EXHIBIT 99(g)
CGU ACQUISITION CO.
$1,000,000,000 CREDIT FACILITIES
SUMMARY OF TERMS AND CONDITIONS
September 24, 2000
White Mountains Insurance Group, Ltd., a company incorporated
in Bermuda ("WHITE MOUNTAINS"), together with the investors previously
identified to the Arranger (the "INVESTOR GROUP"), will form a holding company
(the "PARENT"), which will in turn form an acquisition corporation ("ACQUISITION
CO.", or the "BORROWER"), which will then acquire (the "ACQUISITION") the U.S.
property and casualty insurance business (the "ACQUIRED ASSETS") of CGU plc (the
"SELLER"). The Acquisition will be consummated pursuant to the Stock Purchase
Agreement, dated as of September 24, 2000, among CGU International Holdings
Luxembourg S.A., a Luxembourg corporation, CGU Holdings LLC, a Delaware limited
liability company, Seller and White Mountains (the "STOCK PURCHASE AGREEMENT").
The Acquisition will be accomplished as described in Annex II to this Summary of
Terms and Conditions; certain terms defined in such Annex II are used herein
with the meanings given therein.
In that connection, credit facilities in an aggregate
principal amount of $1,000,000,000 are being established, as described below.
I. PARTIES
Borrower: Acquisition Co. (the "BORROWER").
Guarantors: The Parent and each subsidiary of the Borrower other than
any insurance company subsidiary (the "GUARANTORS"; the
Borrower and the Guarantors, collectively, the "CREDIT
PARTIES").
Sole Advisor, Sole
Arranger and Sole
Book Manager: Lehman Brothers Inc. (in such capacity, the "ARRANGER").
Syndication Agent: Lehman Commercial Paper Inc. (in such capacity, the
"SYNDICATION AGENT").
Administrative
Agent: Lehman Commercial Paper Inc. (in such capacity, the
"ADMINISTRATIVE AGENT").
Lenders: A syndicate of banks, financial institutions and other
entities arranged by the Arranger (collectively, the
"LENDERS").
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II. TYPES AND AMOUNTS OF CREDIT FACILITIES
1. TERM LOAN FACILITY
Type and Amount of
Facility: Five-year term loan facility (the "TERM LOAN FACILITY") in an
aggregate principal amount equal to $700,000,000 (the loans
thereunder, the "TERM LOANS"). The Term Loans shall be
repayable in installments in the amounts set forth below for
each year following the Closing Date (as defined below):
YEAR AMOUNT
Year 1 $ 95,000,000
Year 2 $110,000,000
Year 3 $120,000,000
Year 4 $180,000,000
Year 5 $195,000,000
The foregoing amounts payable in each year will be payable in
equal quarterly installments during such year; PROVIDED, that
(i) no principal installment shall be required to be paid
before the later of December 31, 2001 and the first
anniversary of the Closing Date and (ii) if, having used its
best efforts to obtain regulatory approvals required to permit
quarterly payment of dividends by its insurance company
subsidiaries, the Borrower does not obtain such approvals for
payments prior to the second anniversary of the Closing Date,
principal payments in respect of the Term Loans prior to the
second anniversary of the Closing Date will be required to be
made once per year rather than quarterly.
The Arranger, in its sole discretion (after consultation with
the Borrower), may determine that the Term Loans shall
comprise two separate tranches (the Term Loans comprising one
tranche with a final maturity on the fifth anniversary of the
Closing Date, the "TRANCHE A TERM LOANS" and the Term Loans
comprising the other tranche with a final maturity on the
sixth anniversary of the Closing Date, the "TRANCHE B TERM
LOANS"). The aggregate amount of Term Loans constituting
Tranche A Term Loans and the Tranche B Term Loans,
respectively, shall be determined by the Arranger in its sole
discretion after consultation with the Borrower.
Availability: The Term Loans shall be made in a single drawing on the
Closing Date.
Purpose: The proceeds of the Term Loans shall be used to finance the
Acquisition, to repay certain existing indebtedness of CGU and
its subsidiaries, to pay related fees and expenses and for
general corporate purposes.
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2. REVOLVING CREDIT FACILITY
Type and Amount of
Facility: Five-year revolving credit facility (the "REVOLVING CREDIT
FACILITY"; together with the Term Loan Facility, the "CREDIT
FACILITIES") in the amount of $300,000,000 (the loans
thereunder, the "REVOLVING CREDIT LOANS").
Availability: The Revolving Credit Facility shall be available on a
revolving basis during the period commencing on the Closing
Date and ending on the fifth anniversary thereof (the
"REVOLVING CREDIT TERMINATION DATE").
Letters of A portion of the Revolving Credit Facility not in excess of
Credit $25,000,000 shall be available for the issuance of letters of
credit (the "LETTERS OF CREDIT") by a Lender to be selected in
the syndication process (in such capacity, the "ISSUING
LENDER"). No Letter of Credit shall have an expiration date
after the earlier of (a) one year after the date of issuance
and (b) five business days prior to the Revolving Credit
Termination Date, PROVIDED that any Letter of Credit with a
one-year tenor may provide for the automatic renewal thereof
(in the absence of notice to the contrary from the Issuing
Lender) for additional one-year periods (which shall in no
event extend beyond the date referred to in clause (b) above).
Drawings under any Letter of Credit shall be reimbursed by the
Borrower (whether with its own funds or with the proceeds of
Revolving Credit Loans) on the next business day. To the
extent that the Borrower does not so reimburse the Issuing
Lender, the Lenders under the Revolving Credit Facility shall
be irrevocably and unconditionally obligated to reimburse the
Issuing Lender on a PRO RATA basis.
Swing Line Loans: A portion of the Revolving Credit Facility not in excess of
$10,000,000 shall be available for swing line loans (the
"SWING LINE LOANS") from a Lender to be selected in the
syndication process (in such capacity, the "SWING LINE
LENDER") on same-day notice. Any Swing Line Loans will reduce
availability under the Revolving Credit Facility on a
dollar-for-dollar basis. Each Lender under the Revolving
Credit Facility shall acquire, under certain circumstances, an
irrevocable and unconditional PRO RATA participation in each
Swing Line Loan.
Maturity: The Revolving Credit Termination Date.
Purpose: The proceeds of the Revolving Credit Loans shall be used to
finance the Acquisition, to repay certain existing
indebtedness of CGU and its subsidiaries, to pay related fees
and expenses and for working capital and general corporate
purposes of the Borrower and its subsidiaries in the ordinary
course of business.
III. CERTAIN PAYMENT
PROVISIONS
Fees and Interest
Rates: As set forth on Annex I.
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Optional Prepayments
and Commitment
Reductions: Loans may be prepaid and commitments may be reduced by the
Borrower in minimum amounts to be agreed upon. Optional
prepayments of the Term Loans shall be applied, FIRST, to
the next installment thereof due after the date of such
prepayment, and, SECOND, to the remaining installments
thereof ratably in accordance with the then outstanding
amounts thereof and may not be reborrowed.
Mandatory Prepayments
and Commitment
Reductions: The following amounts shall be applied to prepay the Term
Loans and reduce the Revolving Credit Facility:
(a) 50% of the net proceeds, above a threshold amount to be
agreed upon, of any sale or issuance of equity by the Borrower
or any of its non-insurance company subsidiaries (with
exceptions to be agreed upon, including exceptions permitting
proceeds of equity to be used to prepay the Seller Note and to
repay the $96,000,000 aggregate principal amount of medium
term notes due 2003 (the "MEDIUM TERM NOTES"), which were
issued by a predecessor to White Mountains and will become an
obligation of the Borrower in connection with the
Acquisition); and
(b) 100% of the net proceeds, above a threshold amount to be
agreed upon, of any sale or other disposition by assets by the
Borrower or any of its non-insurance company subsidiaries
(with exceptions to be agreed upon, including exceptions
permitting disposition of portfolio investments and the
reinvestment of the proceeds thereof in other portfolio
investments).
All such amounts shall be applied, FIRST, to the prepayment of
the Term Loans and, SECOND, to the permanent reduction of the
Revolving Credit Facility; PROVIDED, that the Revolving Credit
Facility shall not be reduced to less than $150,000,000
pursuant to the foregoing mandatory prepayment and commitment
reduction provisions. Each such prepayment of the Term Loans
made with the proceeds of asset sales shall be applied to the
installments thereof ratably in accordance with the then
outstanding amounts thereof and may not be reborrowed; and
each other such prepayment of Term Loans shall be applied,
FIRST, to the next installment thereof due after the date of
such prepayment, and, SECOND, to the remaining installments
thereof ratably in accordance with the then outstanding
amounts thereof and may not be reborrowed. The Revolving
Credit Loans shall be prepaid and the Letters of Credit shall
be cash collateralized or replaced to the extent such
extensions of credit exceed the amount of the Revolving Credit
Facility.
IV. COLLATERAL The obligations of the Borrower and each Guarantor in
respect of the Credit Facilities shall be secured by a
perfected first priority security interest in the
capital stock of each of its subsidiaries (including the
capital stock of the Borrower, which will be pledged by
the Parent) and substantially all of its other
intangible assets (it being understood that the Parent
and its subsidiaries (other than insurance company
subsidiaries) will not have any material tangible
assets. Not more than 65% of the capital stock of any
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foreign subsidiaries will be required to be pledged.
V. CERTAIN CONDITIONS
Initial
Conditions: The availability of the Credit Facilities shall be
conditioned upon satisfaction of, among other things, the
following conditions precedent (the date upon which all such
conditions precedent shall be satisfied, the "CLOSING DATE")
on or before March 31, 2001 (which date shall be extended to
June 30, 2001 if the only condition to the consummation of the
Acquisition as set forth in the Stock Purchase Agreement that
has not been met on March 31, 2001 is the receipt of all
required governmental approvals) (with references to the
Borrower and its subsidiaries in this paragraph being deemed
to refer to and include the Acquired Assets after giving
effect to the Acquisition):
(a) Each Credit Party shall have executed
and delivered customary definitive financing
documentation with respect to the Credit
Facilities, which shall be reasonably
satisfactory to all parties thereto and
shall reflect the terms and conditions set
forth herein and such other terms and
conditions, consistent with the terms and
conditions set forth herein, as shall be
reasonably acceptable to all parties thereto
(the "CREDIT DOCUMENTATION").
(b) White Mountains shall have received
commitments from (i) the Investor Group to
purchase for cash an amount consistent with
the Sources and Uses Table attached as Annex
I-B (the "SOURCES AND USES Table") of equity
securities of the Parent or White Mountains
and (ii) Berkshire Hathaway to purchase no
less than an amount consistent with the
Sources and Uses Table of convertible
preferred stock of White Mountains. The
Parent shall have received at least an
amount consistent with the Sources and Uses
Table in cash and marketable securities from
the issuance of its equity securities to
White Mountains and/or the Investor Group.
The Borrower shall have received at least an
amount consistent with the Sources and Uses
Table in cash and marketable securities from
the issuance of its equity securities to the
Parent. CGU shall have received as dividends
from its subsidiaries cash in an amount
consistent with the Sources and Uses Table,
and such cash shall be available for use to
pay a portion of the purchase price of the
Acquisition.
(c) The Acquisition shall have been
consummated in accordance with the Stock
Purchase Agreement (without any material
waiver or other modification of any material
provision thereof unless such waiver or
other modification has been approved by the
Administrative Agent), and as described in
Annex II hereto. After giving effect to the
consummation of the Acquisition, the
Borrower shall have no material indebtedness
other than indebtedness under the Credit
Facilities, the Seller Note, the Medium Term
Notes, approximately $30,000,000 of existing
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indebtedness of CGU and indebtedness of
Folksamerica in respect of a promissory note
in the original principal amount of
approximately $21,000,000 (which is
currently carried on the books of
Folksamerica at an outstanding principal
amount of approximately $2,000,000).
(d) The Lenders, the Administrative Agent
and the Arranger shall have received all
fees required to be paid on or before the
Closing Date, and the Administrative Agent
shall have received reimbursement of all
out-of-pocket expenses of the Arranger and
the Administrative Agent payable by the
Borrower in connection with the Credit
Facilities.
(e) All governmental and third party
approvals required for the financing
contemplated hereby and the creation of the
security interests contemplated hereby, and,
to the extent required by the Stock Purchase
Agreement, all governmental and third party
approvals required for the Acquisition and
the continuing operations of the Borrower
and its subsidiaries, shall have been
obtained and be in full force and effect,
and all applicable waiting periods shall
have expired without any action being taken
or threatened by any competent authority
which would restrain, prevent or otherwise
impose materially adverse conditions on the
Acquisition or the financing thereof.
(f) The Lenders shall have received (i)
audited consolidated financial statements of
White Mountains and CGU for fiscal years
1998 and 1999 (and, if the Closing Date
occurs after audited financial statements of
White Mountain and CGU for fiscal year 2000
are available, such financial statements)
and (ii) unaudited interim consolidated
financial statements of White Mountains and
CGU for each fiscal quarterly period ended
subsequent to the date of the latest
financial statements delivered pursuant to
clause (i) of this paragraph as to which
such financial statements are available. All
such financial statements shall be in
reasonable detail, shall be prepared in
accordance with generally acceptable
accounting principles and shall be certified
by an appropriate financial officer or
accountants, as applicable.
(g) The Lenders shall have received a PRO
FORMA consolidated balance sheet of the
Borrower as at the date of the most recent
consolidated balance sheet delivered
pursuant to paragraph (f) above, adjusted to
give effect to the consummation of the
Acquisition and the financings and other
transactions contemplated hereby as if such
transactions had occurred on such date. Such
PRO FORMA consolidated balance sheet shall
be prepared in reasonable detail and in
accordance with customary standards.
(h) The Lenders shall have received (i)
unaudited
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consolidating financial statements of CGU
for fiscal years 1998 and 1999, (ii)
unaudited interim consolidating financial
statements of CGU for each fiscal quarterly
period ended subsequent to the date of the
latest financial statements delivered
pursuant to clause (i) of this paragraph as
to which such financial statements are
available and (iii) monthly PRO FORMA
financial statements of the Acquired Assets
for each monthly period ending from and
after May 31, 2000 and prior to the Closing
Date. All such financial statements shall be
in reasonable detail, shall be prepared in
accordance with generally acceptable
accounting principles and shall be certified
by an appropriate financial officer or
accountants, as applicable.
(i) The Lenders shall have received a
business plan for fiscal years 2000-2006 and
a written analysis of the business and
prospects of the Borrower and its
subsidiaries for the period from the Closing
Date through the final maturity of the Term
Loans. Such business plan and analysis shall
be prepared in reasonable detail and in
accordance with customary standards.
(j) All material insurance company
subsidiaries of the Borrower shall have
received ratings from A.M. Best of at least
A-.
(k) The Lenders shall have received the
results of a recent lien search in each
relevant jurisdiction with respect to the
Credit Parties, and such search shall reveal
no liens on any of the assets of the Credit
Parties except for liens permitted by the
Credit Documentation or liens to be
discharged on or prior to the Closing Date
pursuant to documentation satisfactory to
the Administrative Agent. It is understood
that mortgages securing approximately
$30,000,000 of existing debt of insurance
company subsidiaries shall be permitted.
(l) Insurance company subsidiaries of CGU
shall have completed a reinsurance
transaction with Berkshire Hathaway (as
described in the letter, dated July 18,
2000, from Ajit Jain of Berkshire Hathaway
Group to Ray Barrette of White Mountains,
together with the Reinsurance Agreement
Terms attached to such letter) for not less
than $2,500,000,000 (relating to certain
discontinued operations).
(m) The aggregate statutory net worth of the
Borrower's insurance company subsidiaries
shall be not less than $2,300,000,000.
(n) The Lenders shall have received such
legal opinions, documents and other
instruments as are customary for
transactions of this type or as they may
reasonably request.
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On-Going Conditions: The making of each extension of credit shall be
conditioned upon (a) the accuracy of all representations
and warranties in the Credit Documentation (including,
without limitation, the material adverse change and
litigation representations) and (b) there being no
default or event of default in existence at the time of,
or after giving effect to the making of, such extension
of credit.
As used herein and in the Credit Documentation, a
"material adverse change" shall mean:
(i) with respect to the "material adverse
change" representation and warranty to be made on
the Closing Date, any event or development that has
had or would reasonably be expected to have a
material adverse effect on (a) the business,
operations, property or financial condition of the
Borrower and its subsidiaries, taken as a whole,
the Acquired Assets or White Mountains and its
subsidiaries, taken as a whole, or (b) the validity
or enforceability of any of the Credit
Documentation or the rights and remedies of the
Administrative Agent and the Lenders thereunder,
other than any such effect resulting from (1)
changes in general economic or securities or
financial market conditions (including changes in
interest rates), (2) any write-off of assets or
establishment of liabilities identified in Schedule
1.1(a) of the Disclosure Schedule to the Stock
Purchase Agreement, in each case in amounts
materially consistent with the amounts reflected in
the Projections provided by White Mountains to LBI
and LCPI prior to the date hereof or (3) any
ratings downgrade of any material insurance company
subsidiary of the Borrower by A.M. Best to a level
not below A-; and
(ii) with respect to the "material adverse
change" representation and warranty to be made at
any time after the Closing Date, any event,
development or circumstance that has had or could
reasonably be expected to have a material adverse
effect on (a) the Acquisition or the other
transactions contemplated hereby, (b) the business,
assets, property or financial condition of the
Borrower and its subsidiaries taken as a whole, or
(c) the validity or enforceability of any of the
Credit Documentation or the rights and remedies of
the Administrative Agent and the Lenders
thereunder.
VI. CERTAIN DOCUMENTATION
MATTERS The Credit Documentation shall contain
representations, warranties, covenants and
events of default customary for financings
of this type (in each case applicable to
each of the Credit Parties, as appropriate),
including, without limitation:
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Representations and
Warranties: Financial statements (including pro forma
financial statements and statutory
accounts); absence of undisclosed
liabilities; no material adverse change;
corporate existence; compliance with law;
corporate power and authority;
enforceability of Credit Documentation; no
conflict with law or contractual
obligations; no material litigation; no
default; ownership of property; liens;
intellectual property; no burdensome
restrictions; taxes; Federal Reserve
regulations; ERISA; Investment Company Act;
subsidiaries; environmental matters;
solvency; insurance regulatory matters;
accuracy of disclosure; and creation and
perfection of security interests.
Affirmative Covenants: Delivery of financial statements, reports,
statutory accounts, accountants' letters,
projections, officers' certificates and
other information reasonably requested by
the Lenders; payment of other obligations;
continuation of business and maintenance of
existence and material rights and
privileges; compliance with laws and
material contractual obligations;
maintenance of property and insurance;
maintenance of books and records; right of
the Lenders (subject to customary
restrictions and standards) to inspect
property and books and records; notices of
defaults, litigation and other material
events; compliance with environmental laws;
agreement to obtain within 150 days after
the Closing Date interest rate protection
for at least 50% of the Term Loan Facility
for a period of at least three years on
terms and conditions satisfactory to the
Administrative Agent; and agreement to
either convert the Seller Note to common
stock of the Parent or to refinance the
Seller Note with the proceeds of common
stock of the Parent or White Mountains or
subordinated debt maturing after the Credit
Facilities and having other terms and
conditions reasonably satisfactory to the
Lenders.
Financial Covenants: Financial covenants (including, without
limitation, minimum interest and fixed
charge coverage, maximum leverage, minimum
net worth, and minimum statutory surplus and
minimum risk based capital ratio for each
material insurance company subsidiary). The
terms of the foregoing financial covenants
are set forth in detail in Annex III hereto.
Negative Covenants: Limitations on: indebtedness (including
preferred stock of subsidiaries); liens;
guarantee obligations; mergers,
consolidations, liquidations and
dissolutions; sales of assets; leases;
dividends and other payments in respect of
capital stock (which will permit the
Borrower to pay annual dividends and other
restricted payments to the Parent, and the
Parent to pay such amounts to its
shareholders, in each case in an aggregate
amount not exceeding $60,000,000, subject to
compliance with covenants and absence of
default under Credit Documentation, it being
understood that the foregoing $60,000,000
amount is based upon the assumptions that
the
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investment of Berkshire Hathaway in White
Mountains will be in the amount of
$300,000,000 and will require payment of
dividends at the rate of 13% per annum, and
such $60,000,000 amount will be subject to
reduction to an amount to be agreed upon if
either the amount of the Berkshire Hathaway
investment or the required dividend rate is
reduced); investments, loans and advances;
optional payments and modifications of
subordinated and other debt instruments;
transactions with affiliates; sale and
leasebacks; changes in fiscal year; negative
pledge clauses; and changes in lines of
business.
Events of Default: Nonpayment of principal when due; nonpayment
of interest, fees or other amounts after a
grace period to be agreed upon; material
inaccuracy of representations and
warranties; violation of covenants (subject,
in the case of certain affirmative
covenants, to a grace period to be agreed
upon); cross-default to other material debt
instruments; bankruptcy and insolvency
events; certain ERISA events; material
judgments; actual or asserted invalidity of
any guarantee or security document,
subordination provisions or security
interest; and a change of control (as
defined below).
Change of Control: (a) Prior to any initial public offering of
the Parent's capital stock, White Mountains
ceases to own, directly or indirectly, at
least 50% of all of the outstanding capital
stock of the Parent, and (b) after any
initial public offering of the Parent's
capital stock, (i) White Mountains ceases to
own, directly or indirectly, at least 25% of
all of the outstanding capital stock of the
Parent, or (ii) any person or group other
than White Mountains owns a greater
percentage than White Mountains owns of all
of the outstanding capital stock of the
Parent or (iii) a majority of the directors
of the Parent ceases to be persons appointed
or approved by White Mountains.
Voting: Amendments and waivers with respect to the
Credit Documentation shall require the
approval of Lenders holding not less than a
majority of the aggregate amount of the
outstanding Loans and unused commitments
under the Credit Facilities, except that (a)
the consent of each Lender directly affected
thereby shall be required with respect to
(i) reductions in the amount or extensions
of the scheduled date of amortization or
final maturity of any Loan, (ii) reductions
in the rate of interest or any fee or
extensions of any due date thereof, (iii)
increases in the amount or extensions of the
expiry date of any Lender's commitment and
(iv) modifications to the pro rata
provisions of the Credit Documentation and
(b) the consent of 100% of the Lenders shall
be required with respect to (i)
modifications to any of the voting
percentages and (ii) releases of all or
substantially all of the Guarantors or all
or substantially all of the collateral.
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Assignments
and Participations: The Lenders shall be permitted to assign and
sell participations in their Loans and
commitments, subject, in the case of
assignments (other than assignments (i) by
the Administrative Agent, (ii) to another
Lender or to an affiliate of a Lender or
(iii) of funded Term Loans), to the consent
of the Administrative Agent and the Borrower
and, in the case of any assignment of
commitments under the Revolving Credit
Facility, the Issuing Lender and, the Swing
Line Lender (which consent in each case
shall not be unreasonably withheld). Non-pro
rata assignments shall be permitted. In the
case of partial assignments (other than to
another Lender or to an affiliate of a
Lender), the minimum assignment amount shall
be $5,000,000, and, after giving effect
thereto, the assigning Lender (if it shall
retain any commitments or Loans) shall have
commitments and Loans aggregating at least
$5,000,000, in each case unless otherwise
agreed by the Borrower and the
Administrative Agent. Participants shall
have the same benefits as the Lenders with
respect to yield protection and increased
cost provisions, subject to customary
limitations. Voting rights of participants
shall be limited to those matters with
respect to which the affirmative vote of the
Lender from which it purchased its
participation would be required as described
under "Voting" above. Pledges of Loans in
accordance with applicable law shall be
permitted without restriction. Promissory
notes shall be issued under the Credit
Facilities only upon request.
Yield Protection: The Credit Documentation shall contain
customary provisions (a) protecting the
Lenders against increased costs or loss of
yield resulting from changes in reserve,
tax, capital adequacy and other requirements
of law and from the imposition of or changes
in withholding or other taxes and (b)
indemnifying the Lenders for "breakage
costs" incurred in connection with, among
other things, any prepayment of a Eurodollar
Loan (as defined in Annex I) on a day other
than the last day of an interest period with
respect thereto.
Expenses and
Indemnification: The Borrower shall pay (a) all reasonable
out-of-pocket expenses of the Administrative
Agent and the Arranger associated with the
syndication of the Credit Facilities and the
preparation, execution, delivery and
administration of the Credit Documentation
and any amendment or waiver with respect
thereto (including the reasonable fees,
disbursements and other charges of counsel
and the charges of Intralinks) and (b) all
out-of-pocket expenses of the Administrative
Agent and the Lenders (including the fees,
disbursements and other charges of counsel)
in connection with the enforcement of the
Credit Documentation.
The Administrative Agent, the Arranger and
the Lenders (and their affiliates and their
respective officers, directors, employees,
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advisors and agents) will have no liability
for, and will be indemnified and held
harmless against, any loss, liability, cost
or expense incurred in respect of the
financing contemplated hereby or the use or
the proposed use of proceeds thereof (except
to the extent resulting from the gross
negligence or willful misconduct of the
indemnified party).
Governing Law and Forum: State of New York.
Counsel to the
Administrative Agent
and the Arranger: Simpson Thacher & Bartlett.
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ANNEX I
INTEREST AND CERTAIN FEES
Interest Rate Options: The Borrower may elect that the Loans
comprising each borrowing bear interest at a
rate per annum equal to:
the Base Rate plus the Applicable
Margin; or
the Eurodollar Rate plus the
Applicable Margin.
PROVIDED, that all Swing Line Loans shall
bear interest based upon the Base Rate.
As used herein:
"BASE RATE" means the highest of (i) the
rate of interest publicly announced by
Deutsche Bank, New York Office as its prime
rate in effect at its principal office in
New York City (the "PRIME RATE"), (ii) the
secondary market rate for three-month
certificates of deposit (adjusted for
statutory reserve requirements) PLUS 1% and
(iii) the federal funds effective rate from
time to time PLUS 0.5%.
"APPLICABLE MARGIN" means, initially, the
rates per annum determined in accordance
with the Pricing Grid attached hereto as
Annex I-A (the "PRICING GRID") based upon
the Level applicable to the Borrower on the
Closing Date.
"EURODOLLAR RATE" means the rate (adjusted
for statutory reserve requirements for
eurocurrency liabilities, as and if
incurred) at which eurodollar deposits for
one, two, three or six months (as selected
by the Borrower) are offered in the
interbank eurodollar market.
Interest Payment Dates: In the case of Loans bearing interest based
upon the Base Rate ("BASE RATE LOANS"),
quarterly in arrears.
In the case of Loans bearing interest based
upon the Eurodollar Rate ("EURODOLLAR
LOANS"), on the last day of each relevant
interest period and, in the case of any
interest period longer than three months, on
each successive date three months after the
first day of such interest period.
Commitment Fees: The Borrower shall pay a commitment fee
calculated at the rate of .375% per annum on
the average daily unused portion of the
Revolving Credit Facility, payable quarterly
in arrears; the commitment fee rate will be
subject to reduction based upon performance
criteria to be agreed upon. Swing Line Loans
shall, for purposes of the commitment fee
calculations only, not be
2
deemed to be a utilization of the Revolving
Credit Facility.
Letter of Credit Fees: The Borrower shall pay a commission on all
outstanding Letters of Credit at a per annum
rate equal to the Applicable Margin then in
effect with respect to Revolving Credit
Loans that are Eurodollar Loans on the face
amount of each such Letter of Credit. Such
commission shall be shared ratably among the
Lenders participating in the Revolving
Credit Facility and shall be payable
quarterly in arrears.
In addition to letter of credit commission,
a fronting fee calculated at a rate per
annum to be agreed upon by the Borrower and
the Issuing Bank on the face amount of each
Letter of Credit shall be payable quarterly
in arrears to the Issuing Lender for its own
account. In addition, customary
administrative, issuance, amendment, payment
and negotiation charges shall be payable to
the Issuing Lender for its own account.
Default Rate: At any time when the Borrower is in default
in the payment of any amount of principal
due under the Credit Facilities, such amount
shall bear interest at 2% above the rate
otherwise applicable thereto. Overdue
interest, fees and other amounts shall bear
interest at 2% above the rate applicable to
Base Rate Loans.
Rate and Fee Basis: All per annum rates shall be calculated on
the basis of a year of 360 days (or 365/366
days, in the case of Base Rate Loans the
interest rate payable on which is then based
on the Prime Rate) for actual days elapsed.
Annex I-A
PRICING GRID
S&P/MOODY'S APPLICABLE MARGIN - APPLICABLE MARGIN -
PRICING LEVEL RATING EURODOLLAR LOANS BASE RATE LOANS
Level 1 >= BBB- AND 1.75% .75%
>= Baa3
Level 2 >= BBB- OR 2.00% 1.00%
> Baa3, and
Level 1 does
not apply
Level 3
[less than] BBB- 2.25% 1.25%
AND [less than]
Baa3
Notwithstanding the foregoing Pricing Grid, the Credit
Documentation will provide that if the senior, unsecured, non-credit enhanced
debt of the Borrower receives a rating of BBB or higher from Standard & Poor's
Ratings Group and a rating of Baa2 or higher from Moody's Investors Service,
Inc., the Applicable Margins applicable to Revolving Credit Loans and Tranche A
Term Loans shall be 1.50% for such Loans that are Eurodollar Loans and .50% for
such Loans that are Base Rate Loans; and such change in the Applicable Margins
shall become effective on the later of (i) the date on which the Borrower shall
have obtained both of such ratings and (ii) the first anniversary of the Closing
Date.
Annex II
DESCRIPTION OF ACQUISITION
White Mountains Insurance Group, Ltd., a company incorporated
in Bermuda ("WHITE MOUNTAINS"), together with investors previously identified
to the Arranger (the "INVESTOR GROUP"), will form a holding company (the
"PARENT"), which will in turn form an acquisition corporation ("ACQUISITION
CO.", or the "BORROWER"), which will then acquire (the "ACQUISITION") the
U.S. property and casualty insurance business (the "ACQUIRED ASSETS") of CGU
plc (the "SELLER"). The Acquisition will be consummated pursuant to the Stock
Purchase Agreement, dated as of September 24, 2000, among CGU International
Holdings Luxembourg S.A., a Luxembourg corporation, CGU Holdings LLC, a
Delaware limited liability company, Seller and White Mountains (the "STOCK
PURCHASE AGREEMENT"). The Acquisition will be accomplished through the
acquisition by the Borrower from the Seller of 100% of the equity interests
of CGU Corporation, a Delaware corporation ("CGU").
Prior to or concurrently with the Acquisition, the following
transactions (the "PRE- CLOSING TRANSACTIONS") will occur:
(i) White Mountains will contribute to the Parent, which
will in turn contribute to Acquisition Co., all of the outstanding shares
of Folksamerica Holding Company, Inc., a New York company
("FOLKSAMERICA"), and White Mountains' interests in certain other
insurance assets (collectively with Folksamerica, the "PARENT INSURANCE
ASSETS");
(ii) CGU will exchange and/or contribute all of the shares
of Commercial Union Insurance Company, a Massachusetts company, The
Northern Assurance Company of America, a Massachusetts company, The
Employers' Fire Insurance Company, a Massachusetts company, American
Employers' Insurance Company, a Massachusetts company and Potomac
Insurance Company of Illinois, an Illinois company, which are all
first-tier subsidiaries of CGU, for (x) all of the shares of Pilot
Insurance Company, a Canadian company ("PILOT"), a second-tier subsidiary
of CGU, and (y) cash (the combined value of shares and cash to total an
amount consistent with the Sources and Uses Table) (the Pilot shares are
currently held by CGU Insurance Company, a Pennsylvania company
("CGUIC"), CGU Insurance Company of New Jersey, a New Jersey company
("CGUIC-NJ"), and General Accident Insurance Company, a Pennsylvania
company ("GAIC"));
(iii) Acquisition Co. will transfer all of the Parent
Insurance Assets to CGUIC;
(iv) CGU will sell all of the shares of Pilot to the
Seller or an affiliate of Seller for cash;
(v) CGU Asset Management, Inc., a Delaware corporation and
a subsidiary of CGU, will sell all of the outstanding shares of CGU
Investment Management Canada Limited, a Canadian company, to a subsidiary
of the Seller;
(vi) CGU will sell all of the outstanding shares of CGU
Annuity Service Corporation, a Delaware corporation, and CGU Life
Insurance Company of America, a Delaware corporation, to a newly-formed
Delaware corporation that will be an indirect subsidiary of the Seller;
(vii) CGU will sell all of the outstanding shares of
Societe Generale held by it to one or more subsidiaries of the Seller;
and
(viii) the subsidiaries of CGU that hold shares of Munich
Re will sell all of such shares to one or more subsidiaries of the
Seller.
Cash and certain other proceeds of the sales and other dispositions contemplated
in clauses (v) through (viii) of the prior sentence will be applied towards the
repayment of the outstanding promissory note made by CGU to the Seller in the
outstanding principal amount of $1,100,000,000 (the "TERM NOTE"), which Term
Note will be repaid in full in connection with the Acquisition.
The aggregate purchase price (the "PURCHASE PRICE") payable by Acquisition Co.
to the Seller in connection with the Acquisition shall consist of (a) cash equal
to the sum of (1) an amount consistent with the Sources and Uses Table, (2) any
net income (loss) of CGU (net of (i) realized gains (losses) in CGU's and its
subsidiaries' fixed income portfolio and (ii) taxes) for the period from June 1,
2000 through August 31, 2000 and (3) the difference between (x) the amount of
unrealized gains (losses) on CGU's and its subsidiaries' investments in publicly
traded common equity securities (other than Societe Generale and Munich Re
shares) as of August 31, 2000 and (y) the amount of unrealized gains (losses) on
such common securities as of May 31, 2000 (in the case of each of (x) and (y),
net of taxes), and (b) a seller note in an aggregate principal amount consistent
with the Sources and Uses Table. The Purchase Price will be adjusted (up or
down) by the difference between the actual proceeds of the sales contemplated in
clauses (iv)-(viii) of the first sentence of the preceding paragraph and the
reference sales proceeds set forth in the Stock Purchase Agreement.