LINE OF CREDIT AGREEMENT
THIS LINE OF CREDIT AGREEMENT (the "Agreement") is made and entered into
this 15th day of December, 1994 by and between SANWA BANK CALIFORNIA (the
"Bank") and ZENITH NATIONAL INSURANCE CORP. (the "Borrower").
SECTION I
AGREEMENT TO LEND
1.01 COMMITMENT TO LEND. Subject to the terms and conditions of this
Agreement and so long as no Event of Default occurs, the Bank agrees to extend
to the Borrower the credit accommodations that follow.
1.02 LINE OF CREDIT. The Bank agrees to make loans and advances
("Advances") to the Borrower, upon the Borrower's telephonic, written or
facsimile request therefor made prior to the Expiration Date, up to a total
principal amount from time to time outstanding of not more than $30,000,000.00
(the "Line of Credit"); provided that any sums repaid under the Line of Credit
may be reborrowed. The Borrower may permanently reduce the amount of the Line
of Credit by notice in writing to the Bank provided such reductions are in
increments of $1,000,000.00.
A. PURPOSE. Advances made under the Line of Credit shall be used for
general corporate purposes.
B. LINE ACCOUNT. The Bank shall maintain on its books a record of
account in which the Bank shall make entries for each Advance and such other
debits and credits as shall be appropriate in connection with the Line of Credit
(the "Line Account"). The Bank shall provide the Borrower with a monthly
statement of the Borrower's Line Account, which statement shall be considered to
be correct and conclusively binding on the Borrower unless the Borrower notifies
the Bank to the contrary within 30 days after the Borrower's receipt of any such
statement which it deems to be incorrect.
C. INTEREST. Interest shall accrue from the date of each Advance
under the Line of Credit at one of the following rates, as quoted by the Bank
and as elected by the Borrower pursuant to paragraph 1.02F or 1.02G below:
1. REFERENCE RATE ADVANCES. A variable rate equivalent to an
index for a variable interest rate which is quoted, published or announced from
time to time by the Bank as its reference rate and as to which loans may be made
by the Bank at, below or above such reference rate (the "Reference Rate") minus
.25% per annum (the "Variable Rate"). Interest shall be adjusted concurrently
with any change in the Reference Rate. An Advance based upon the Variable Rate
is hereinafter referred to as a "Reference Rate Advance." Each such Reference
Rate Advance shall be a minimum of $100,000.
2. FED FUNDS ADVANCES. A variable rate per annum (the "Federal
Funds Rate"), for each day in which the Advance is based upon the Federal Funds
Rate (a "Fed Funds Advance"), equivalent to 1.00% in excess of the interest rate
equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System, quoted to the Bank on
such day by Federal funds brokers of recognized standing which are selected by
the Bank in its sole discretion or, if such day is not a business day, for the
immediately preceding business day. With respect to this section 1.02(C)(2), a
business day means a day in which banks are open generally in Chicago and New
York for the conduct of substantially all of their commercial lending
activities. Fed Funds Advances must be in the minimum amount of $250,000.00.
3. EURODOLLAR ADVANCES. A fixed rate quoted by the Bank for 30,
60, 90, 120, 180 or 360 days or for such other period of time that the Bank may
quote and offer (provided that any such period of time does not extend beyond
the Expiration Date) [the "Interest Period"] for Advances in the minimum amount
of $250,000.00. Such interest rate shall be a percentage equivalent to .75% in
excess of the Bank's Eurodollar Rate which is that rate determined by the Bank's
Treasury Desk as being the approximate rate at which the Bank could purchase
offshore U.S. dollar deposits in an amount approximately equal to the amount of
the relevant Advance and for a period of time approximately equal to the
relevant Interest Period (adjusted for any and all assessments, surcharges and
reserve requirements pertaining to the purchase by the Bank of such U.S. dollar
deposits) [the "Eurodollar Rate"]. An Advance based upon the Eurodollar Rate is
hereinafter referred to as a "Eurodollar Advance."
Interest on any advance shall be computed on the basis of 360 days per
year, but charged on the actual number of days elapsed.
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Interest on any Reference Rate Advance or Fed Funds Advance (hereinafter
referred to as "Variable Rate Advances") shall be paid in monthly installments
commencing on the last day of the month following the date of the first such
Advance and continuing on the last day of each month thereafter.
Interest on any Eurodollar Advance with an Interest Period of 90 or less
days shall be paid on the last day of the Interest Period pertaining to such
Eurodollar Rate Advance. Interest on any Eurodollar Rate Advance with an
Interest Period in excess of 90 days shall be paid quarterly (i.e., on the last
day of each 90 day period occurring in such Interest Period) and on the last day
of the Interest Period pertaining to such Eurodollar Rate Advance.
If interest is not paid as and when it is due, it shall be added to the
principal, become and be treated as a part thereof, and shall thereafter bear
like interest.
D. PRINCIPAL. Unless sooner due in accordance with the terms of this
Agreement, the Borrower hereby promises and agrees to pay to the Bank in full
the aggregate unpaid principal amount of all Advances then outstanding, together
with all accrued and unpaid interest thereon on the Expiration Date.
E. EXPIRATION OF LINE OF CREDIT. Unless earlier terminated in
accordance with the terms of this Agreement, the Bank's commitment to make
Advances to the Borrower hereunder shall automatically expire on November 30,
1999 (the "Expiration Date").
F. NOTICE OF BORROWING. Upon telephonic, written or facsimile notice
which shall be received by the Bank at or before 10:00 a.m. (California time) on
a business day, the Borrower may borrow under the Line of Credit by requesting:
1. A VARIABLE RATE ADVANCE. A Variable Rate Advance may be made
on the day notice is received by the Bank; provided, however, that if the Bank
shall not have received notice at or before 11:00 a.m. on the day such Advance
is requested to be made, such Variable Rate Advance may, at the Bank's option,
be made on the next business day.
2. A EURODOLLAR RATE ADVANCE. Notice of any Eurodollar Rate
Advance shall be received by the Bank no later than two business days prior to
the day (which shall be a business day) on which the Borrower requests such
Eurodollar Rate Advance to be made.
G. NOTICE OF ELECTION TO ADJUST INTEREST RATE. Upon telephonic,
written or facsimile notice which shall be received by the Bank at or before
10:00 a.m. (California time) on a business day, the Borrower may elect:
1. That interest on a Variable Rate Advance, which continues to
remain a Variable Rate Advance, shall accrue at the sole discretion of the
Borrower at either the Federal Funds Rate or at the Variable Rate;
2. That interest on a Variable Rate Advance shall be adjusted to
accrue at the Eurodollar Rate; provided, however, that such notice shall be
received by the Bank no later than two business days prior to the day (which
shall be a business day) on which the Borrower requests that interest be
adjusted to accrue at the Eurodollar Rate.
3. That interest on a Eurodollar Rate Advance shall continue to
accrue at a newly quoted Eurodollar Rate or shall be adjusted to commence to
accrue at the Variable Rate or the Federal Funds Rate; provided, however, that
such notice shall be received by the Bank no later than two business days prior
to the last day of the Interest Period pertaining to such Eurodollar Rate
Advance. If the Bank shall not have received notice (as prescribed herein) of
the Borrower's election that interest on any Eurodollar Rate Advance shall
continue to accrue at the newly quoted Eurodollar Rate, the Borrower shall be
deemed to have elected that interest thereon shall be adjusted to accrue at the
Variable Rate upon the expiration of the Interest Period pertaining to such
Advance.
H. PREPAYMENT. The Borrower may prepay any Advance in whole or in
part, at any time and without penalty, provided, however, that: (i) any partial
prepayment shall first be applied to accrued and unpaid interest and next to the
outstanding principal balance; and (ii) during any period of time in which
interest is accruing on any Advance on the basis of the Eurodollar Rate, no
prepayment shall be made except on a day which is the last day of the Interest
Period pertaining thereto. If the whole or any part of any Eurodollar Advance
is prepaid by reason of acceleration or otherwise, the Borrower shall, upon the
Bank's request, promptly pay to and indemnify the Bank for all costs and any
loss (including interest) actually incurred by the Bank as a consequence of such
prepayment.
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I. INDEMNIFICATION FOR EURODOLLAR RATE COSTS. During any period of
time in which interest on any Advance is accruing on the basis of the Eurodollar
Rate, the Borrower shall, upon the Bank's request, promptly pay to and reimburse
the Bank for all costs incurred and payments made by the Bank by reason of any
future assessment, reserve, deposit or similar requirement or any surcharge, tax
or fee imposed upon the Bank or as a result of the Bank's compliance with any
directive or requirement of any regulatory authority pertaining or relating to
funds used by the Bank in quoting and determining the Eurodollar Rate.
J. CONVERSION FROM EURODOLLAR RATE TO VARIABLE RATE. In the event
that the Bank shall at any time reasonably determine that the accrual of
interest on the basis of the Eurodollar Rate (i) is infeasible because the Bank
is unable to determine the Eurodollar Rate due to the unavailability of U.S.
dollar deposits or contracts in an amount approximately equal to the amount of
the relevant Advance and for a period of time approximately equal to relevant
Interest Period or (ii) is or has become unlawful or infeasible by reason of the
Bank's compliance with any new law, rule, regulation, guideline or order, or any
new interpretation of any present law, rule, regulation, guideline or order,
then the Bank shall give telephonic notice thereof (confirmed in writing) to the
Borrower, in which event the Eurodollar Advance shall be deemed to be a
Reference Rate Advance and interest shall thereupon immediately accrue at the
Variable Rate.
1.03 DISBURSEMENT OF PROCEEDS FROM ADVANCES. Any Advance made hereunder
shall be conclusively presumed to have been made to and for the Borrower's
benefit when the proceeds of such Advance are disbursed in accordance with the
Borrower's instructions or deposited into a checking account of the Borrower
maintained at the Bank.
1.04 LOAN FEE; COMMITMENT FEE. The Borrower agrees to pay to the Bank (i)
no later than thirty (30) days after the date of this Agreement, a non-
refundable loan fee in the amount of $37,500.00 and (ii) from the date hereof to
the termination of this Agreement a fee equal to 0.25% per annum of the average
daily amount of the Line of Credit, payable in arrears for the immediately
preceding calendar quarter on the 15th day of each January, April, July and
October of each year and payable at the termination date of this Agreement for
the immediately preceding calendar quarter, if not previously paid, and for the
then current calendar quarter. With respect to the first and last fee payments
as required under this section 1.04(ii), such fees shall be calculated pro rata
with respect to the number of days during the applicable time periods for which
the Line of Credit has been in effect.
SECTION II
CONDITIONS PRECEDENT
2.01 CONDITIONS PRECEDENT TO FIRST ADVANCE. Prior to the first Advance
hereunder, the Borrower shall deliver or cause to be delivered to the Bank, in
form and substance satisfactory to the Bank:
A. AUTHORITY TO BORROW. Evidence relating to the duly given approval
and authorization of the execution, delivery and performance of this Agreement,
all other documents, instruments and agreements required under this Agreement
and all other actions to be taken by the Borrower hereunder or thereunder.
B. LOAN DOCUMENTS. All documents, instruments and agreements
required or necessary to consummate the transactions contemplated under this
Agreement (collectively the "Loan Documents"), all fully executed.
C. MISCELLANEOUS DOCUMENTS. Such other documents and opinions as the
Bank may require with respect to the transactions described in this Agreement.
2.02 CONDITIONS PRECEDENT TO ALL ADVANCES. The obligation of the Bank to
make each Advance (including the first Advance) is subject to the further
conditions precedent that, as of the date of each Advance and after the making
of such Advance:
A. REPRESENTATIONS AND WARRANTIES. The representations and
warranties set forth herein and in any other document, instrument, agreement or
certificate delivered to the Bank hereunder are true and correct.
B. EVENT OF DEFAULT. No event has occurred and is continuing which
constitutes, or, with the lapse of time or giving of notice or both, would
constitute an Event of Default as defined in Section V hereof.
For the purposes hereof, the Borrower's acceptance of the proceeds of any
Advance shall be deemed to constitute the Borrower's representation and warranty
that the statements set forth in sections 2.02 A. and 2.02 B above are true and
correct.
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SECTION III
REPRESENTATIONS AND WARRANTIES
The Borrower hereby makes the following representations and warranties to
the Bank, which representations and warranties are continuing:
3.01 STATUS. The Borrower and each of its subsidiaries is a corporation
duly organized and validly existing under the laws of the state of its
incorporation and is properly licensed, qualified to do business and in good
standing in, and, where necessary to maintain its rights and privileges, has
complied with the fictitious name statute of every jurisdiction in which it is
doing business.
3.02 AUTHORITY. The execution, delivery and performance by the Borrower
of this Agreement and the Loan Documents have been duly authorized and do not
and will not: (i) violate any provision of any law, rule, regulation, writ,
judgment or injunction presently in effect and materially affecting the
Borrower; (ii) result in a material breach of or constitute a material default
under any material agreement to which the Borrower is a party or by which it or
its properties may be bound of affected; or (iii) require any consent or
approval of its stockholders or violate any provision of its certificate of
incorporation or by-laws.
3.03 LEGAL EFFECT. This Agreement constitutes, and any document,
instrument or agreement required hereunder when delivered will constitute,
legal, valid and binding obligations of the Borrower enforceable against the
Borrower in accordance with their respective terms.
3.04 FICTITIOUS TRADE STYLES. All fictitious trade styles used by the
Borrower in connection with its business operations and each state in which each
such fictitious trade style is used are listed below. The Borrower shall notify
the Bank not less than 30 days prior to effecting any change in the matters
described below or prior to using any other fictitious trade style at any future
date, indicating the trade style and state(s) of its use.
TRADE STYLE STATE OF USE
THE ZENITH CALIFORNIA
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3.05 FINANCIAL STATEMENTS. All financial statements, information and
other data which may have been or which may hereafter be submitted by the
Borrower to the Bank are true, accurate and correct and have been or will be
prepared in accordance with generally accepted accounting principles
consistently applied (or, as appropriate, in accordance with statutory
accounting principles) and accurately represent the Borrower's financial
condition or, as applicable, the other information disclosed therein. Since the
most recent submission of any such financial statement, information or other
data to the Bank, the Borrower represents and warrants that no material adverse
change in the Borrower's financial condition or operations has occurred which
has not been fully disclosed to the Bank in writing.
3.06 LITIGATION. Except as have been disclosed to the Bank in writing,
there are no actions, suits or proceedings pending or, to the knowledge of the
Borrower, threatened against or affecting the Borrower or the Borrower's
properties before any court or administrative agency which, if determined
adversely to the Borrower, would have a material adverse effect on the
Borrower's financial condition or operations.
3.07 GOVERNMENTAL APPROVALS. The Borrower and its subsidiaries have
obtained all permits and approvals from the California Department of Insurance
and any other state regulatory authority that may be required to conduct its
respective business as presently conducted.
3.08 TITLE TO ASSETS; PERMITTED LIENS. The Borrower and its subsidiaries
have title to all of its assets subject only to security interests,
encumbrances, liens or claims of any third person as follows: (i) liens and
security interests securing indebtedness owed by the Borrower to the Bank; (ii)
liens for taxes, assessments or similar charges either not yet due and payable
or being duly contested in good faith; (iii) liens of mechanics, materialmen,
warehousemen or other like liens arising in the ordinary course of business and
securing obligations which are not yet delinquent; (iv) liens and security
interests which, as of the date of this Agreement, have been disclosed to and
approved by the Bank in writing; (v) purchase money liens or purchase money
security interests upon or in any property acquired or held by the Borrower in
the ordinary course of business to secure indebtedness outstanding on the date
hereof or permitted to be incurred hereunder; (vi) any liens on the assets of
Perma-Bilt, A Nevada Corporation ("Perma-Bilt"); and (vii) those liens and
security interests which in the aggregate constitute an immaterial and
insignificant monetary amount with respect to the value of the Borrower's assets
(collectively "Permitted Liens").
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3.09 ERISA. If the Borrower has a pension, profit sharing or retirement
plan subject to the Employee Retirement Income Security Act of 1974, as amended
from time to time, including any rules and regulations promulgated thereunder
("ERISA"), such plan has been and will continue to be funded in accordance with
its terms and otherwise complies with and continues to comply with the
requirements of ERISA.
3.10 TAXES. The Borrower has filed all tax returns required to be filed
and paid all taxes shown thereon to be due, including interest and penalties,
other than taxes which are not currently due or those which are being duly
contested in good faith.
3.11 NO EXERCISED PUT RIGHT OF HOLDERS OF NOTES UNDER INDENTURE. The
holders of the 9.00% senior notes due May 1,2002 covered by that certain Zenith
National Insurance Corp. to Norwest Bank Minnesota, National Association,
Trustee, Indenture Dated as of May 1, 1992 (the "Indenture") have not exercised,
or given notice of their intention to exercise their Put Right under Section
3.05 of the Indenture.
SECTION IV
COVENANTS
The Borrower covenants and agrees that, during the term of this Agreement,
and so long thereafter as the Borrower is indebted to the Bank under this
Agreement, the Borrower shall, unless the Bank otherwise consents in writing:
4.01 PRESERVATION OF EXISTENCE; COMPLIANCE WITH APPLICABLE LAWS. Borrower
and its subsidiaries shall maintain and preserve its existence and all rights
and privileges now enjoyed; not liquidate or dissolve, merge or consolidate with
or into an entity (which would be survivor); and conduct its business in
accordance with all applicable laws, rules and regulations.
4.02 MAINTENANCE OF INSURANCE. Maintain insurance in such amounts and
covering such risks as is usually carried by companies engaged in similar
businesses and owning similar properties in the same general areas in which the
Borrower operates and maintain such other insurance and coverages as may be
reasonably required by the Bank.
4.03 PAYMENT OF OBLIGATIONS AND TAXES. Make timely payment of all
assessments and taxes and all of its liabilities and obligations unless the same
are being contested in good faith.
4.04 INSPECTION RIGHTS. At any reasonable time and from time to time
permit the Bank or any representative thereof to examine and make copies of the
pertinent records and visit the properties of the Borrower and to discuss the
business and operations of the Borrower with the President and Chairman of the
Board, Executive Vice President, Senior Vice President of Finance, Vice
President of Finance, Treasurer or Assistant Treasurer, or those employees
designated by any of the preceding officers, of the Borrower or any of its
subsidiaries. If the Borrower now or at any time hereafter maintains any
records (including, but not limited to, computer generated records and computer
programs for the generation of such records) in the possession of a third party,
the Borrower hereby agrees to notify such third party to permit the Bank free
access to such pertinent records at all reasonable times and to provide the Bank
with copies of any pertinent records it may request, all at the Borrower's
expense, the amount of which shall be payable immediately upon demand.
4.05 REPORTING REQUIREMENTS. Deliver or cause to be delivered to the Bank
in form and detail satisfactory to the Bank:
A. ANNUAL STATEMENTS. Not later than 120 days after the end of each
of the Borrower's fiscal years, a copy of the audited consolidated annual
financial report of the Borrower for such year.
B. QUARTERLY STATEMENTS. Not later than 75 days after the end of the
first three quarters of each fiscal year of the Borrower, the Borrower's
consolidated financial statement as of the end of such quarter.
C. TRIANNUAL AUDIT. Not later than 30 days after the Borrower
receives it, a copy of the triannual audit of Zenith Insurance Company and
CalFarm Life Insurance Company prepared by the Department of Insurance.
D. QUARTERLY STATUTORY STATEMENTS. Not later than 75 days after the
end of the first three quarters of each fiscal year of the Borrower, the
quarterly statutory statement of Zenith Insurance Company and its consolidated
subsidiaries and the quarterly statutory statement of CalFarm Life Insurance
Company.
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E. ANNUAL STATUTORY STATEMENTS. Not later than 120 days after the
end of each of the Borrower's fiscal years, copies of the annual statutory
statements of Zenith Insurance Company and its consolidated subsidiaries and the
annual statutory statements of CalFarm Life Insurance Company.
F. COMPLIANCE CERTIFICATE. Not later than 75 days after the end of
the first three quarters and 120 days after the end of each fiscal year of the
Borrower, a certificate signed by the President and Chairman of the Board
stating that the statements set forth in Section 2.02A and 2.02B herein are true
as of the date of such certificate.
G. CREDIT RATING CHANGES. Promptly, and in any event within three
business days after a senior officer of the Borrower obtains knowledge thereof,
notice of any change in the credit rating assigned by Moody's or S&P to any
long-term debt of the Borrower (including without limitation, any change in the
Moody's Credit Rating or the S&P Credit Rating).
H. OTHER INFORMATION. Promptly upon transmission thereof, copies of
any filings and registrations with and reports to, the SEC by the Borrower or
any of its subsidiaries (other than any registration statement on Form S-8) and
copies of all financial statements, proxy statements, notices and reports as the
Borrower or any of its subsidiaries shall send to analysts generally or to the
holders (other than the Borrower and its subsidiaries) of their capital stock in
their capacity as such holders (in each case to the extent not theretofore
delivered to the Bank pursuant to this Agreement) and, with reasonable
promptness, such other information or documents, financial or otherwise) as the
Bank may reasonably request from time to time.
4.06 ADDITIONAL INDEBTEDNESS OF INSURANCE SUBSIDIARIES. Borrower's
consolidated property and casualty insurance subsidiaries shall not, after the
date hereof, create, incur or assume, directly or indirectly, any indebtedness
exceeding in the aggregate the amount of $20,000,000.00. CalFarm Life Insurance
Company shall not, after the date hereof, create, incur or assume, directly or
indirectly, any indebtedness exceeding in the aggregate the amount of
$10,000,000.00. The term indebtedness ("Indebtedness") for any borrower as used
in this Agreement shall mean, at any date, the aggregate amount, excluding in
all cases the amount of indebtedness owed to a corporate affiliate, of, without
duplication, (a) all obligations for borrowed money from banks including, but
not limited to, guaranties and letters of credit, (b) all obligations evidenced
by bonds, debentures, notes or similar instruments, (c) all obligations to pay
the deferred purchase price of property or services, (d) capitalized lease
obligations, (e) all obligations or liabilities of others secured by a lien on
any asset, whether or not such obligation or liability is assumed, and (f) any
other obligations or liabilities which are required by generally accepted
accounting principles to be shown as debt on the balance sheet.
4.07 LIENS AND ENCUMBRANCES. Not create, assume or permit to exist any
security interest, encumbrance, mortgage, deed of trust or other lien including,
but not limited to, a lien of attachment, judgment or execution) affecting any
of the Borrower's properties, or execute or allow to be filed any financing
statement or continuation thereof affecting any such properties, except for
Permitted Liens and as otherwise provided in this Agreement.
4.08 TRANSFER ASSETS. Not sell, contract for sale, transfer, convey,
assign, lease or sublet any of its assets except in the ordinary course of
business as presently conducted by the Borrower and except for real property,
and then, only for full, fair and reasonable consideration.
4.09 CHANGE IN THE NATURE OF BUSINESS. Not make any material change in
its corporate structure or in the nature of its business as existing or
conducted as of the date of this Agreement.
4.10 FINANCIAL CONDITION. Maintain at all times:
A. NET WORTH. A minimum consolidated tangible net worth of not less
than $275,000,000.00, provided, however, that: (i) the minimum consolidated
tangible net worth on or after the effective date of this Agreement shall
automatically be reduced by an amount equal to the cumulative purchase amounts
(net of any transaction costs and commissions) paid by the Borrower for the
repurchase of its common stock with the restriction that all such reductions to
the minimum consolidated tangible net worth resulting from the repurchases of
the Borrower's common stock shall not exceed $30,000,000.00 for the purpose of
this section 4.10(A); and (ii) inclusive of the reductions to the consolidated
tangible net worth permitted under section 4.10(A)(i), the consolidated tangible
net worth of the Borrower shall not be less than $245,000,000.00 at any time
during the term of this Agreement.
B. TOTAL INDEBTEDNESS TO NET WORTH RATIO. An aggregate consolidated
Indebtedness to consolidated tangible net worth ratio of not more than 0.5 to 1.
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For purposes of the foregoing, the term "Consolidated Tangible Net Worth"
shall mean, at any time, the net worth of the Borrower and its subsidiaries
determined on a consolidated basis in accordance with generally accepted
accounting principles after appropriate deduction for any minority interests in
subsidiaries and less all intangible assets (which term shall exclude deferred
policy acquisition costs and purchased intangibles). The term "Net Worth" shall
mean the sum of the Borrower's capital stock, capital in excess of par or stated
value of shares of its capital stock, retained earnings and any other account
which, in accordance with generally accepted accounting principles, constitutes
stockholders' equity, but excluding the effect, if any, of unrealized capital
gains and losses. The term "Consolidated Indebtedness" shall mean all of the
Borrower's and its subsidiaries' Indebtedness, excluding all Indebtedness of
Perma-Bilt and provided that such Indebtedness of Perma-Bilt is not guaranteed
by the Borrower or one of its subsidiaries.
C. AGGREGATE STATUTORY SURPLUS. Zenith Insurance Company (and its
consolidated subsidiaries) and CalFarm Life Insurance Company shall maintain an
aggregate statutory surplus of at least $175,000,000.00
D. NET PREMIUMS WRITTEN TO POLICYHOLDERS' SURPLUS. Zenith Insurance
Company and its consolidated insurance subsidiaries shall maintain a
consolidated ratio of net premiums written to policyholders' surplus of no more
than 3.0:1 on a rolling four quarter basis.
E. CONSOLIDATED INDEBTEDNESS. An aggregate Consolidated Indebtedness
of no more than $200,000,000.00.
F. ADVANCES TO PERMA-BILT. Advances and loans extended to Perma-Bilt
of no more than $25,000,000.00.
4.11 NOTICES. Give prompt written notice to the Bank of any and all (i)
Events of Default; (ii) litigation, arbitration or administrative proceedings to
which the Borrower is a defendant and in which the claim or liability exceeds
$15,000,000.00 and (iii) other matters which resulted in or may result in a
material adverse change in the financial conditions or business operation of the
Borrower.
4.12 KEY EMPLOYEE. Continue to employ Stanley R. Zax as its chief
executive officer with the degree of authority and responsibility he presently
exercises in his capacity as President and Chairman of the Board.
4.13 CORPORATE RATING. Zenith Insurance Company (on a pooled or
individual basis) and CalFarm Life Insurance Company shall maintain at all times
an A.M. Best rating of no lower than B+.
SECTION V
EVENTS OF DEFAULT
Any one or more of the following described events shall constitute an event
of default (an "Event of Default") under this Agreement:
5.01 NON-PAYMENT. The Borrower shall fail to pay any payment of principal
or interest or any other sum referred to in this Agreement within five (5) days
after notice from the Bank that the same is past due.
5.02 PERFORMANCE UNDER THIS AND OTHER AGREEMENTS. The Borrower shall fail
in any material respect to perform or observe any material term, covenant or
agreement contained in this Agreement or in any material document, instrument or
agreement evidencing or relating to any material indebtedness of the Borrower
(whether owed to the Bank or third persons), and any such failure (exclusive of
the payment of money to the Bank under this Agreement or under any other
document, instrument or agreement, which failure shall constitute and be an
immediate Event of Default if not paid within five (5) business days after
notice from the Bank that the same is past due) shall continue for more than 30
days after written notice from the Bank to the Borrower of the existence and
character of such Event of Default or should the default require more than
thirty (30) days but less than ninety (90) days to correct, the Borrower does
not commence material corrective action within thirty (30) days and actively
pursues such corrective action.
5.03 REPRESENTATIONS AND WARRANTIES; FINANCIAL STATEMENTS. Any
representation or warranty made by the Borrower under or in connection with this
Agreement or any financial statement given by the Borrower shall prove to have
been incorrect in any material respect when made or given or when deemed to have
been made or given.
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5.04 INSOLVENCY. The Borrower shall: (i) become insolvent or be unable
to pay its debts as they mature; (ii) make an assignment for the benefit of
creditors or to an agent authorized to liquidate any substantial amount of its
properties or assets; (iii) file a voluntary petition in bankruptcy or seeking
reorganization or to effect a plan or other arrangement with creditors; (iv)
file an answer admitting the material allegations of an involuntary petition
relating to bankruptcy or reorganization or join in any such petition; (v)
become or be adjudicated a bankrupt; (vi) apply for or consent to the
appointment of, or consent that an order be made, appointing any receiver,
custodian or trustee for itself or any of its properties, assets or businesses;
or (vii) any receiver, custodian or trustee shall have been appointed for all or
a substantial part of its properties, assets or businesses and shall not be
discharged within 30 days after the date of such appointment.
5.05 EXECUTION. Any writ of execution or attachment or any judgment lien
shall be issued against any property of the Borrower and shall not be discharged
or bonded against or released within 30 days after the issuance or attachment of
such writ or lien.
5.06 SUSPENSION. The Borrower shall voluntarily suspend the transaction
of business or allow to be suspended, terminated, revoked or expired any permit,
license or approval of any governmental body necessary to conduct the Borrower's
business as now conducted.
SECTION VI
REMEDIES ON DEFAULT
Upon the occurrence of any Event of Default, the Bank may, at its sole
election, without demand and upon only such notice as may be required by law:
6.01 ACCELERATION. Declare any or all of the Borrower's indebtedness
owing to the Bank, whether under this Agreement or under any other document,
instrument or agreement for indebtedness, immediately due and payable, whether
or not otherwise due and payable.
6.02 CEASE EXTENDING CREDIT. Cease making Advances or otherwise extending
credit to or for the account of the Borrower under this Agreement or under any
other agreement now existing or hereafter entered into between the Borrower and
the Bank.
6.03 TERMINATION. Terminate this Agreement as to any future obligation of
the Bank without affecting the Borrower's obligations to the Bank or the Bank's
rights and remedies under this Agreement or under any other document, instrument
or agreement for indebtedness.
6.04 NON-EXCLUSIVITY OF REMEDIES. Exercise one or more of the Bank's
rights set forth herein or seek such other rights or pursue such other remedies
as may be provided by law, in equity or in any other agreement now existing or
hereafter entered into between the Borrower and the Bank for indebtedness, or
otherwise.
SECTION VII
MISCELLANEOUS PROVISIONS
7.01 AMOUNTS PAYABLE ON DEMAND. If the Borrower fails to pay on demand
any amount so payable under this Agreement, the Bank may, at its option and
without any obligation to do so and without waiving any default occasioned by
the Borrower's failure to pay such amount, create an Advance in an amount equal
to the amount so payable, which Advance shall thereafter bear interest as
provided under the Line of Credit.
7.02 DEFAULT INTEREST RATE. If an Event of Default, or an event which,
with notice or passage of time could become an Event of Default, has occurred or
is continuing, the Borrower shall pay to the Bank interest on any indebtedness
or amount payable under this Agreement at a rate which is 2% in excess of the
rate or rates then in effect under this Agreement.
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7.03 APPLICATION OF PAYMENTS: All amounts received by the Bank whether as
payments or as proceeds from the disposition or liquidation of collateral, if
any, shall be applied to the Borrower's indebtedness to the Bank as follows:
first, to the costs and expenses of collection, enforcement, protection and
preservation, including but not limited to the Bank's lien in the collateral and
including court costs and reasonable attorneys' fees, whether or not suit is
commenced by the Bank; next, to those costs and expenses incurred by the Bank in
enforcing and collecting this Agreement including protecting, preserving,
liquidating, selling or disposing of the collateral, if any; next, to the
payment of accrued and unpaid interest on all of the Obligations; next, to the
payment of the outstanding principal balance of the Obligations; and last, to
the payment of any other indebtedness owed by the Borrower to the Bank. Any
excess existing after the payment of the foregoing will be returned or paid by
the Bank to the Borrower.
7.04 WAIVER OF JURY TRIAL. THE BORROWER AND THE BANK EACH WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR
PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE.
THE BORROWER AND THE BANK EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION
SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING,
THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS
WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER
PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION
HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
7.05 ACCOUNTING AND OTHER TERMS. All references to financial statements,
assets, liabilities and similar accounting terms not specifically defined in
this Agreement shall mean such financial statements prepared and such terms
determined in accordance with generally accepted accounting principles
consistently applied or in accordance with statutory accounting principles where
appropriate. Except where otherwise specified in this Agreement, all financial
data submitted or to be submitted to the Bank pursuant to this Agreement shall
be prepared in accordance with generally accepted accounting principles
consistently applied or in accordance with statutory accounting principles where
appropriate. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the California Uniform Commercial Code.
7.06 RELIANCE. Each warranty, representation, covenant and agreement
contained in this Agreement shall be conclusively presumed to have been relied
upon by the Bank regardless of any investigation made or information possessed
by the Bank and shall be cumulative and in addition to any other warranties,
representations, covenants or agreements which the Borrower shall now or
hereafter give, or cause to be given, to the Bank.
7.07 ATTORNEY'S FEES. In the event of any action in relation to this
Agreement or any document, instrument or agreement executed with respect to,
evidencing or securing the indebtedness hereunder, the prevailing party, in
addition to all other sums to which it may be entitled, shall be entitled to
reasonable attorneys' fees.
7.08 NOTICES. All notices, payments, requests, information and demands
which either party hereto may desire, or may be required to give or make to the
other party shall be given or made to such party by hand delivery or through
deposit in the United States mail, postage prepaid, or by Western Union
telegram, addressed to the address set forth below such party's signature to
this Agreement or to such other address as may be specified from time to time in
writing by either party to the other.
7.09 WAIVER. Neither the failure nor delay by the Bank in exercising any
right hereunder or under any document, instrument or agreement mentioned herein
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right hereunder or under any document, instrument or agreement mentioned
herein preclude other or further exercise thereof or the exercise of any other
right; nor shall any waiver of any right or default hereunder or under any other
document, instrument or agreement mentioned herein constitute a waiver of any
other right or default or constitute a waiver of any other default of the same
or any other term or provision.
7.10 CONFLICTING PROVISIONS. To the extent that any of the terms or
provisions contained in this Agreement are inconsistent with those contained in
any other document, instrument or agreement executed pursuant hereto, the terms
and provisions contained herein shall control. Otherwise, such provisions shall
be considered cumulative.
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7.11 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Borrower and the Bank and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights hereunder or any interest herein without the Bank's prior
written consent. The Bank may sell, assign or grant participations in all or
any portion of its rights and benefits hereunder. The Borrower agrees that, in
connection with any such sale, grant or assignment, the Bank may deliver to the
prospective buyer, participant or assignee financial statements and other
relevant information relating to the Borrower.
7.12 JURISDICTION. This Agreement, any notes issued hereunder, and any
documents, instruments or agreements mentioned or referred to herein shall be
governed by and construed according to the laws of the State of California, to
the jurisdiction of whose courts the parties hereby submit.
7.13 HEADINGS. The headings set forth herein are solely for the purpose
of identification and have no legal significance.
7.14 ENTIRE AGREEMENT. This Agreement and the Loan Documents shall
constitute the entire and complete understanding of the parties with respect to
the transactions contemplated hereunder. All previous conversations, memoranda
and writings between the parties or pertaining to the transactions contemplated
hereunder that are not incorporate or referenced in this Agreement or the Loan
Documents are superseded hereby.
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
as of the date first hereinabove
written.
BANK:
SANWA BANK CALIFORNIA
By: /s/ Richard H. Palmer
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Richard H. Palmer, Vice President
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(Name/Title)
Address: Insurance & Financial Services, LA CBC
601 S. Figueroa Street, W8-6
Los Angeles, California 90017
BORROWER:
ZENITH NATIONAL INSURANCE CORP.
By: /s/ Stanley R. Zax
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Stanley R. Zax, President and Chairman of the Board
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(Name/Title)
Address: 21255 Califa Street
Woodland Hills, California 91367
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