Exhibit 10.35
[Chase Logo Appears Here]
December 1, 1998
Allmerica Financial Corporation
440 Lincoln Street
Worcester, Massachusetts 01653
and
Citizens Acquisition Corporation
c/o Allmerica Financial Corporation
Attention: Mr. Edward J. Parry, III
Chief Financial Officer
Ladies and Gentlemen:
The Chase Manhattan Bank ("Lender") is pleased to confirm that it is
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prepared to make funds available to Allmerica Financial Corporation
("Allmerica") and Citizens Acquisition Corporation ("Citizens Acquisition;" each
--------- --------------------
of Allmerica and Citizens Acquisition shall hereinafter be referred to as
individually as "Borrower" and collectively as "Borrowers"), subject to the
-------- ---------
terms and conditions outlined below. Unless otherwise defined herein,
capitalized terms used herein shall have the meanings assigned to them in the
Note (as defined below).
Commitment Lender agrees to make loans in an aggregate principal amount not
to exceed at any one time $200,000,000, as such amount may be
reduced in part or in whole (the "Commitment"), which loans may
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be Eurodollar Loans or Base Rate Loans (collectively, "Committed
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Loans"). Borrowers may borrow, repay, prepay and reborrow at any
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time from the date hereof to but excluding June 1, 1999 (the
"Availability Period"), subject to the limitations set forth
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herein and in a promissory note (the "Note") substantially in the
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form of Exhibit B hereto. In addition, the Bank may, in its sole
discretion, but shall have no obligation to, make Offered Rate
Loans to the Borrower; provided that at no time shall the sum of
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outstanding Committed Loans and outstanding Offered Rate Loans
exceed $200,000,000. Committed Loans and any Offered Rate Loans
which the Bank may make (collectively, the "Loans") shall be
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evidenced by the Note.
Purpose proceeds of the Loans will be used to acquire the publicly-
- ------- held shares of Citizens Corporation; provided that no part of
the proceeds of the Loans will be used in violation of
Regulation U of the Board of Governors of the Federal Reserve
System of the United States of America.
Termination/ Borrowers may upon at least three Banking Days' notice to
Reduction of Lender terminate at any time or reduce from time to time, the
Commitment unused amount of the Commitment.
- ----------
Commitment Fee Borrowers jointly and severally agree to pay a commitment fee,
- -------------- which shall accrue on the daily average unused Commitment
during the Availability Period at a rate per annum equal to
0.10%, calculated on the basis of a 365/366 day year, for the
actual number of days elapsed, and payable quarterly in
arrears on the last Banking Day of each calendar quarter and
on the effective date of any reduction or termination of the
Commitment.
Interest Rate; Each Loan shall bear interest as selected by Borrowers and
Interest Periods; provided in the Note. Eurodollar Loans shall be available for
Maturity interest periods of, at Borrowers' selection, one, two, three
- -------- or six months. Offered Rate Loans shall be available for
interest periods offered by Lender in its sole discretion and
accepted by Borrowers. No interest period may extend beyond
June 1, 1999, the date on which all Loans shall finally
mature.
Drawdowns Borrowers may request a Loan by giving Lender notice by
- --------- 11:00 a.m. New York City time (i) on the same Banking Day of a
Base Rate Loan or an Offered Rate Loan and (ii) at least three
Banking Days' prior to a Eurodollar Loan.
Break Funding Borrowers jointly and severally agree to pay Lender on demand
- ------------- an amount determined by Lender in good faith to be sufficient
(in the reasonable opinion of Lender) to compensate Lender for
any loss, cost or expense that Lender determines is
attributable to the failure by Borrowers to borrow a
Eurodollar Loan or Offered Rate Loan on the date specified in
the notice to borrow such Loan. Without limiting the effect of
the preceding sentence, such compensation shall include an
amount equal to the excess, if any, of (i) the amount of
interest which would have accrued on the principal amount of
such Loan had Borrowers not failed to borrow such Loan for the
period from the date of such failure to borrow to the last day
of the interest period that would have been the Interest
Period for such Loan) over (ii) the amount of interest which
would accrue on such principal amount for such period at the
interest rate which Lender would bid were it to bid, at the
commencement of such period, for dollar deposits of a
comparable amount and period from other banks in the London
interbank market (as reasonably determined by Lender), or if
Lender shall cease to make such bids, the equivalent bid rate,
as reasonably determined by Lender, derived from display page
3750 (British Bankers Association - LIBOR) of the Dow Jones
Markets (Telerate) Screen (or any successor or substitute
therefor).
Conditions The obligation of Lender to make Committed Loans to Borrowers
of Lending is subject to the conditions precedent that: (a) in the case
- ---------- of the initial Committed Loan, Lender shall have received
(i) the Note duly executed and delivered by Borrowers as joint
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and several obligors, (ii) a corporate borrowing resolution
certified by each Borrower's Secretary or Assistant Secretary,
(iii) an incumbency certificate of each Borrower's Secretary
or Assistant Secretary setting forth the names, titles and
true signatures of such Borrower's officers authorized to sign
this Agreement and the Note, (iv) an opinion of counsel to
Borrowers substantially in the form of Exhibit A hereto,
(v) in the case of the initial Committed Loan, a certificate
signed by a duly authorized officer of Allmerica, dated the
date of such Loan, certifying that since December 31, 1997,
there has been no material adverse change in the condition
(financial or otherwise), business or operations of Allmerica
and its subsidiaries on a consolidated basis or the ability of
Allmerica to pay its obligations hereunder or under the Note,
and (b) in the case of any Committed Loan, no default or Event
of Default under this Agreement or the Note has occurred and
is continuing, or would result from the making of such Loan
and (c) in the case of any Committed Loan which increases the
aggregate principal amount of Committed Loans outstanding
immediately prior to the making of such Committed Loan, the
fact that the statement referred to in clause (a)(v) above is
true on the date of such Committed Loan. Borrowers' request
for a Committed Loan and acceptance of the proceeds thereof
shall each constitute a representation and warranty that the
statements in clauses (b) and (c) above are true and correct
both as of the date of such request and as of the date of such
Committed Loan.
Representations Each Borrower hereby represents and warrants as to itself
and Warranties that: (a) this Agreement and the Note when delivered will be
- -------------- the legal, valid and binding obligations of such Borrower
enforceable against such Borrower in accordance with their
terms, except to the extent that such enforcement may be
limited by applicable bankruptcy, insolvency and other similar
laws affecting creditors' rights generally, and (b) the
execution, delivery and performance by such Borrower of this
Agreement and the Note have been authorized by all necessary
corporate action and do not and will not contravene such
Borrower's charter or by-laws or any applicable law or any
contractual provision binding on or affecting such Borrower.
In addition, Allmerica hereby makes the representations and
warranties contained in Section 7 of that certain Credit
Agreement dated as of May 29, 1998 among Allmerica, the
Lenders signatory thereto, the Bank, as Administrative Agent,
and Fleet National Bank, as Co-Agent (the "Existing Credit
-------- ------
Agreement"), which provisions, together with the related
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definitions, as in effect on the date hereof are hereby
incorporated herein by reference (mutatis mutandis) for the
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benefit of Lender and shall continue for the purposes of this
Agreement regardless of the termination of the Existing Credit
Agreement or Lender's participation therein, or any amendment
of, or any consent to any deviation from or other modification
of, the Existing Credit Agreement; provided that references in
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Section 7 of the Existing Credit Agreement to (i) the
"Agreement" and "Lenders" and (ii) "Administrative Agent"
shall be deemed to mean this Agreement and Lender,
respectively.
Covenants So long as this Agreement shall remain in effect and until the
- --------- Commitment has been terminated and all amounts owing hereunder
and the Note shall have been paid in full, Allmerica shall (a)
comply with and be bound by the covenants contained in Section
8 of the Existing Credit Agreement, which provisions, together
with the related definitions, as in effect on the date hereof
are hereby incorporated herein by
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reference (mutatis mutandis) for the benefit of Lender and
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shall continue for the purposes of this Agreement regardless
of the termination of the Existing Credit Agreement or
Lender's participation therein, or any amendment of, or any
consent to any deviation from or other modification of, the
Existing Credit Agreement; provided that references in Section
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8 of the Existing Credit Agreement to (i) the "Administrative
Agent" or "Lender(s)," (ii) "Loans" and (iii) "Default" shall
be deemed to mean Lender, Loans and a default hereunder or
under the Note, respectively.
Indemnity The Borrowers, jointly and severally agree to indemnify Lender
- --------- against, and hold Lender harmless from, any and all losses,
claims, damages, liabilities and related expenses, including
the reasonable fees, charges and disbursements of any counsel
for Lender, incurred by or asserted against Lender arising out
of, in connection with, or as a result of (i) the execution or
delivery of this Agreement or any agreement or instrument
contemplated hereby, the performance by the parties hereto of
their respective obligations hereunder or the consummation of
the transactions contemplated hereby, (ii) any Loan or the use
of the proceeds therefrom, or (iii) any actual or prospective
claim, litigation, investigation or proceeding relating to any
of the foregoing, whether based on contract, tort or any other
theory and regardless of whether Lender is a party thereto;
provided that such indemnity shall not, as to Lender, be
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available to the extent that such losses, claims, damages,
liabilities or related expenses resulted from the gross
negligence or wilful misconduct of Lender.
Default Events which may cause the acceleration of the maturity of any
- ------- Loan ("Events of Default") are specified in the Note. Lender
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may terminate the Commitment upon the occurrence of any Event
of Default, but it shall terminate immediately upon the
occurrence of any "bankruptcy" or "insolvency" Event of
Default.
Joint and Several Each Borrower hereby accepts joint and several liability for
Liability the obligations under this Agreement in consideration of the
- --------- financial accommodation provided by the Bank hereunder and
agrees that if and to the extent that a Borrower shall fail to
make any payment due hereunder as and when due in accordance
with the terms hereof, then the other Borrower will make such
payment. The liability of each Borrower hereunder is absolute
and unconditional irrespective of any defense, setoff or
counterclaim with respect to this Agreement and the Note and
the transactions contemplated thereby which might constitute a
defense available to, or discharge of, a Borrower or a
guarantor.
Governing Law; This Agreement shall be governed by the laws of the State of
Jurisdiction New York. Borrowers consent to the nonexclusive jurisdiction
- ------------ and venue of the state and federal courts located in the City
of New York. Service of process by Lender in connection with
any dispute hereunder shall be binding on Borrowers if sent to
Borrowers by registered mail at the address specified therefor
in the Note. EACH BORROWER AND LENDER WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO JURY TRIAL
IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY
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ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTE OR
TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT,
TORT OR ANY OTHER THEORY).
Very truly yours,
THE CHASE MANHATTAN BANK
By:
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Name:
Title:
Agreed and Accepted:
ALLMERICA FINANCIAL CORPORATION
By:
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Name:
Title:
CITIZENS ACQUISITION CORPORATION
By:
--------------------------------------
Name:
Title:
5
EXHIBIT A
(Letterhead of counsel to the Borrowers)
[Date of Initial Borrowing]
The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Ladies and Gentlemen:
We have acted as counsel to Allmerica Financial Corporation and
Citizens Acquisition Corporation (the "Borrowers") in connection with the
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execution and delivery of that certain Letter Agreement (the "Letter Agreement")
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dated as of December 1, 1998 between the Borrowers and The Chase Manhattan Bank
(the "Lender") and the Note (as defined in the Letter Agreement; the Note
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together with the Letter Agreement, the "Facility Documents") executed by the
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Borrowers in connection with the Letter Agreement. Except as otherwise defined
herein, all terms used herein and defined in the Letter Agreement, the Note or
any agreement delivered thereunder shall have the meanings assigned to them
therein.
In rendering the opinions expressed below, we have examined the
Facility Documents. We have also examined such certificates, documents and
records, and have made such examination of law, as we have deemed necessary to
enable us to render the opinions expressed below. In addition, we have examined
and relied as to matters of fact upon representations and warranties contained
in the Facility Documents and in certificates and upon covenants contained in
the Facility Documents as to the application of the proceeds of the loans made
pursuant thereto.
We call your attention to the fact that each of the Facility Documents
provides that it is to be governed by and construed in accordance with the laws
of the State of New York, and we understand that you are relying on the advice
of your own counsel with respect to all matters involving New York law. For
purposes of rendering the opinions expressed in paragraph 3 below, we have
assumed that each Facility Document is to be governed by and construed in
accordance with the internal laws of The Commonwealth of Massachusetts.
The opinions expressed below are limited to matters governed by the
internal laws of The Commonwealth of Massachusetts, the Federal laws of the
United States of America and the Delaware General Corporation Law. The
following opinions do not purport to cover matters relating to Regulations T, U
or X of the Board of Governors of the Federal Reserve System.
In connection with this opinion, we have examined executed copies of
the Facility Documents and such other documents, records, agreements and
certificates as we have deemed appropriate. We have also reviewed such matters
of law as we have considered relevant for the purpose of this opinion.
Based upon the foregoing, we are of the opinion that:
1. Each Borrower is a corporation duly incorporated, validly existing
and in good standing under the laws of the jurisdiction of its incorporation,
has the corporate power and authority to borrow under the Facility Documents and
to execute and deliver and to perform is obligations under, the Facility
Documents.
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2. The execution, delivery and performance by each Borrower of the
Facility Documents have been duly authorized by all necessary corporate action
and do not and will not (a) contravene such Borrower's charter or by-laws,
(b) violate any applicable law, rule or regulation of the United States of
America, The Commonwealth of Massachusetts or the Delaware General Corporation
law, or (c) result in a breach of, constitute a default under, require any
consent under, or result in the acceleration or required prepayment of any
indebtedness pursuant to the terms of, any agreement or instrument to which such
Borrower or any of its Subsidiaries is a party, or by which any of them is bound
or to which any of them is subject, and which has been or is required to be
filed with the Securities and Exchange Commission, or result in the creation or
imposition of any Lien upon any Property of such Borrower pursuant to, the terms
of any such agreement or instrument.
3. Each Facility Document is, or when delivered under the Letter
Agreement will be, a legal, valid and binding obligation of each Borrower,
enforceable against such Borrower in accordance with its terms.
Our opinions that each of the Facility Documents being delivered to
you today constitute the legal, valid and binding obligation of the Borrowers,
enforceable against them in accordance with its terms, are subject to (a)
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors and secured parties
and (b) general principles of equity, regardless of whether enforcement is
sought in proceedings in equity or at law.
We express no opinion with respect to the applicability of Section 548
of the Bankruptcy Code or any other fraudulent conveyance provision. In
particular, we express no opinion as to whether a subsidiary may guarantee or
otherwise become liable for, or pledge its assets to secure, indebtedness
incurred by its parent or another subsidiary of its parent, except to the extent
such subsidiary may be determined to have received a benefit from the incurrence
of such indebtedness by its parent or such other subsidiary, or as to whether
such benefit may be measured other than by the extent to which the proceeds of
the indebtedness incurred by the parent or such other subsidiary are directly or
indirectly made available to such subsidiary for its corporate purposes. We
call your attention to the fact that certain cases have held that an obligation
of a corporation incurred to purchase a corporation's stock may under certain
circumstances become subordinate to the claims of general creditors upon the
bankruptcy or insolvency of the corporation.
The foregoing opinions are subject to the following comments and
qualifications:
(A) The enforceability of the Facility Documents may be limited by
laws rendering unenforceable indemnification contrary to Federal or state
securities laws and the public policy underlying such laws.
(B) The enforceability of provisions in the Facility Documents to the
effect that terms may not be waived or modified except in writing may be limited
under certain circumstances
(C) We express no opinion as to (i) the effect of the laws of any
jurisdiction in which the Lender is located that limit the interest, fees or
other charges the Lender may impose and (ii) the second sentence of the section
of the Letter Agreement captioned "Governing Law; Jurisdiction" and the first
sentence of Section 5(e) of the Note, insofar as such sentences relate to the
subject matter jurisdiction of the United States District Court for the Southern
District of New York to adjudicate any controversy related to the Facility
Documents.
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The foregoing opinion is solely for your benefit and may not be relied
on by any other Person.
Very truly yours,
8
EXHIBIT B
[Chase Logo Appears Here]
PROMISSORY NOTE
New York, New York December 1, 1998
FOR VALUE RECEIVED, ALLMERICA FINANCIAL CORPORATION and CITIZENS
ACQUISITION CORPORATION (collectively, the "Borrowers"), jointly and severally,
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unconditionally promises to pay to the order of THE CHASE MANHATTAN BANK (the
"Bank"), at its principal office, 270 Park Avenue, New York, New York l0017 (the
- -----
"Principal Office"), for the account of the Principal Office (or such other
----------------
office or affiliate as the Bank may from time to time specify), the principal
amount of each Loan endorsed on the schedule attached hereto and made a part
hereof (including any continuations, the "Schedule") on the maturity date of
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such Loan as shown on the Schedule, and to pay interest on the unpaid balance of
the principal amount of such Loan from and including the date of such Loan (as
shown on the Schedule ) to such maturity date at (a) a variable rate per annum
equal to the higher of (i) the Federal Funds Rate plus 1/2 of 1% and (ii) the
Prime Rate (such higher rate being the "Base Rate" and such Loan a "Base Rate
--------- ---------
Loan"); or (b) a fixed rate per annum equal to the Eurodollar Rate applicable to
- ----
such Loan (a "Eurodollar Loan"), plus the Applicable Margin; or (c) a fixed rate
---------------
per annum as the Bank may in its discretion offer to the Borrowers and the
Borrowers may accept (an "Offered Rate Loan"). Any principal not paid when due
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shall bear interest from maturity until paid in full at a rate per annum equal
to the Default Rate. Interest shall be payable on the relevant Interest Payment
Date. Interest shall be calculated on the basis of a year of 360 days for the
actual days elapsed, except that interest computed by reference to the Prime
Rate shall be calculated on the basis of a year of 365 days (or 366 days, in the
case of a leap year) for the actual days elapsed. All payments hereunder shall
be made in lawful money of the United States and in immediately available funds.
Any extension of time for the payment of the principal of this note resulting
from the due date falling on a non-Banking Day shall be included in the
computation of interest. The date, and interest periods of, and the interest
rates with respect to, the Loans and any payments of principal shall be recorded
by the Bank on its books and prior to any transfer of this note (or, at the
discretion of the Bank, at any other time) endorsed by the Bank on the Schedule,
which shall be conclusive in the absence of manifest error; provided, however,
-------- -------
that the Bank's failure to endorse the Schedule shall not affect the Borrowers'
obligations hereunder.
1. Certain Definitions. Unless otherwise defined herein, capitalized
-------------------
terms shall have the meanings assigned to them in the Letter Agreement (as
defined in Section 2 hereof). As used herein, the following terms shall have
the corresponding meanings.
(a) "Applicable Margin" means, with respect to any Eurodollar Loan,
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(i) 0.45% for such Eurodollar Loan drawn at or before 12:00 p.m. on December 4,
1998, (ii) 0.60% for such Eurodollar Loan drawn after 12:00 p.m. on December 4,
1998 but at or before 12:00 p.m. on December 18, 1998, (iii) 1.0% for such
Eurodollar Loan drawn after 12:00 p.m. on December 18, 1998 but at or before
5:00 p.m. on January 8, 1999 and (iv) 0.45% for such Eurodollar Loan drawn after
8:00 a.m. on January 11, 1999; provided that if Allmerica's short term debt
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rating from S&P or Moody's shall be reduced from the respective rating from S&P
or Moody's in existence on the date hereof at any time during the period from
the date hereof until the date of the drawdown of the initial Loan hereunder,
the Applicable Margin shall be increased by 0.10%.
9
(b) "Banking Day" means any day on which commercial banks are not
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authorized or required to close in New York City and, where such term is used in
the definition of "Eurodollar Rate" or refers to the Eurodollar Rate, which is
also a day on which dealings in U.S. dollar deposits are carried out in the
London interbank market.
(c) "Default Rate" means, in respect of any amount not paid when due,
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a rate per annum during the period commencing on the due date until such amount
is paid in full equal to a floating rate 2% above the Base Rate; provided that,
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if the amount in default is principal of an Offered Rate Loan or Eurodollar
Loan, a fixed rate 2% above the rate of interest in effect thereon (including
the margin) at the time of default until the end of the then current interest
period therefor and, thereafter, a floating rate 2% above the Base Rate.
(d) "Eurodollar Rate" means the rate per annum (rounded upwards, if
---------------
necessary, to the nearest 1/100 of 1%) quoted by the Bank at approximately 11:00
a.m. London time (or as soon thereafter as practicable) two Banking Days' prior
to the first day of an interest period during which the Eurodollar Rate will
accrue for the offering by the Bank to leading banks in the London interbank
market of U.S. dollar deposits having a term comparable to such loan and in an
amount comparable to the principal amount of such loan.
(e) "Federal Funds Rate" means, for any day, the rate per annum
------------------
(expressed on a 360 day basis of calculation) equal to the weighted average of
the rates on overnight Federal funds transactions as published by the Federal
Reserve Bank of New York for such day (or for any day that is not a Banking Day,
for the immediately preceding Banking Day).
(f) "Interest Payment Date" means for any loan hereunder, the first
---------------------
day commencing after such loan as follows: (i) for any Base Rate Loan, the last
Banking Day of each March, June, September and December; (ii) for any Offered
Rate Loan, at 90-day intervals; (iii) for any Eurodollar Loan, at three-month
intervals; (iv) for any amount accruing interest at the Default Rate, on demand;
and (v) for any amount, upon maturity and any prepayment or repayment.
(g) "Prime Rate" means the rate of interest per annum publicly
----------
announced from time to time announced by the Bank as its prime rate in effect at
the Principal Office; each change in the Prime Rate shall be effective from and
including the date such change is publicly announced as being effective.
(h) "Regulatory Change" means any change after the date hereof in
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United States federal, state or foreign laws or regulations (including
Regulation D of the Board of Governors of the Federal Reserve System) or the
adoption or making after such date of any interpretations, directives or
requests applying to a class of banks including the Bank of or under any United
States federal or state, or any foreign, laws or regulations (whether or not
having the force of law) by any court or governmental or monetary authority
charged with the interpretation or administration thereof.
2. Related Letter Agreement. Loans evidenced hereby are made pursuant
------------------------
to that certain letter agreement dated December 1, 1998 between the Bank and the
Borrowers (the "Letter Agreement").
----------------
3. Additional Costs, Etc. (a) If, as a result of any Regulatory
----------------------
Change, the Bank reasonably determines that the cost to the Bank of making or
maintaining any Eurodollar Loan evidenced hereby is increased, or any amount
received or receivable by the Bank hereunder is reduced, or the Bank is required
to make any payment in connection with any transaction contemplated hereby, then
the Borrowers jointly and severally agree to pay to the Bank on demand such
additional amount or amounts as the Bank determines will compensate the Bank for
such increased cost, reduction or payment. The Bank shall furnish the Borrowers
with calculations of such amounts due, in the absence of demonstrable error,
shall be conclusive.
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(b) If there is any payment of a Eurodollar Loan or Offered Rate Loan
prior to its stated maturity (by reason of acceleration or otherwise), the
Borrowers jointly and severally agree that they will promptly pay the Bank on
demand an amount determined by the Bank in good faith sufficient to compensate
it for such payment. Without limiting the effect of the preceding sentence, such
compensation shall include an amount equal to the excess, if any, of (i) the
amount of interest which would have accrued on the principal amount of such Loan
had Borrowers not so paid, for the period from the date of such payment to the
last day of the current interest period therefor over (ii) the amount of
interest which would accrue on such principal amount for such period at the
interest rate which Lender would bid were it to bid, at the commencement of such
period, for dollar deposits of a comparable amount and period from other banks
in the London interbank market (as reasonably determined by Lender), or if
Lender shall cease to make such bids, the equivalent bid rate, as reasonably
determined by Lender, derived from display page 3750 (British Bankers
Association - LIBOR) of the Dow Jones Markets (Telerate) Screen (or any
successor or substitute therefor).
4. Events of Default. If any of the following events shall occur and
-----------------
be continuing: (a) the Borrowers shall fail to pay the principal of this Note
when due; or interest on, or any other amount payable under, this Note, within
three Banking Days of when due and payable; (b) any Borrower shall breach any
representation or warranty made by it in this Note or the Letter Agreement or
any other document executed in connection with this Note (this Note, the Letter
Agreement and any such other document being the "Facility Documents") or which
------------------
is contained in any certificate, document, opinion, financial or other statement
furnished by such Borrower at any time under or in connection with any Facility
Documents shall prove to have been incorrect in any material respect on or as of
the date made; (c) Allmerica shall fail to perform or observe any term, covenant
or agreement contained in Section 8.04, 8.05, 8.06, 8.08, 8.10 or 8.11 of the
Existing Credit Agreement as in incorporated herein by reference pursuant to the
section of the Letter Agreement captioned "Covenants"; (d) any Borrower shall
fail to perform or observe any term, covenant or agreement (other than the
covenants referenced in clause (c) above) contained in any Facility Document and
such failure shall continue for 30 days after written notice from the Bank
thereof; (e) Allmerica or any of its Subsidiaries (as defined in the Existing
Credit Agreement) shall default in the payment when due (after giving effect to
any applicable grace periods) of any principal of or interest on any of its
other Indebtedness (as defined in the Existing Credit Agreement) aggregating
$10,000,000 or more; or any event specified in any note, agreement, indenture or
other document evidencing or relating to such Indebtedness shall occur if the
effect of such event is to cause, or (with the giving of any notice or the lapse
of time or both) to permit the holder or holders of such indebtedness (or a
trustee or agent on behalf of such holder or holders) to cause, such
Indebtedness to become due, or to be prepaid in full (whether by redemption,
purchase, offer to purchase or otherwise), prior to its stated maturity or to
have the interest rate thereon reset to a level so that securities evidencing
such Indebtedness trade at a level specified in relation to the par value
thereof; (f) Allmerica shall fail to pay when due (after giving effect to any
applicable grace periods) of any amount aggregating $10,000,000 or more on any
of its Rate Hedging Obligations (as defined in the Existing Credit Agreement) or
any event specified in any agreement or document relating to any such Rate
Hedging Obligations shall occur if the effect of such event is to cause, or
(with the giving of notice or the lapse of time or both) to permit, termination
or liquidation payment or payments aggregating $10,000,000 or more to become
due; (g) Citizens Acquisition or Allmerica or any of its Insurance Subsidiaries
(as defined in the Existing Credit Agreement): (i) shall generally not, or be
unable to, or shall admit in writing its inability to, pay its debts as its
debts become due; (ii) shall make an assignment for the benefit of creditors;
(iii) shall file a petition in bankruptcy or for any relief under any law of any
jurisdiction relating to reorganization, arrangement, readjustment of debt,
dissolution or liquidation; (iv) shall have any such petition filed against it
in which an adjudication is made or order for relief is entered or which shall
remain undismissed for a period of 60 days or shall consent or acquiesce
thereto; (v) shall have had a receiver, custodian or trustee appointed for all
or a substantial part of its property; (h) any event described in Sections 9(h),
(i), (j), (k) or (l) of the Existing Credit Agreement shall have occurred, THEN,
in any such case, if the Bank shall elect by notice to the Borrowers, the unpaid
principal amount of this Note, together with accrued interest, shall become
11
forthwith due and payable; provided that in the case of an event of default
--------
under clause (g) above, the unpaid principal amount of this Note, together with
accrued interest, shall immediately become due and payable without any notice or
other action by the Bank.
5. Miscellaneous. (a) Each Borrower hereby accepts joint and several
-------------
liability for the obligations under this Note in consideration of the financial
accommodation provided by the Bank under the Letter Agreement and agrees that if
and to the extent that a Borrower shall fail to make any payment due hereunder
as and when due in accordance with the terms hereof, then the other Borrower
will make such payment. The liability of each Borrower hereunder is absolute
and unconditional irrespective of any defense, setoff or counterclaim with
respect to the Letter Agreement and this Note and the transactions contemplated
thereby which might constitute a defense available to, or discharge of, a
Borrower or a guarantor.
(b) Each Borrower waives presentment, notice of dishonor, protest and
any other formality with respect to this Note.
(c) The Borrowers jointly and severally agree to reimburse the Bank on
demand for all costs, expenses and charges (including without limitation,
reasonable fees and charges of external legal counsel for the Bank and costs
allocated by its internal legal department) in connection with the preparation,
interpretation, performance or enforcement of this Note and the Letter
Agreement.
(d) This Note shall be binding on the Borrowers and their successors
and assigns and shall inure to the benefit of the Bank and its successors and
assigns, except that no Borrower may delegate any obligations hereunder without
the prior written consent of the Bank. This Note may not be assigned by the
Bank except with the prior written consent of the Borrowers, which consent shall
not be unreasonably withheld.
(e) Each Borrower consents to the nonexclusive jurisdiction and venue of the
state and federal courts located in the City of New York. Service of process by
the Bank in connection with any dispute shall be binding on each Borrower if
sent to such Borrower by registered mail at the address specified below. EACH
OF THE BANK AND EACH BORROWER HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, ANY RIGHT IT MAY HAVE TO JURY TRIAL IN ANY LEGAL PROCEEDING DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS NOTE OR TRANSACTIONS CONTEMPLATED
HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).
(f) This Note shall be governed by and interpreted and construed in
accordance with the laws of the State of New York, provided that the foregoing
--------
is not intended to limit the maximum rate of interest which may be charged or
collected by the Bank hereon if, under the law applicable to it, the Bank may
charge or collect such interest at a higher rate than is permissible under the
law of said State. In no case shall the interest hereon exceed the maximum
amount which the Bank may charge or collect under such law applicable to it.
ALLMERICA FINANCIAL CORPORATION CITIZENS ACQUISITION CORPORATION
By: By:
-------------------------------- --------------------------------
Name: Name:
Title: Title:
Address: Address:
Allmerica Financial Corporation Citizens Acquisition Corporation
440 Lincoln Street c/o Allmerica Financial Corporation
Worcester, Massachusetts 01653 440 Lincoln Street
Worcester, Massachusetts 01653
12
SCHEDULE
Amount of
Payment and Principal
Loan Number Balance
Notation Date and Amount of Loan Maturity to Which Remaining
Made By Loan Number and Interest Rate Date Applied Unpaid
13
[Chase Logo Appears Here]
PROMISSORY NOTE
New York, New York December 1, 1998
FOR VALUE RECEIVED, ALLMERICA FINANCIAL CORPORATION and CITIZENS
ACQUISITION CORPORATION (collectively, the "Borrowers"), jointly and severally,
---------
unconditionally promises to pay to the order of THE CHASE MANHATTAN BANK (the
"Bank"), at its principal office, 270 Park Avenue, New York, New York l0017 (the
- -----
"Principal Office"), for the account of the Principal Office (or such other
----------------
office or affiliate as the Bank may from time to time specify), the principal
amount of each Loan endorsed on the schedule attached hereto and made a part
hereof (including any continuations, the "Schedule") on the maturity date of
--------
such Loan as shown on the Schedule, and to pay interest on the unpaid balance of
the principal amount of such Loan from and including the date of such Loan (as
shown on the Schedule ) to such maturity date at (a) a variable rate per annum
equal to the higher of (i) the Federal Funds Rate plus 1/2 of 1% and (ii) the
Prime Rate (such higher rate being the "Base Rate" and such Loan a "Base Rate
--------- ---------
Loan"); or (b) a fixed rate per annum equal to the Eurodollar Rate applicable to
- ----
such Loan (a "Eurodollar Loan"), plus the Applicable Margin; or (c) a fixed rate
---------------
per annum as the Bank may in its discretion offer to the Borrowers and the
Borrowers may accept (an "Offered Rate Loan"). Any principal not paid when due
-----------------
shall bear interest from maturity until paid in full at a rate per annum equal
to the Default Rate. Interest shall be payable on the relevant Interest Payment
Date. Interest shall be calculated on the basis of a year of 360 days for the
actual days elapsed, except that interest computed by reference to the Prime
Rate shall be calculated on the basis of a year of 365 days (or 366 days, in the
case of a leap year) for the actual days elapsed. All payments hereunder shall
be made in lawful money of the United States and in immediately available funds.
Any extension of time for the payment of the principal of this note resulting
from the due date falling on a non-Banking Day shall be included in the
computation of interest. The date, and interest periods of, and the interest
rates with respect to, the Loans and any payments of principal shall be recorded
by the Bank on its books and prior to any transfer of this note (or, at the
discretion of the Bank, at any other time) endorsed by the Bank on the Schedule,
which shall be conclusive in the absence of manifest error; provided, however,
-------- -------
that the Bank's failure to endorse the Schedule shall not affect the Borrowers'
obligations hereunder.
1. Certain Definitions. Unless otherwise defined herein, capitalized
-------------------
terms shall have the meanings assigned to them in the Letter Agreement (as
defined in Section 2 hereof). As used herein, the following terms shall have
the corresponding meanings.
(a) "Applicable Margin" means, with respect to any Eurodollar Loan,
-----------------
(i) 0.45% for such Eurodollar Loan drawn at or before 12:00 p.m. on December 4,
1998, (ii) 0.60% for such Eurodollar Loan drawn after 12:00 p.m. on December 4,
1998 but at or before 12:00 p.m. on December 18, 1998, (iii) 1.0% for such
Eurodollar Loan drawn after 12:00 p.m. on December 18, 1998 but at or before
5:00 p.m. on January 8, 1999 and (iv) 0.45% for such Eurodollar Loan drawn after
8:00 a.m. on January 11, 1999; provided that if Allmerica's short term debt
--------
rating from S&P or Moody's shall be reduced from the respective rating from S&P
or Moody's in existence on the date hereof at any time during the period from
the date hereof until the date of the drawdown of the initial Loan hereunder,
the Applicable Margin shall be increased by 0.10%.
(b) "Banking Day" means any day on which commercial banks are not
-----------
authorized or required to close in New York City and, where such term is used in
the definition of "Eurodollar Rate" or refers to the Eurodollar Rate, which is
also a day on which dealings in U.S. dollar deposits are carried out in the
London interbank market.
14
(c) "Default Rate" means, in respect of any amount not paid when due,
------------
a rate per annum during the period commencing on the due date until such amount
is paid in full equal to a floating rate 2% above the Base Rate; provided that,
--------
if the amount in default is principal of an Offered Rate Loan or Eurodollar
Loan, a fixed rate 2% above the rate of interest in effect thereon (including
the margin) at the time of default until the end of the then current interest
period therefor and, thereafter, a floating rate 2% above the Base Rate.
(d) "Eurodollar Rate" means the rate per annum (rounded upwards, if
---------------
necessary, to the nearest 1/100 of 1%) quoted by the Bank at approximately 11:00
a.m. London time (or as soon thereafter as practicable) two Banking Days' prior
to the first day of an interest period during which the Eurodollar Rate will
accrue for the offering by the Bank to leading banks in the London interbank
market of U.S. dollar deposits having a term comparable to such loan and in an
amount comparable to the principal amount of such loan.
(e) "Federal Funds Rate" means, for any day, the rate per annum
------------------
(expressed on a 360 day basis of calculation) equal to the weighted average of
the rates on overnight Federal funds transactions as published by the Federal
Reserve Bank of New York for such day (or for any day that is not a Banking Day,
for the immediately preceding Banking Day).
(f) "Interest Payment Date" means for any loan hereunder, the first
---------------------
day commencing after such loan as follows: (i) for any Base Rate Loan, the last
Banking Day of each March, June, September and December; (ii) for any Offered
Rate Loan, at 90-day intervals; (iii) for any Eurodollar Loan, at three-month
intervals; (iv) for any amount accruing interest at the Default Rate, on demand;
and (v) for any amount, upon maturity and any prepayment or repayment.
(g) "Prime Rate" means the rate of interest per annum publicly
----------
announced from time to time announced by the Bank as its prime rate in effect at
the Principal Office; each change in the Prime Rate shall be effective from and
including the date such change is publicly announced as being effective.
(h) "Regulatory Change" means any change after the date hereof in
-----------------
United States federal, state or foreign laws or regulations (including
Regulation D of the Board of Governors of the Federal Reserve System) or the
adoption or making after such date of any interpretations, directives or
requests applying to a class of banks including the Bank of or under any United
States federal or state, or any foreign, laws or regulations (whether or not
having the force of law) by any court or governmental or monetary authority
charged with the interpretation or administration thereof.
2. Related Letter Agreement. Loans evidenced hereby are made pursuant
------------------------
to that certain letter agreement dated December 1, 1998 between the Bank and the
Borrowers (the "Letter Agreement").
----------------
3. Additional Costs, Etc. (a) If, as a result of any Regulatory
----------------------
Change, the Bank reasonably determines that the cost to the Bank of making or
maintaining any Eurodollar Loan evidenced hereby is increased, or any amount
received or receivable by the Bank hereunder is reduced, or the Bank is required
to make any payment in connection with any transaction contemplated hereby, then
the Borrowers jointly and severally agree to pay to the Bank on demand such
additional amount or amounts as the Bank determines will compensate the Bank for
such increased cost, reduction or payment. The Bank shall furnish the Borrowers
with calculations of such amounts due, in the absence of demonstrable error,
shall be conclusive.
(b) If there is any payment of a Eurodollar Loan or Offered Rate Loan
prior to its stated maturity (by reason of acceleration or otherwise), the
Borrowers jointly and severally agree that they will promptly
15
pay the Bank on demand an amount determined by the Bank in good faith sufficient
to compensate it for such payment. Without limiting the effect of the preceding
sentence, such compensation shall include an amount equal to the excess, if any,
of (i) the amount of interest which would have accrued on the principal amount
of such Loan had Borrowers not so paid, for the period from the date of such
payment to the last day of the current interest period therefor over (ii) the
amount of interest which would accrue on such principal amount for such period
at the interest rate which Lender would bid were it to bid, at the commencement
of such period, for dollar deposits of a comparable amount and period from other
banks in the London interbank market (as reasonably determined by Lender), or if
Lender shall cease to make such bids, the equivalent bid rate, as reasonably
determined by Lender, derived from display page 3750 (British Bankers
Association - LIBOR) of the Dow Jones Markets (Telerate) Screen (or any
successor or substitute therefor).
4. Events of Default. If any of the following events shall occur and
-----------------
be continuing: (a) the Borrowers shall fail to pay the principal of this Note
when due; or interest on, or any other amount payable under, this Note, within
three Banking Days of when due and payable; (b) any Borrower shall breach any
representation or warranty made by it in this Note or the Letter Agreement or
any other document executed in connection with this Note (this Note, the Letter
Agreement and any such other document being the "Facility Documents") or which
------------------
is contained in any certificate, document, opinion, financial or other statement
furnished by such Borrower at any time under or in connection with any Facility
Documents shall prove to have been incorrect in any material respect on or as of
the date made; (c) Allmerica shall fail to perform or observe any term, covenant
or agreement contained in Section 8.04, 8.05, 8.06, 8.08, 8.10 or 8.11 of the
Existing Credit Agreement as in incorporated herein by reference pursuant to the
section of the Letter Agreement captioned "Covenants"; (d) any Borrower shall
fail to perform or observe any term, covenant or agreement (other than the
covenants referenced in clause (c) above) contained in any Facility Document and
such failure shall continue for 30 days after written notice from the Bank
thereof; (e) Allmerica or any of its Subsidiaries (as defined in the Existing
Credit Agreement) shall default in the payment when due (after giving effect to
any applicable grace periods) of any principal of or interest on any of its
other Indebtedness (as defined in the Existing Credit Agreement) aggregating
$10,000,000 or more; or any event specified in any note, agreement, indenture or
other document evidencing or relating to such Indebtedness shall occur if the
effect of such event is to cause, or (with the giving of any notice or the lapse
of time or both) to permit the holder or holders of such indebtedness (or a
trustee or agent on behalf of such holder or holders) to cause, such
Indebtedness to become due, or to be prepaid in full (whether by redemption,
purchase, offer to purchase or otherwise), prior to its stated maturity or to
have the interest rate thereon reset to a level so that securities evidencing
such Indebtedness trade at a level specified in relation to the par value
thereof; (f) Allmerica shall fail to pay when due (after giving effect to any
applicable grace periods) of any amount aggregating $10,000,000 or more on any
of its Rate Hedging Obligations (as defined in the Existing Credit Agreement) or
any event specified in any agreement or document relating to any such Rate
Hedging Obligations shall occur if the effect of such event is to cause, or
(with the giving of notice or the lapse of time or both) to permit, termination
or liquidation payment or payments aggregating $10,000,000 or more to become
due; (g) Citizens Acquisition or Allmerica or any of its Insurance Subsidiaries
(as defined in the Existing Credit Agreement): (i) shall generally not, or be
unable to, or shall admit in writing its inability to, pay its debts as its
debts become due; (ii) shall make an assignment for the benefit of creditors;
(iii) shall file a petition in bankruptcy or for any relief under any law of any
jurisdiction relating to reorganization, arrangement, readjustment of debt,
dissolution or liquidation; (iv) shall have any such petition filed against it
in which an adjudication is made or order for relief is entered or which shall
remain undismissed for a period of 60 days or shall consent or acquiesce
thereto; (v) shall have had a receiver, custodian or trustee appointed for all
or a substantial part of its property; (h) any event described in Sections 9(h),
(i), (j), (k) or (l) of the Existing Credit Agreement shall have occurred, THEN,
in any such case, if the Bank shall elect by notice to the Borrowers, the unpaid
principal amount of this Note, together with accrued interest, shall become
forthwith due and payable; provided that in the case of an event of default
--------
under clause (g) above, the unpaid principal amount of this Note, together with
accrued interest, shall immediately become due and payable without any notice or
other action by the Bank.
16
5. Miscellaneous. (a) Each Borrower hereby accepts joint and several
-------------
liability for the obligations under this Note in consideration of the financial
accommodation provided by the Bank under the Letter Agreement and agrees that if
and to the extent that a Borrower shall fail to make any payment due hereunder
as and when due in accordance with the terms hereof, then the other Borrower
will make such payment. The liability of each Borrower hereunder is absolute
and unconditional irrespective of any defense, setoff or counterclaim with
respect to the Letter Agreement and this Note and the transactions contemplated
thereby which might constitute a defense available to, or discharge of, a
Borrower or a guarantor.
(b) Each Borrower waives presentment, notice of dishonor, protest and
any other formality with respect to this Note.
(c) The Borrowers jointly and severally agree to reimburse the Bank on
demand for all costs, expenses and charges (including without limitation,
reasonable fees and charges of external legal counsel for the Bank and costs
allocated by its internal legal department) in connection with the preparation,
interpretation, performance or enforcement of this Note and the Letter
Agreement.
(d) This Note shall be binding on the Borrowers and their successors
and assigns and shall inure to the benefit of the Bank and its successors and
assigns, except that no Borrower may delegate any obligations hereunder without
the prior written consent of the Bank. This Note may not be assigned by the
Bank except with the prior written consent of the Borrowers, which consent shall
not be unreasonably withheld.
(e) Each Borrower consents to the nonexclusive jurisdiction and venue of the
state and federal courts located in the City of New York. Service of process by
the Bank in connection with any dispute shall be binding on each Borrower if
sent to such Borrower by registered mail at the address specified below. EACH
OF THE BANK AND EACH BORROWER HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, ANY RIGHT IT MAY HAVE TO JURY TRIAL IN ANY LEGAL PROCEEDING DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS NOTE OR TRANSACTIONS CONTEMPLATED
HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).
(f) This Note shall be governed by and interpreted and construed in
accordance with the laws of the State of New York, provided that the foregoing
--------
is not intended to limit the maximum rate of interest which may be charged or
collected by the Bank hereon if, under the law applicable to it, the Bank may
charge or collect such interest at a higher rate than is permissible under the
law of said State. In no case shall the interest hereon exceed the maximum
amount which the Bank may charge or collect under such law applicable to it.
ALLMERICA FINANCIAL CORPORATION CITIZENS ACQUISITION CORPORATION
By: By:
-------------------------------- --------------------------------
Name: Name:
Title: Title:
Address: Address:
Allmerica Financial Corporation Citizens Acquisition Corporation
440 Lincoln Street c/o Allmerica Financial Corporation
Worcester, Massachusetts 01653 440 Lincoln Street
Worcester, Massachusetts 01653
17
SCHEDULE
Amount of
Payment and Principal
Loan Number Balance
Notation Date and Amount of Loan Maturity to Which Remaining
Made By Loan Number and Interest Rate Date Applied Unpaid
18