries; provided, however,
that neither the Borrower nor any of its Subsidiaries shall be required to pay
any such tax, 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 GAAP or
SAP, as the case may be.
5.7 Insurance. The Borrower will, and will cause each of its Subsidiaries
to, maintain with financially sound and reputable insurance companies insurance
with respect to its assets, properties and business, against such hazards and
liabilities, of such types and in such amounts, as is customarily maintained by
companies in the same or similar businesses similarly situated.
5.8 Maintenance of Books and Records; Inspection. The Borrower will, and
will cause each of its Subsidiaries to, (i) maintain adequate books, accounts
and records, in which full, true and correct entries shall be made of all
financial transactions in relation to their respective business and properties,
and prepare all financial statements required under this Agreement, in each case
in accordance with GAAP or SAP, as the case may be, and in compliance with the
requirements of any Governmental Authority having jurisdiction over them, and
(ii) permit employees or agents of the Lender to inspect their respective
properties and examine or audit their respective books, records, working papers
and accounts and make copies and memoranda of them, and to discuss their
respective affairs, finances and accounts with their respective officers and
employees and, upon notice to the Borrower the independent public
38
accountants of the Borrower, and its Subsidiaries (and by this provision the
Borrower authorizes such accountants to discuss the finances and affairs of the
Borrower and its Subsidiaries), all at such times and from time to time, upon
reasonable notice and during business hours, as may be reasonably requested.
5.9 Permitted Acquisitions. Subject to the requirements contained in the
definition of Permitted Acquisition, and subject to the other terms and
conditions of this Agreement, the Borrower may from time to time on or after the
Closing Date effect Permitted Acquisitions, provided that, with respect to each
Permitted Acquisition no Default or Event of Default shall have occurred and be
continuing at the time of the consummation of such Permitted Acquisition or
would exist immediately after giving effect thereto.
5.10 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 the terms of this
Agreement. 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 interest payments, the Borrower will forthwith exercise its
best efforts and take all actions permitted by law and necessary to obtain such
approval.
5.11 Further Assurances. The Borrower will, and will cause each of its
Subsidiaries to, make, execute, endorse, acknowledge and deliver any amendments,
modifications or supplements hereto and restatements hereof and any other
agreements, instruments or documents and to effect, confirm or further assure or
protect and preserve the interests, rights and remedies of the Lender under this
Agreement and the other Credit Documents.
ARTICLE VI
FINANCIAL COVENANTS
The Borrower covenants and agrees that, until the termination of the
Commitment and the payment in full of all principal and interest with respect to
the Loans together with all other amounts then due and owing hereunder:
6.1 Maximum Consolidated Debt to Consolidated Total Capitalization. The
ratio of Consolidated Indebtedness to Consolidated Total Capitalization shall at
all times not be greater than .3 : 1.0.
ARTICLE VII
NEGATIVE COVENANTS
The Borrower covenants and agrees that, until the termination of the
Commitment and the payment in full of all principal and interest with respect to
the Loans together with all other amounts then due and owing hereunder:
39
7.1 Merger; Consolidation. The Borrower will not, and will not permit or
cause any of its Material Subsidiaries to, liquidate, wind up or dissolve, or
enter into any consolidation, merger or other combination, or agree to do any of
the foregoing; provided, however, that:
(i) the Borrower may merge or consolidate with another Person so
long as (x) the Borrower is the surviving entity, (y) unless such other
Person is a Wholly Owned Subsidiary immediately prior to giving effect
thereto, such merger or consolidation shall constitute a Permitted
Acquisition and the applicable conditions and requirements of SECTION 5.9
shall be satisfied, and (z) immediately after giving effect thereto, no
Default or Event of Default would exist; and
(ii) any Subsidiary may merge or consolidate with another Person so
long as (x) the surviving entity is the Borrower or a Subsidiary, (y)
unless such other Person is a Wholly Owned Subsidiary immediately prior to
giving effect thereto, such merger or consolidation shall constitute a
Permitted Acquisition and the applicable conditions and requirements of
SECTION 5.9 shall be satisfied, and (z) immediately after giving effect
thereto, no Default or Event of Default would exist.
7.2 Indebtedness. The Borrower will not, and will not permit or cause any
of its Subsidiaries to, create, incur, assume or suffer to exist any
Indebtedness other than:
(i) Indebtedness incurred under this Agreement and the Note;
(ii) Indebtedness existing on the Closing Date and described in
SCHEDULE 7.2;
(iii) accrued expenses (including salaries, accrued vacation and
other compensation), current trade or other accounts payable and other
current liabilities arising in the ordinary course of business and not
incurred through the borrowing of money, provided that the same shall be
paid when due except to the extent being contested in good faith and by
appropriate proceedings;
(iv) Indebtedness of any Subsidiary to the Borrower; provided that
no Default has occurred and is continuing and no Default shall occur as a
result of the incurrence of such Indebtedness;
(v) Indebtedness of any Subsidiary to any wholly-owned Subsidiary of
the Borrower; provided that that no Default has occurred and is continuing
and no Default shall occur as a result of the incurrence of such
Indebtedness;
(vi) purchase money Indebtedness of the Borrower and its
Subsidiaries incurred solely to finance the payment of all or part of the
purchase price of any equipment, real property or other fixed assets
acquired in the ordinary course of business, including Indebtedness in
respect of capital lease obligations, and any renewals, refinancings or
replacements thereof (subject to the limitations on the principal amount
thereof set forth in this clause (iv)), which Indebtedness shall not
exceed $10,000,000 in aggregate principal amount outstanding at any time;
40
(vii) Indebtedness in connection with Permitted Liens;
(viii) Indebtedness of the Borrower; provided that no Default has
occurred and is continuing and no Default shall occur as a result of the
incurrence of such Indebtedness; and provided further that, with respect
to Indebtedness to third parties, such Indebtedness shall either rank pari
passu or be subordinated in right and time of payment to the Obligations
and, with respect to Indebtedness of the Borrower to any Subsidiary, such
Indebtedness is subordinated in right and time of payment to the
Obligations, in form and substance reasonably satisfactory to the Lender.
For purposes of determining whether the incurrence of new Indebtedness on
any particular date will cause a Default hereunder, such new Indebtedness,
along with any other Indebtedness outstanding as of such date, shall be
deemed to be the outstanding Indebtedness as of the last day of the
previous fiscal quarter; and
(ix) Indebtedness of any Insurance Subsidiary of the Borrower
involved primarily in providing reinsurance to major financial guarantors
that is incurred to obtain and maintain a soft capital facility to support
such Insurance Subsidiary's reinsurance or financial guaranty direct
insurance business in the ordinary course in such amount as the applicable
rating agencies deem necessary, provided that recourse on such facility
must be limited to the pledged recoveries of such Insurance Subsidiary;
and provided further that no Default has occurred and is continuing and no
Default shall occur as a result of the incurrence of such Indebtedness.
7.3 Liens. The Borrower will not, and will not permit or cause any of its
Material Subsidiaries to, directly or indirectly, make, create, incur, assume or
suffer to exist, any Lien upon or with respect to any part of its property or
assets, whether now owned or hereafter acquired, or file or permit the filing
of, or permit to remain in effect, any financing statement or other similar
notice of any Lien with respect to any such property, asset, income or profits
under the Uniform Commercial Code of any state or under any similar recording or
notice statute, or agree to do any of the foregoing, other than the following
(collectively, "Permitted Liens"):
(i) Liens in existence on the Closing Date and set forth on SCHEDULE
7.3;
(ii) Liens imposed by law, such as Liens of carriers, warehousemen,
mechanics, materialmen, repairmen and landlords, and other similar Liens
incurred in the ordinary course of business for sums not constituting
borrowed money that are not overdue for a period of more than thirty (30)
days or that are being contested in good faith by appropriate proceedings
and for which adequate reserves have been established in accordance with
GAAP (if so required);
(iii) Liens (other than any Lien imposed by ERISA, the creation or
incurrence of which would result in an Event of Default under SECTION
8.1(I)) incurred in the ordinary course of business in connection with
worker's compensation, unemployment insurance or other forms of
governmental insurance or benefits, or to secure the performance of
letters of credit, bids, tenders, statutory obligations, surety and
41
appeal bonds, leases, government contracts and other similar obligations
(other than obligations for borrowed money) entered into in the ordinary
course of business;
(iv) Liens for taxes, assessments or other governmental charges or
statutory obligations that are not delinquent or remain payable without
any penalty or that are being contested in good faith by appropriate
proceedings and for which adequate reserves have been established in
accordance with GAAP (if so required);
(v) Liens securing the purchase money Indebtedness permitted under
clause (v) of SECTION 7.2, provided that any such Lien (i) shall attach to
such property concurrently with 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 or (z) the
cost thereof to the Borrower or such Subsidiary and (iii) shall not
encumber any other property of the Borrower or any of its Subsidiaries;
(vi) any attachment or judgment Lien not constituting an Event of
Default under SECTION 8.1(h) that is being contested in good faith by
appropriate proceedings and for which adequate reserves have been
established in accordance with GAAP (if so required);
(vii) Liens arising from the filing, for notice purposes only, of
financing statements in respect of true leases;
(viii) Liens on Borrower Margin Stock, to the extent the fair market
value thereof exceeds 25% of the fair market value of the assets of the
Borrower and its Subsidiaries (including Borrower Margin Stock);
(ix) with respect to any real property occupied by the Borrower or
any of its Subsidiaries, all easements, rights of way, restrictions,
licenses, similar encumbrances on title and encumbrances consisting of
zoning restrictions, easements, licenses, restrictions on the use of
property or minor imperfections in title thereto which, in the aggregate,
are not material in amount, that do not materially interfere with the
ordinary conduct of the business of the Borrower;
(x) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(xi) Liens upon real or tangible personal property acquired after
the Effective Date by the Borrower or any of its Subsidiaries, each of
which Liens either existed on such property prior to the time of its
acquisition by the Borrower or any of its Subsidiaries and was not created
in anticipation thereof or was created solely for the purpose of securing
Indebtedness incurred to finance, refinance or refund the cost (including
the cost of construction) of such property; provided, that (A) no such
Lien shall extend to or cover any property of the Borrower or such
Subsidiary other than the property so acquired and improvements thereon,
and (B) the principal amount of Indebtedness secured by any such Lien
shall not exceed 80% of the fair market value (as
42
determined in good faith by a senior financial officer of the Borrower) of
such property at the time it was acquired;
(xii) Liens on property of any corporation, partnership, limited
liability company or other legal entity that becomes a Subsidiary of the
Borrower after the Effective Date; provided, that such Liens are in
existence at the time such entity becomes a Subsidiary of the Borrower and
were not created in anticipation thereof; and
(xiii)any extension, renewal or replacement of the foregoing;
provided that the Liens permitted by this clause shall not extend to or
cover any additional Indebtedness or property (other than a substitution
of like property).
7.4 Disposition of Assets. The Borrower will not, and will not permit or
cause any of its Subsidiaries to, sell, assign, lease, convey, transfer or
otherwise dispose of (whether in one or a series of transactions) all or any
portion of its assets, business or properties (including, without limitation,
any Capital Stock of any Subsidiary) or enter into any arrangement with any
Person providing for the lease by the Borrower or any Subsidiary as lessee of
any asset that has been sold or transferred by the Borrower or such Subsidiary
to such Person, or agree to do any of the foregoing, except for:
(i) sales of inventory or other assets and licenses or leases of
intellectual property and other assets, in each case in the ordinary
course of business;
(ii) the sale or exchange of used or obsolete equipment to the
extent (A) the proceeds of such sale are applied towards, or such
equipment is exchanged for, replacement equipment or (B) such equipment is
no longer necessary for the operations of the Borrower or its applicable
Subsidiary in the ordinary course of business; or
(iii) the sale, lease or other disposition of assets by a Subsidiary
to another Subsidiary if, immediately after giving effect thereto, no
Default or Event of Default would exist.
7.5 Investments and Acquisitions. The Borrower will not, and will not
permit or cause any of its Subsidiaries to, directly or indirectly, purchase,
own, invest in or otherwise acquire any Capital Stock, evidence of indebtedness
or other obligation or security or any interest whatsoever in any other Person,
or make or permit to exist any loans, advances or extensions of credit to, or
any investment in cash or by delivery of property in, any other Person, or
purchase or otherwise acquire (whether in one or a series of related
transactions) any portion of the assets, business or properties of another
Person (including pursuant to an Acquisition), or create or acquire any
Subsidiary, or become a partner or joint venturer in any partnership or joint
venture (collectively, "Investments"), or make a commitment or otherwise agree
to do any of the foregoing, other than:
(i) Investments by the Borrower and its Subsidiaries to the extent
permitted under applicable Requirements of Law and in compliance at all
times with the: (A) the requirements of the Lloyd's insurance market, if
applicable, (B) all applicable insurance laws and regulations of any other
relevant jurisdictions relating to investments by an Insurance Subsidiary
and (C) the limitations set forth in the Investment Policy;
43
(ii) Investments constituting operating deposit accounts with banks
and accounts receivable arising in the ordinary course of business on
ordinary business terms;
(iii) Permitted Acquisitions;
(iv) Investments existing on the Closing Date and either (y)
disclosed on the financial statements required under SECTION 4.11 and
delivered pursuant to SECTION 3.1(j) or (z) described in SCHEDULE 7.5. and
(v) Travel and similar advances by the Borrower and its Subsidiaries
in the ordinary course of business and loans to employees, officers and
directors of the Borrower and its Subsidiaries, provided that such travel
or similar advances and loans to employees, officers and directors at any
one time do not exceed, in the aggregate, $3,000,000 for the Borrower and
its Subsidiaries
7.6 Restricted Payments. 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 set aside funds for any of the foregoing, except
that:
(i) the Borrower may declare and make dividend payments or other
distributions payable solely in its common stock;
(ii) each Wholly Owned Subsidiary of the Borrower may declare and
make dividend payments or other distributions to the Borrower or another
Wholly Owned Subsidiary of the Borrower, to the extent not prohibited
under applicable Requirements of Law; and
(iii) the Borrower may declare and make dividend payments payable
solely in cash; provided that no Default has occurred and is continuing.
7.7 Transactions with Affiliates. The Borrower will not, and will not
permit or cause any of its Subsidiaries to, enter into any transaction
(including, without limitation, any purchase, sale, lease or exchange of
property or the rendering of any service) with any officer, director,
stockholder or other Affiliate of the Borrower or any Subsidiary, except in the
ordinary course of its business and upon fair and reasonable terms that are in
all material respects as advantageous to the Borrower and its Subsidiaries as
the Borrower would be reasonably able to obtain in a comparable arm's length
transaction with a Person other than an Affiliate of the Borrower or such
Subsidiary; provided, however, that nothing contained in this Section shall
prohibit transactions described on SCHEDULE 7.7, the payment by the Borrower of
reasonable and customary fees to members of its board of directors or
transactions otherwise expressly permitted under this Agreement.
7.8 Certain Amendments. The Borrower will not, and will not permit or
cause any of its Subsidiaries to amend, modify or change any provision of its
articles or certificate of incorporation or organization or bylaws or operating
agreement, as the case may be, or the terms
44
of any class or series of its Capital Stock, other than in a manner that would
not reasonably be likely to adversely affect the Lender.
7.9 Limitation on Certain Restrictions. The Borrower will not, and will
not permit or cause any of its Subsidiaries to, directly or indirectly, create
or otherwise cause or suffer to exist or become effective any restriction or
encumbrance on (i) the ability of the Borrower and its Subsidiaries to perform
and comply with their respective obligations under the Credit Documents or (ii)
the ability of any Subsidiary of the Borrower to make any dividend payments or
other distributions in respect of its Capital Stock, to repay Indebtedness owed
to the Borrower or any other Subsidiary, to make loans or advances to the
Borrower or any other Subsidiary, or to transfer any of its assets or properties
to the Borrower or any other Subsidiary, in each case other than such
restrictions or encumbrances existing under or by reason of the Credit Documents
or applicable Requirements of Law; it being understood that Radian Reinsurance
Inc. and Radian Asset Assurance Inc. are prohibited from making any dividend
payments to the Borrower prior to February 28, 2003 without the consent of the
New York State Insurance Department.
7.10 Fiscal Year. The Borrower will not, and will not permit or cause any
of its Subsidiaries to, change the ending date of its fiscal year to a date
other than December 31.
7.11 Accounting Changes. The Borrower will not, and will not permit or
cause any of its Subsidiaries to, make or permit any material change in its
accounting policies or reporting practices, except as may be required by GAAP or
SAP, as the case may be.
7.12 Ratings. The Borrower will not permit or cause the financial strength
rating of any Material Insurance Subsidiary by (a) Fitch and Standard & Poor's,
respectively, to be lower than "AA-" at any time or (b) Moody's to be lower than
"Aa3" at any time; provided that the Borrower shall not be required to maintain
or obtain a financial strength rating for Radian Asset Assurance Inc. from
Moody's.
ARTICLE VIII
EVENTS OF DEFAULT
8.1 Events of Default. The occurrence of any one or more of the following
events shall constitute an "Event of Default":
(a) The Borrower shall fail to pay (i) any principal of any Loan, any fee
or any other Obligation or (ii) when due or any interest on any Loan within
three (3) days after the date when due;
(b) The Borrower shall fail to observe, perform or comply with any
condition, covenant or agreement contained in any of SECTIONS 2.14, 5.1, 5.2,
5.3(a), 5.3(e)(i), 5.3(e)(iii), 5.4(i) or 5.9 or in ARTICLE VI or ARTICLE VII;
(c) The Borrower or any of its Subsidiaries shall fail to observe, perform
or comply with any condition, covenant or agreement contained in this Agreement
or any of the other Credit Documents other than those enumerated in subsections
(a) and (b) above, and such failure
45
(i) is deemed by the terms of the relevant Credit Document to constitute an
Event of Default or (ii) shall continue unremedied for any grace period
specifically applicable thereto or, if no such grace period is applicable, for a
period of thirty (30) days after the earlier of (y) the date on which a
Responsible Officer of the Borrower acquires knowledge thereof and (z) the date
on which written notice thereof is delivered by the Lender to the Borrower;
(d) Any representation or warranty made or deemed made by or on behalf of
the Borrower or any of its Subsidiaries in this Agreement, any of the other
Credit Documents or in any certificate, instrument, report or other document
furnished in connection herewith or therewith or in connection with the
transactions contemplated hereby or thereby shall prove to have been false or
misleading in any material respect as of the time made, deemed made or
furnished;
(e) The Borrower or any of its Subsidiaries shall (i) fail to pay when due
(whether by scheduled maturity, acceleration or otherwise and after giving
effect to any applicable grace period) any principal of or interest on any
Indebtedness (other than the Indebtedness incurred pursuant to this Agreement)
having an aggregate principal amount of at least $15,000,000, or (ii) fail to
observe, perform or comply with any condition, covenant or agreement contained
in any agreement or instrument evidencing or relating to any such Indebtedness,
or any other event shall occur or condition exist in respect thereof, and the
effect of such failure, event or condition is to cause, or permit the holder or
holders of such Indebtedness (or a trustee or agent on its or their behalf) to
cause (with the giving of notice, lapse of time, or both), such Indebtedness to
become due, or to be prepaid, redeemed, purchased or defeased, prior to its
stated maturity having an aggregate principal amount of at least $15,000,000;
(f) The Borrower or any of its Subsidiaries shall (i) file a voluntary
petition or commence a voluntary case seeking liquidation, winding-up,
reorganization, dissolution, arrangement, readjustment of debts or any other
relief under the Bankruptcy Code, the insurance laws applicable to any Insurance
Subsidiary, or under any other applicable bankruptcy, insolvency or similar law
now or hereafter in effect, (ii) consent to the institution of, or fail to
controvert in a timely and appropriate manner, any petition or case of the type
described in subsection (g) below, (iii) apply for or consent to the appointment
of or taking possession by a custodian, trustee, receiver or similar official
for or of itself or all or a substantial part of its properties or assets, (iv)
fail generally, or admit in writing its inability, to pay its debts generally as
they become due, (v) make a general assignment for the benefit of creditors or
(vi) take any corporate action to authorize or approve any of the foregoing;
(g) Any involuntary petition or case shall be filed or commenced against
the Borrower or any of its Subsidiaries seeking liquidation, winding-up,
reorganization, dissolution, arrangement, readjustment of debts, the appointment
of a custodian, trustee, receiver or similar official for it or all or a
substantial part of its properties or any other relief under the Bankruptcy
Code, the insurance laws applicable to any Insurance Subsidiary, or under any
other applicable bankruptcy, insolvency or similar law now or hereafter in
effect, and such petition or case shall continue undismissed and unstayed for a
period of sixty (60) days; or an order, judgment or decree approving or ordering
any of the foregoing shall be entered in any such proceeding;
46
(h) Any one or more money judgments, writs or warrants of attachment,
executions or similar processes involving an aggregate amount (exclusive of
amounts fully bonded or covered by insurance as to which the surety or insurer,
as the case may be, has acknowledged its liability in writing) in excess of
$10,000,000 shall be entered or filed against the Borrower or any of its
Subsidiaries or any of their respective properties and the same shall not be
dismissed, stayed or discharged for a period of thirty (30) days;
(i) Any ERISA Event or any other event or condition shall occur or exist
with respect to any Plan or Multiemployer Plan and, as a result thereof,
together with all other ERISA Events and other events or conditions then
existing, the Borrower and the respective ERISA Affiliates have incurred or
would be reasonably likely to incur liability to any one or more Plans or
Multiemployer Plans or to the PBGC (or to any combination thereof) that has or
would be reasonably likely to have a Material Adverse Effect;
(j) Any one or more Licenses, permits, accreditations or authorizations of
the Borrower or any of its Subsidiaries shall be suspended, limited or
terminated or shall not be renewed, or any other action shall be taken, by any
Governmental Authority in response to any alleged failure by the Borrower, any
of its Subsidiaries to be in compliance with applicable Requirements of Law, and
such action, individually or in the aggregate, has or would be reasonably likely
to have a Material Adverse Effect;
(k) Any one or more Environmental Claims shall have been asserted against
the Borrower or any of its Subsidiaries (or a reasonable basis shall exist
therefor); the Borrower has incurred or would be reasonably likely to incur
liability as a result thereof; and such liability, individually or in the
aggregate, has or would be reasonably likely to have a Material Adverse Effect;
or
(l) Any of the following shall occur: (i) any Person or group of Persons
acting in concert as a partnership or other group, shall, as a result of a
tender or exchange offer, open market purchases, privately negotiated purchases
or otherwise, have become, after the date hereof, the "beneficial owner" (within
the meaning of such term under Rule 13d-3 under the Exchange Act) of securities
of the Borrower representing 20% 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 date hereof or who shall have become a member thereof subsequent to
the date hereof after having been nominated, or otherwise approved in writing,
by at least a majority of individuals who constituted the Board of Directors of
the Borrower as of the date hereof (or their replacements approved as herein
required).
8.2 Remedies: Termination of Commitment, Acceleration, etc. Upon and at
any time after the occurrence and during the continuance of any Event of
Default, the Lender may take any or all of the following actions at the same or
different times:
(a) Declare the Commitment to be terminated, whereupon the same shall
terminate (provided that, upon the occurrence of an Event of Default pursuant to
SECTION 8.1(f) or SECTION 8.1(g), the Commitment shall automatically be
terminated);
47
(b) Declare all or any part of the outstanding principal amount of the
Loans to be immediately due and payable, whereupon the principal amount so
declared to be immediately due and payable, together with all interest accrued
thereon and all other amounts payable under this Agreement, the Note and the
other Credit Documents, shall become immediately due and payable without
presentment, demand, protest, notice of intent to accelerate or other notice or
legal process of any kind, all of which are hereby knowingly and expressly
waived by the Borrower (provided that, upon the occurrence of an Event of
Default pursuant to SECTION 8.1(f) or SECTION 8.1(g), all of the outstanding
principal amount of the Loans and all other amounts described in this subsection
(b) shall automatically become immediately due and payable without presentment,
demand, protest, notice of intent to accelerate or other notice or legal process
of any kind, all of which are hereby knowingly and expressly waived by the
Borrower); and
(c) Exercise all rights and remedies available to it under this Agreement,
the other Credit Documents and applicable law.
8.3 Remedies: Set-Off. In addition to all other rights and remedies
available under the Credit Documents or applicable law or otherwise, upon and at
any time after the occurrence and during the continuance of any Event of
Default, the Lender may, and is hereby authorized by the Borrower, at any such
time and from time to time, to the fullest extent permitted by applicable law,
without presentment, demand, protest or other notice of any kind, all of which
are hereby knowingly and expressly waived by the Borrower, to set off and to
apply any and all deposits (general or special, time or demand, provisional or
final) and any other property at any time held (including at any branches or
agencies, wherever located), and any other Indebtedness at any time owing, by
the Lender 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
Lender a continuing security interest in and Lien upon all such deposits and
other property as security for such Obligations. The Lender agrees 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 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 Lender (including,
without limitation, the reasonable fees and expenses of counsel to the Lender)
in connection with (y) the Lender's due diligence investigation in connection
with, and the preparation, negotiation, execution, and delivery of, this
Agreement and the other Credit Documents, and any amendment, modification or
waiver hereof or thereof or consent with respect hereto or thereto, and (z) the
administration, monitoring and review of the Loans (including, without
limitation, out-of-pocket expenses for travel, meals, long-distance telephone
calls, wire transfers, facsimile transmissions and copying and with respect to
the engagement of appraisers, consultants, auditors or similar Persons by the
Lender at any time, whether before or after the Closing, to render opinions
concerning the financial
48
condition of the Borrower), (ii) to pay upon demand all reasonable out-of-pocket
costs and expenses of the Lender (including, without limitation, reasonable
attorneys' fees and expenses) in connection with (y) any refinancing or
restructuring of the credit arrangement provided under this Agreement, whether
in the nature of a "work-out," in any insolvency or bankruptcy proceeding or
otherwise and whether or not consummated, and (z) the enforcement, attempted
enforcement (except to the extent relating to any claim by the Lender against
the Borrower that is unsuccessful because the Lender's rights were not violated)
or preservation of any rights or remedies under this Agreement or any of the
other Credit Documents, whether in any action, suit or proceeding (including any
bankruptcy or insolvency proceeding) or otherwise, and (iii) to pay and hold the
Lender harmless from and against all liability for any intangibles, documentary,
stamp or other similar taxes, fees and excises, if any, including any interest
and penalties, and any finder's or brokerage fees, commissions and expenses
(other than any fees, commissions or expenses of finders or brokers engaged by
the Lender), that may be payable in connection with the transactions
contemplated by this Agreement and the other Credit Documents.
9.2 Indemnification. The Borrower agrees, whether or not the transactions
contemplated by this Agreement shall be consummated, to indemnify and hold the
Lender and its directors, officers, employees, agents and Affiliates (each, an
"Indemnified Person") harmless from and against any and all claims, losses,
damages, obligations, liabilities, penalties, costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses) of any kind or
nature whatsoever, whether direct, indirect or consequential (collectively,
"Indemnified Costs"), that may at any time be imposed on, incurred by or
asserted against any such Indemnified Person as a result of, arising from or in
any way relating to the preparation, execution, performance or enforcement of
this Agreement or any of the other Credit Documents, any of the transactions
contemplated herein or therein or any transaction financed or to be financed in
whole or in part, directly or indirectly, with the proceeds of any Loans
(including, without limitation, in connection with the actual or alleged
generation, presence, discharge or release of any Hazardous Substances on, into
or from, or the transportation of Hazardous Substances to or from, any real
property at any time owned or leased by the Borrower or any of its Subsidiaries,
any other Environmental Claims or any violation of or liability under any
Environmental Law), or any action, suit or proceeding (including any inquiry or
investigation) by any Person, whether threatened or initiated, related to any of
the foregoing, and in any case whether or not such Indemnified Person is a party
to any such action, proceeding or suit or a subject of any such inquiry or
investigation; provided, however, that no Indemnified Person shall have the
right to be indemnified hereunder for any Indemnified Costs to the extent
determined by a final and nonappealable judgment of a court of competent
jurisdiction to have resulted 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
CREDIT DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS
(EXCLUDING NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1401). THE PARTIES HERETO
HEREBY DECLARE THAT IT IS THEIR INTENTION THAT THIS AGREEMENT SHALL BE REGARDED
AS MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND
49
THAT THE LAWS OF SAID STATE SHALL BE APPLIED IN INTERPRETING ITS PROVISIONS IN
ALL CASES WHERE LEGAL INTERPRETATION SHALL BE REQUIRED. EACH OF THE PARTIES
HERETO AGREES (A) THAT THIS AGREEMENT INVOLVES AT LEAST $250,000; AND (B) THAT
THIS AGREEMENT HAS BEEN ENTERED INTO BY THE PARTIES HERETO IN EXPRESS RELIANCE
UPON NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1401. NOTWITHSTANDING THE
FOREGOING CHOICE OF LAW, THE BORROWER AND THE LENDER HEREBY CONSENT TO THE
NONEXCLUSIVE JURISDICTION OF ANY STATE COURT WITHIN MECKLENBURG COUNTY, NORTH
CAROLINA OR NEW YORK COUNTY, NEW YORK OR ANY FEDERAL COURT LOCATED WITHIN THE
WESTERN DISTRICT OF THE STATE OF NORTH CAROLINA OR THE SOUTHERN DISTRICT OF THE
STATE OF NEW YORK FOR ANY PROCEEDING INSTITUTED HEREUNDER OR UNDER ANY OF THE
OTHER CREDIT DOCUMENTS, OR ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT
OR ANY OF THE OTHER CREDIT DOCUMENTS, OR ANY PROCEEDING TO WHICH THE LENDER OR
THE BORROWER IS A PARTY. INCLUDING ANY ACTIONS BASED UPON, ARISING OUT OF, OR IN
CONNECTION WITH ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER
ORAL OR WRITTEN) OR ACTIONS OF THE LENDER OR THE BORROWER. THE BORROWER AND THE
LENDER EACH 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. EACH OF THE
BORROWER AND THE LENDER CONSENTS THAT ALL SERVICE OF PROCESS BE MADE BY
REGISTERED OR CERTIFIED MAIL DIRECTED TO IT AT ITS ADDRESS SET FORTH
HEREINBELOW, AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON THE
EARLIER OF ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE UNITED
STATES MAILS, PROPER POSTAGE PREPAID AND PROPERLY ADDRESSED. NOTHING IN THIS
SECTION SHALL AFFECT THE RIGHT TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR AFFECT THE RIGHT OF THE LENDER OR THE BORROWER, AS THE CASE
MAY BE, TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER IN THE COURTS OF
ANY OTHER JURISDICTION.
9.4 Waiver of Trial by Jury. EACH PARTY HEREBY EXPRESSLY WAIVES ANY RIGHT
TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS
UNDER THIS AGREEMENT OR ANY OF THE OTHER CREDIT DOCUMENTS TO WHICH IT IS A
PARTY, OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR
WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR
ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT OR ANY
OTHER CREDIT DOCUMENT AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY.
50
9.5 Notices. All notices and other communications provided for hereunder
shall be in writing (including telegraphic, telex, facsimile transmission or
cable communication) and mailed (via certified mail), telegraphed, telexed,
telecopied, cabled or delivered to the party to be notified at the following
addresses:
(a) if to the Borrower, to Radian Group Inc., 1601 Market Street,
Philadelphia, PA 19103, Attention: Chief Financial Officer, Telecopy No. (215)
963-9658, with a copy to the Treasurer and General Counsel;
(b) if to the Lender, to First Union National Bank, Financial Institutions
Group, 1339 Chestnut Street, 3rd Floor, Philadelphia, Pennsylvania 19101-4819,
Attention: Kimberly Shaffer, Telecopy No. (267) 321-7102;
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 (via certified or registered
mail) as provided above by any method other than overnight delivery service, on
the third Business Day after deposit in the mails, (ii) if mailed by overnight
delivery service, telegraphed, telexed, telecopied or cabled, when delivered for
overnight delivery, delivered to the telegraph company, confirmed by telex
answerback, transmitted by telecopier or delivered to the cable company,
respectively, or (iii) if delivered by hand, upon delivery; provided that
Notices of Borrowing, Notices of Conversion/Continuation and any notices
required to be delivered to the Lender pursuant to SECTIONS 5.3(e) and 5.3(f)
shall not be effective until received by the Lender.
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 Credit Document, shall be effective
unless in a writing signed by the Lender, and then the same shall be effective
only in the specific instance and for the specific purpose for which given
9.7 Assignments, Participations.
(a) The Lender may assign to one or more 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, the Note held by it); provided, however, that any such assignment
(other than an assignment to an Affiliate of the Lender) shall not be made
without the prior written consent of the Borrower, which consent shall not be
unreasonably withheld (provided that the Borrower's consent shall not be
required in the event a Default or Event of Default shall have occurred and be
continuing).
(b) The Lender may, without the consent of the Borrower, 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 Commitment, the outstanding
Loans made by it, the Note); provided, however, that the Lender's obligations
under this Agreement shall remain unchanged and the Lender shall remain solely
responsible for the performance of such obligations, and no Participant shall
have any rights under this Agreement or any of the other Credit Documents, each
Participant's rights against the
51
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 the Lender had not granted such participation.
(c) Nothing in this Agreement shall be construed to prohibit the Lender
from pledging or assigning all or any portion of its rights and interest
hereunder or under the Note to any Federal Reserve Bank as security for
borrowings therefrom; provided, however, that no such pledge or assignment shall
release the Lender from any of its obligations hereunder.
(d) The Lender or Participant may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section,
disclose to the Assignee or Participant or proposed Assignee or Participant any
information relating to the Borrower furnished to it by or on behalf of any
other party hereto, provided that such Assignee or Participant or proposed
Assignee or Participant shall keep such information confidential to the same
extent required of the Lender under SECTION 9.13.
9.8 No Waiver. The rights and remedies of the Lender and the Borrower
expressly set forth in this Agreement and the other Credit Documents are
cumulative and in addition to, and not exclusive of, all other rights and
remedies available at law, in equity or otherwise. No failure or delay on the
part of either party hereto 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 Borrower
and the Lender or their agents or employees shall be effective to amend, modify
or discharge any provision of this Agreement or any other Credit Document or to
constitute a waiver of any Default or Event of Default. No notice to or demand
upon the Borrower in any case shall entitle the Borrower to any other or further
notice or demand in similar or other circumstances or constitute a waiver of the
right of the 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 respective rights, interests,
duties or obligations under this Agreement without the prior written consent of
the Lender and (ii) any Assignees and Participants shall have such rights and
obligations with respect to this Agreement and the other Credit Documents as are
provided for under and pursuant to the provisions of SECTION 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 Credit 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 Credit Documents relating to indemnification or payment
of fees, costs and expenses, including, without limitation, the provisions of
SECTIONS 2.15(a), 2.15(b), 2.16, 2.17, 9.1 and 9.2, shall survive the payment in
full of all Loans,
52
the termination of the Commitment, and any termination of this Agreement or any
of the other Credit 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.
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 Credit
Documents, in the event of any inconsistency or conflict between any provision
of this Agreement and any provision of any of the other Credit Documents, the
provision of this Agreement shall control.
9.13 Confidentiality. The Lender agrees to keep confidential, pursuant to
its customary procedures for handling confidential information of a similar
nature and in accordance with safe and sound banking practices, all nonpublic
information provided to it by or on behalf of the Borrower or any of its
Subsidiaries in connection with this Agreement or any other Credit Document;
provided, however, that the Lender may disclose such information (i) to its
directors, employees and agents and to its auditors, counsel and other
professional advisors (so long as such persons have been advised of the
confidential nature of such information), (ii) at the demand or request of any
bank regulatory authority, court, other Governmental Authority or Insurance
Regulatory Authority having or asserting jurisdiction over the Lender, as may be
required pursuant to subpoena or other legal process, or otherwise in order to
comply with any applicable Requirement of Law (provided that, to the extent
reasonably possible, the Borrower is provided with timely notice of such demand
or request so that the Borrower may seek an appropriate protective order with
the reasonable cooperation of the Lender (at the Borrower's expense)), (iii) in
connection with any proceeding to enforce its rights hereunder or under any
other Credit Document or any other litigation or proceeding related hereto or to
which it is a party, (iv) to the extent the same has become publicly available
other than as a result of a breach of this Agreement and (v) pursuant to and in
accordance with the provisions of SECTION 9.7(d).
9.14 Counterparts; Effectiveness. This Agreement may be executed in any
number of counterparts and by different parties hereto on separate counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument. This Agreement
shall become effective upon the execution of a counterpart hereof by each of the
parties hereto and receipt by the Lender and the Borrower of written or
telephonic notification of such execution and authorization of delivery thereof.
9.15 Disclosure of Information. The Borrower agrees and consents to the
Lender's disclosure of information relating to this transaction to Gold Sheets
and other similar bank trade publications. Such information will consist of deal
terms and other information customarily found in such publications.
53
9.16 Entire Agreement. THIS AGREEMENT AND THE OTHER DOCUMENTS AND
INSTRUMENTS EXECUTED AND DELIVERED IN CONNECTION HEREWITH (A) EMBODY THE ENTIRE
AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES HERETO AND THERETO RELATING TO
THE SUBJECT MATTER HEREOF AND THEREOF, (B) SUPERSEDE ANY AND ALL PRIOR
AGREEMENTS AND UNDERSTANDINGS OF SUCH PERSONS, ORAL OR WRITTEN, RELATING TO THE
SUBJECT MATTER HEREOF AND THEREOF INCLUDING, WITHOUT LIMITATION, THE COMMITMENT
LETTER FROM FIRST UNION TO THE BORROWER, DATED NOVEMBER 7, 2001, 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.
[Signatures contained on following pages]
54
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.
RADIAN GROUP INC.
By: ________________________________
Title: ________________________________
S-1
FIRST UNION NATIONAL BANK
By: ________________________________
Title: ________________________________
Instructions for wire transfers to the
Lender:
First Union National Bank
ABA Routing No. 053000219
Account Name: GL
Account Number: 01459168111011
Attention: Romonia Lester
Reference: Radian Group Inc.
Address for notices as a Lender:
First Union National Bank
Financial Institutions Group
1339 Chestnut Street, 3rd Floor
Philadelphia, Pennsylvania 19101-4819
Attention: Kimberly Shaffer
Telephone: (267) 321-7033
Telecopy: (267) 321-7102
Lending Office:
First Union National Bank
201 S. College Street, CP 17
Charlotte, North Carolina 28288-1183
Attention: Romonia Lester
Telephone: (704) 383-5364
Telecopy: (704) 383-7201
S-2
SCHEDULE 4.4
CONSENTS AND FILINGS
None.
SCHEDULE 4.5
LITIGATION
IN DECEMBER 2000, A COMPLAINT SEEKING CLASS ACTION STATUS ON BEHALF OF A
NATIONWIDE CLASS OF HOME MORTGAGE BORROWERS WAS FILED AGAINST RADIAN GUARANTY
INC. IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF NORTH
CAROLINA (GREENSBORO DIVISION). THE COMPLAINT ALLEGES THAT RADIAN GUARANTY INC.
VIOLATED SECTION 8 OF RESPA. THE COMPLAINT ASSERTS THAT THE PRICING OF POOL
INSURANCE, CAPTIVE REINSURANCE CONTRACT UNDERWRITING, PERFORMANCE NOTES AND
OTHER UNIDENTIFIED STRUCTURED TRANSACTIONS, SHOULD BE INTERPRETED AS IMPUTED
KICKBACKS MADE IN EXCHANGE FOR THE REFERRAL OF PRIMARY MORTGAGE INSURANCE
BUSINESS, WHICH ACCORDING TO THE COMPLAINT, IS A SETTLEMENT SERVICE UNDER RESPA.
THE COMPLAINT SEEKS INJUNCTIVE RELIEF AND DAMAGES OF 3X THE AMOUNT OF ANY
MORTGAGE INSURANCE PREMIUMS PAID BY PERSONS WHO WERE REFERRED TO RADIAN GUARANTY
INC. TO THE ALLEGED AGREEMENT OR UNDERSTANDING. THE PLAINTIFFS IN THE LAWSUIT
ARE REPRESENTED BY THE SAME GROUP OF PLAINTIFFS' ATTORNEYS WHO FILED SIMILAR
LAWSUITS AGAINST OTHER PROVIDERS OF PRIMARY MORTGAGE INSURANCE IN FEDERAL COURT
IN GEORGIA. THE GEORGIA COURT DISMISSED THOSE SUITS FOR A FAILURE TO STATE A
CLAIM. THREE OF THOSE LAWSUITS WERE SETTLED PRIOR TO APPEAL; TWO ARE CURRENTLY
ON APPEAL. RADIAN GUARANTY HAS RESPONDED TO THE COMPLAINT BY FILING A MOTION TO
DISMISS.
A SIMILAR ACTION FOCUSING ON POOL INSURANCE WAS FILED IN FEBRUARY 2001 IN
THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS.
SCHEDULE 4.6
TAXES
IN CONNECTION WITH A ROUTINE SALES TAX AUDIT OF RADIAN REINSURANCE INC. (F/K/A
ENHANCE REINSURANCE COMPANY) BY THE STATE OF NEW YORK, RADIAN REINSURANCE AGREED
TO EXTEND THE STATUTE OF LIMITATIONS RELATED TO THE PAYMENT OF SALES TAXES WHICH
ARE THE SUBJECT OF SUCH AUDIT, DUE TO DELAYS IN THE COMPLETION OF THE AUDIT AS A
RESULT OF THE EVENTS OF 9/11/01.
IN CONNECTION WITH A ROUTINE SALES TAX AUDIT OF RADIAN GUARANTY INC, RADIAN
GUARANTY AGREED TO EXTEND THE STATUTE OF LIMITATIONS RELATED TO THE PAYMENT OF
SALES TAXES WHICH ARE THE SUBJECT OF SUCH AUDIT.
{ADD DESCRIPTION OF AUDIT}
SCHEDULE 4.7
SUBSIDIARIES
(A) AMERIN GUARANTY CORPORATION
(i) 100% of the outstanding capital stock owned directly by Borrower
(ii) direct owner: 100% Radian Group Inc.
(B) AMERIN INVESTOR SERVICES CORPORATION
(i) 100% of the outstanding capital stock owned directly by Borrower
(ii) direct owner: 100% Radian Group Inc.
(C) AMERIN RE CORPORATION
(i) 100% of the outstanding capital stock owned directly by Borrower
(ii) direct owner: 100% Radian Group Inc.
(D) CMAC INVESTMENT MANAGEMENT CORP.
(i) 100% of the outstanding capital stock owned directly by Borrower
(ii) direct owner: 100% Radian Group Inc.
(E) ENHANCE FINANCIAL SERVICES GROUP INC.
(i) 100% of the outstanding capital stock owned directly by Borrower
(ii) direct owner: 100% Radian Group Inc.
(F) RADIAN GUARANTY INC.
(i) 100% of the outstanding capital stock owned by Borrower
(ii) direct owner: 100% Radian Group Inc.
(G) RADIAN MORTGAGE REINSURANCE COMPANY
(i) 100% of the outstanding capital stock owned directly by Borrower
(ii) direct owner: 100% Radian Group Inc.
(H) RADIANEXPRESS.COM INC.
(i) 100% of the outstanding capital stock owned directly by Borrower
(ii) direct owner: 100% Radian Group Inc.
(I) COMMONWEALTH MORTGAGE ASSURANCE COMPANY OF ARIZONA
(i) 100% of the outstanding capital stock indirectly owned by Borrower
(ii) direct owner: 100% Radian Guaranty Inc.
(J) COMMONWEALTH MORTGAGE ASSURANCE COMPANY OF TEXAS
(i) 100% of the outstanding capital stock indirectly owned by Borrower
(ii) direct owner: 100% Radian Guaranty Inc.
(K) RADIAN INSURANCE INC.
(i) 100% of the outstanding capital stock indirectly owned by Borrower
(ii) direct owner: 100% Radian Guaranty Inc.
(L) RADIAN SERVICES LLC
(i) 100% of the outstanding membership interests indirectly owned by
Borrower
(ii) direct owner: 100% Radian Guaranty Inc.
(M) ALEGIS GROUP INC.
(i) 100% of the outstanding common stock owned indirectly by Borrower
(ii) direct owner: 100% Enhance Financial Services Group Inc.
(N) ASSET GUARANTY UK REPRESENTATIVES LIMITED (to be renamed Radian UK
Representatives Limited)
(i) 100% of the outstanding common shares owned indirectly by Borrower
(ii) direct owner: 100% Enhance Financial Services Group Inc.
(O) CREDIT-BASED ASSET SERVICING AND SECURITIZATION, INC.
(i) 100% of the outstanding common stock owned indirectly by Borrower
(ii) direct owner: 100% Enhance Financial Services Group Inc.
(P) CREDIT2B.COM INC.
(i) 85.7% of the outstanding equity owned indirectly by Borrower
14.3% of the outstanding equity owned by former officers of
Credit2B.com Inc.
(ii) direct owners:
- 100% of the Voting Convertible Preferred Stock (which
represents 85.7% of the voting power and is convertible into
85.7% of the outstanding common stock):Enhance Financial
Services Group Inc.
- 100% of the outstanding common stock (which represents 14.3%
of the voting power) is owned by a group of former officers of
Credit2B.com none of whom have more that 4.6% of the voting
power
(please note that operations at Credit2B.com have been shut down since
3/01)
(Q) ENHANCE REINSURANCE (BERMUDA) LIMITED. (to be renamed Radian Reinsurance
(Bermuda) Limited)
(i) 100% of the outstanding common shares owned indirectly by Borrower
(ii) direct owner: 100% Enhance Financial Services Group Inc.
(R) ENHANCE C-BASS RESIDUAL FINANCE CORPORATION
(i) 100% of the outstanding common stock indirectly owned by Borrower
(ii) direct owner: 100% Enhance Financial Services Group Inc.
(S) ENHANCE CONSUMER SERVICES LLC
(i) 100% of the outstanding membership interests indirectly owned by
Borrower)
(ii) direct owner: 100% Enhance Financial Services Group Inc.
(T) LLS INC.
(i) 100% of the outstanding common stock owned indirectly by Borrower
(ii) direct owner: 100% Enhance Financial Services Group Inc.
(U) GUARANTY RISK SERVICES INC.
(i) 100% of the outstanding common stock owned indirectly by Borrower
(ii) direct owner: 100% Enhance Financial Services Group Inc.
(V) RADIAN ASSET ASSURANCE INC. (f/k/a Asset Guaranty Insurance Company)
(i) 100% of the outstanding common stock owned indirectly by Borrower
(ii) direct owner: 100% Enhance Financial Services Group Inc.
(W) RADIAN REINSURANCE INC (f/k/a Enhance Reinsurance Company)
(i) 100% of the outstanding common stock indirectly owned by Borrower
(ii) direct owner: 100% Enhance Financial Services Group Inc.
(X) SINGER ASSET FINANCE COMPANY, L.L.C.
(i) 100% of the outstanding membership interests indirectly owned by
Borrower
(ii) direct owner: 100% Enhance Financial Services Group Inc.
(Y) VAN-AMERICAN COMPANIES, INC.
(i) 95.8% of the outstanding common stock and 100% of the outstanding
preferred stock owned indirectly by Borrower
(ii) direct owners
- 95.8% of the common stock, 100% of the non-cumulative senior
preferred stock; 100% of the non-cumulative convertible
preferred stock owned by Radian Asset Assurance Inc.
- 4.2% of the common stock is owned by current and former
employees of Van-American Companies, Inc. In addition, certain
employees of Van-American Companies, Inc. own options to
purchase common stock of Van-American Companies, Inc. which if
fully exercised would not materially dilute the Borrower's
interest in Van-American Companies, Inc.
(Z) VAN-AMERICAN INSURANCE COMPANY, INC.
(i) interest owned indirectly by Borrower through its interest in 95.8%
of the outstanding common stock and 100% of the outstanding
preferred stock of Van-American Companies, Inc.
(ii) direct owner: 100% of the common stock (only class outstanding)
owned by Van American Companies, Inc.
(AA) VAN-AMERICAN INSURANCE AGENCY, INC.
(i) interest owned indirectly by Borrower through its interest in 95.8%
of the outstanding common stock and 100% of the outstanding
preferred stock of Van-American Companies, Inc.
(ii) direct owner: 100% of the common stock (only class outstanding)
owned by Van American Companies, Inc.
(BB) VAN-AMERICAN COAL SALES, INC.
(i) interest owned indirectly by Borrower through its interest in 95.8%
of the outstanding common stock and 100% of the outstanding
preferred stock of Van-American Companies, Inc.
(ii) direct owner: 100% of the common stock (only class outstanding)
owned by Van-American Insurance Company, Inc.
(CC) VAN-AMERICAN BUSINESS SERVICES, INC.
(i) interest owned indirectly by Borrower through its interest in 95.8%
of the outstanding common stock and 100% of the outstanding
preferred stock of Van-American Companies, Inc.
(ii) direct owner: 100% of the common stock (only class outstanding)
owned by Van-American Insurance Company, Inc.
(DD) RESIDUAL INTEREST INVESTMENTS LP
(i) 100% of the outstanding general and limited partnership interests
indirectly owned by Borrower
(ii) direct owners: Enhance C-BASS Residual Finance Corporation 0.8%
general partnership interest; Enhance Financial Services Group Inc.
99.2% limited partnership interest.
(EE) AG INTERMEDIARIES, INC.
(i) 85.7% of the outstanding common stock owned indirectly by Borrower
(ii) direct owner: 100% Credit2B.com Inc.
(FF) ALEGIS CORPORATION
(i) 100% of the outstanding common stock owned indirectly by Borrower
(ii) direct owner: 100% Alegis Group Inc.
SCHEDULE 4.18
MATERIAL CONTRACTS
1. The contents of Schedule 7.2 are incorporated herein by reference.
2. Registration Rights Agreement, made and entered into as of January 11,
2002, by and among Radian Group Inc., Banc of America Securities LLC and
Lehman Brothers Inc, in relation to the Convertible Debentures.
3. Credit Agreement between Radian Asset Assurance Inc. (f/k/a Asset Guaranty
Insurance Company) and Deutsche Bank AG, dated as of February 27, 2001 and
the related Promissory Note and Pledge and Security Agreement executed in
connection therewith. This is one of the two soft capital facilities
contemplated by Section 7.2(ix) providing $25 million of soft capital.
4. Credit Agreement among Radian Reinsurance Inc. (f/k/a Enhance Reinsurance
Company), Deutsche Bank AG, as agent and other banks from time to time a
party thereto dated as of November 7, 2001 and the related Promissory
Notes and Pledge and Security Agreement executed in connection therewith.
This is one of the two soft capital facilities contemplated by Section
7.2(ix) providing $90 million of soft capital.
SCHEDULE 4.19
REINSURANCE AGREEMENTS
None.
SCHEDULE 7.2
INDEBTEDNESS
1. Indenture dated as of March 5, 1993 between Enhance Financial Services Group
Inc. and The Chase Manhattan Bank, as Trustee, and $75 million principal amount
of 6 3/4% Debentures due 2003 issued pursuant thereto.
2. Indenture, dated as of May 29, 2001 between Radian Group Inc. and First Union
National Bank, as Trustee and $250 million principal amount of 7.75% Debentures
Due June 1, 2011 issued pursuant thereto.
3. Indenture, dated as of January 11, 2002, between Radian Group Inc., and First
Union National Bank, as Trustee; and $200 million principal amount of 2.25%
Senior Convertible Debentures Due January 1, 2021 issued pursuant thereto (the
"Convertible Debentures").
4. Guaranty of Radian Group Inc. to BofA, dated as of December 28, 2001,
guaranteeing up to $25 million of the obligations of Sherman Financial Group
LLC, an affiliate of the Company. ("Sherman Financial"), to BofA pursuant to a
Credit Agreement, dated as of May 27, 1999, as amended to date including without
limitation the Fourth Amendment to Credit Agreement, dated as of December 28,
2001, between BofA and Sherman Financial.
SCHEDULE 7.3
LIENS
ENHANCE REINSURANCE COMPANY
Pitney Bowes Credit UCC-1 NY - Department of State 76547 4/16/97 Lessor/Lessee:
Corporation All equipment relating to
leased dated 1/31/97
Lottery Receivables UCC-1 NY - Department of State 203445 10/22/01 Debtor's right to receive
Company One, LLC payments from the CO State
Lottery from 2001 - 2024,
specifically the Sales
Agreements
Deutsche Bank AG New UCC-1 NY - Department of State 220273 11/13/01 DEBTOR LISTED AS ENHANCE
York Branch REINSUANCE COMPANY
Comprehensive
Deutsche Bank AG New UCC Amendment NY - Department of State 234594 11/30/01 Changing name of Debtor to
York Branch read: Enhance Reinsurance
Company
In addition, liens in form and substance similar to the UCC-1 and amendment
thereto filed by Deutsche Bank AG New York Branch (Nos. 220273 and 234594)
arising from and related to the Credit facility for Radian Reinsurance Inc.
(formerly known as Enhance Reinsurance Company) as set forth on Schedule 4.18,
have or will be filed shortly by Deutsche Bank for Radian Asset Assurance Inc.
and arising from and relating to the Credit facility for Radian Asset Assurance
Inc. as set forth on Schedule 4.18.
SCHEDULE 7.5
INVESTMENTS
None.
SCHEDULE 7.7
TRANSACTIONS WITH AFFILIATES
None.