Exhibit 10.14.5
LOAN AGREEMENT
between
X.L. AMERICA, INC.
as Borrower,
and
X.L. INSURANCE COMPANY, LTD. and X.L. INVESTMENTS LTD.,
as Guarantors,
and
THREE RIVERS FUNDING CORPORATION,
as Lender,
dated as of
December 22, 1998
Table of Contents
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ARTICLE I DEFINITIONS: CONSTRUCTION...........................................1
1.01. Certain Definitions.................................................1
1.02. Construction........................................................7
1.03. Accounting Principles...............................................8
ARTICLE II THE LOANS..........................................................8
2.01. The Loans...........................................................8
2.02. The Note............................................................8
2.03. Loan Request........................................................9
2.04. Commitment..........................................................9
2.05. Mandatory and Optional Prepayments..................................9
2.06. Interest; Fees.....................................................10
2.07. Proceeds...........................................................10
2.08. Taxes..............................................................10
2.09. Increased Cost and Reduced Return..................................11
ARTICLE III REPRESENTATIONS AND WARRANTIES...................................12
3.01. Organization and Qualification.....................................12
3.02. Corporate Power and Authorization..................................12
3.03. Financial Information..............................................12
3.04. Litigation.........................................................12
3.05. No Adverse Changes.................................................12
3.06. No Conflicting Laws or Agreements; Consents and Approvals..........12
3.07. Execution and Binding Effect.......................................13
3.08. Taxes..............................................................13
3.09. Use of Proceeds....................................................13
3.10. Permits, Licenses and Rights.......................................13
3.11. Accurate and Complete Disclosure...................................13
3.12. Absence of Violations..............................................13
3.13. Environmental Matters..............................................13
3.14. Not an Investment Company..........................................14
ARTICLE IV CONDITIONS OF LENDING.............................................14
4.01. Effectiveness......................................................14
4.02. Borrowings.........................................................14
ARTICLE V AFFIRMATIVE COVENANTS..............................................15
5.01. Reporting and Information Requirements.............................15
5.02. Preservation of Existence and Franchises...........................16
5.03. Insurance..........................................................16
5.04. Maintenance of Properties..........................................16
5.05. Payment of Taxes and Other Potential Charges and Priority
Claims Payment of Other Current Liabilities......................16
5.06. Financial Accounting Practices.....................................17
5.07. Compliance with Applicable Laws....................................17
5.08. Use of Proceeds....................................................17
5.09. Continuation Of and Change In Business.............................17
5.10. Visitation.........................................................17
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ARTICLE VI NEGATIVE COVENANTS................................................17
6.01. Mergers and Acquisitions...........................................17
6.02. Dispositions of Assets.............................................18
6.03. Liens..............................................................18
6.04. Transactions With Affiliates.......................................19
6.05. Business...........................................................19
6.06. Ratio of Total Funded Debt to Consolidated Tangible Net Worth......19
6.07. Consolidated Net Worth.............................................19
6.08. Indebtedness.......................................................19
6.09. Operating Leverage.................................................20
6.10. Private Act........................................................20
ARTICLE VII EVENTS OF TERMINATION............................................20
7.01. Events of Termination..............................................20
7.02. Remedies...........................................................21
ARTICLE VIII GUARANTEE.......................................................22
8.01. The Guarantee......................................................22
8.02. Obligations Unconditional..........................................22
8.03. Reinstatement......................................................23
8.04. Remedies...........................................................23
8.05. Continuing Guarantee...............................................23
8.06. No Restrictions....................................................23
ARTICLE IX MISCELLANEOUS.....................................................24
9.01. Amendments and Waivers.............................................24
9.02. Notices............................................................24
9.03. Survival of Representations and Warranties.........................24
9.04. Payment of Expenses and Taxes......................................24
9.05. Successors and Assigns; Participations.............................25
9.06. Set-Off............................................................26
9.07. Counterparts.......................................................26
9.08. Severability.......................................................26
9.09. Integration........................................................26
9.10. Governing Law......................................................26
9.11. Submission To Jurisdiction Waivers.................................26
9.12. Acknowledgments....................................................27
9.13. Waiver Of Jury Trial...............................................27
9.14. No Bankruptcy Petition Against Lender..............................27
9.15. No Recourse........................................................27
9.16. Holidays...........................................................27
9.17. Judgment Currency..................................................28
9.18. Records............................................................28
9.19. Confidentiality....................................................28
Exhibit A Form of Promissory Note
Exhibit B Form of Loan Request
Exhibit C Contents of Opinions of Counsel
Schedule 3.01 Subsidiaries
Schedule 6.03(a) Liens
Schedule 6.08(d) Indebtedness
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LOAN AGREEMENT, dated as of December 22, 1998, by and between X.L.
AMERICA, INC., a Delaware corporation (the "Borrower"), X.L. INSURANCE COMPANY,
LTD. ("X.L. Insurance"), a Bermuda limited liability corporation, and X.L.
INVESTMENTS LTD. ("X.L. Investments"), a Bermuda limited liability corporation,
(X.L. Insurance and X.L. Investments are referred to herein individually as
"Guarantor" and collectively as the "Guarantors"), and THREE RIVERS FUNDING
CORPORATION a Delaware corporation (the "Lender").
PRELIMINARY STATEMENT
WHEREAS, the Lender has agreed to make Loans available to the Borrower
upon all of the terms and conditions herein set forth; and
WHEREAS, the Lender intends to fund the Loan by (a) the issuance of
Commercial Paper or (b) if the Lender is unable for any reason to issue
Commercial Paper, by borrowings under the Funding Agreements.
NOW, THEREFORE, in consideration of their mutual agreements hereinafter
set forth and intending to be legally bound hereby, the Borrower and the Lender
agree as follows.
ARTICLE I
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DEFINITIONS: CONSTRUCTION
-------------------------
1.01. Certain Definitions. In addition to other words and terms defined
elsewhere in this Agreement, as used herein the following words and terms shall
have the following meanings, respectively, unless the context hereof otherwise
clearly requires:
"Affected Party" means the Lender and each Person providing liquidity
or credit support to the Lender pursuant to the Funding Agreement and each of
their respective Affiliates and assigns.
"Affiliate" means, with respect to any specified Person, any other
Person which directly or indirectly, controls, or which is controlled by, or
which is under common control with, such specified Person.
"Agreement" shall mean this Agreement as amended, modified or
supplemented from time to time.
"Assets" at any time shall mean the assets of a Credit Party, as the
context requires, at such time, determined in accordance with GAAP or SAP, as
appropriate.
"Bermuda Companies Law" shall mean The Companies Act of 1981 of
Bermuda, as amended, and the regulations promulgated thereunder.
"Bermuda Insurance Law " shall mean The Insurance Act of 1978 of
Bermuda, as amended, and the regulations promulgated thereunder.
"Business Day" shall mean any day other than a Saturday, Sunday, public
holiday under the laws of the Commonwealth of Pennsylvania, of the State of New
York or of Bermuda or other day on which banking institutions are authorized or
obligated to close in Pittsburgh, Pennsylvania or New York, New York or Bermuda.
(The parties contemplate that on or shortly after the Closing Date they will
exchange and agree upon a list of public holidays for 1999).
"Capitalized Lease Obligation" shall mean any lease obligation which is
required to be capitalized in accordance with GAAP.
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"Change in Control" shall mean the occurrence of any of the following
events or conditions: (a) any Person or group of Persons (as used in Sections 13
and 14 of the Securities Exchange Act of 1934, as amended, (the "Exchange Act"),
and the rules and regulations thereunder) shall have become the beneficial owner
(as defined in rules promulgated by the Securities & Exchange Commission) of
more than 40% of the voting securities of EXEL Limited; (b) the sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of EXEL Limited; or
(c) a majority of the members of EXEL Limited's Board of Directors are persons
who are then serving on the Board of Directors without having been elected by
the Board of Directors or having been nominated for election by EXEL Limited's
shareholders.
"Closing Date" shall mean December 23, 1998 or such later date as may
be specified by the Borrower by one day's written notice to the Lender.
"Collateral" shall have the meaning given that term in the Pledge
Agreement.
"Collateral Agent" means Bankers Trust Company, a New York state bank,
in its capacity as Collateral Agent under the Third Amended and Restated
Security Agreement, dated as of September 10, 1998, between the Lender and such
Collateral Agent.
"Commercial Paper" means the commercial paper notes of the Lender
issued in the United States commercial paper market.
"Commitment" means the obligation of the Lender to make Loans to the
Borrower under this Agreement in a maximum principal amount outstanding at any
time equal to $150,000,000, as such amount may be reduced in accordance with the
provisions of Section 2.04 hereof.
"Commitment Expiration Date" means the earliest of (i) December 21,
1999, which may be extended from time to time for an additional period or
periods commencing on the then scheduled Commitment Expiration Date, by written
notice of request given by the Borrower to the Lender, specifying the duration
of the period of extension requested, at least 120 days before such scheduled
Commitment Expiration Date, and by written notice of acceptance (which
acceptance may be given or withheld by the Lender in its sole discretion) by the
Lender to the Borrower not later than ninety (90) days prior to such scheduled
Commitment Expiration Date, provided, that the new scheduled Commitment
Expiration Date shall in no event result in a remaining term of the commitment
that exceeds 360 days, (ii) the date that the Lender shall give notice of the
termination of the Commitment pursuant to Article VII of this Agreement, and
(iii) the first date on which there shall no longer be the Funding Agreement in
effect (as to which the Lender shall promptly notify the Borrower after
obtaining notice of such termination); provided, further, that if any Commitment
Expiration Date is not a Business Day it shall occur on the next preceding
Business Day.
"Consolidated Net Worth" shall mean at any date the consolidated
stockholders' equity of the Borrower and its consolidated Subsidiaries.
"Consolidated Tangible Net Worth" shall mean at any date the
consolidated stockholders' equity of the Borrower and its consolidated
Subsidiaries less their consolidated Intangible Assets, all determined as of
such date. For purposes of this definition "Intangible Assets" means the amount
(to the extent reflected in determining such consolidated stockholders' equity)
of (i) all write-ups (other than write-ups resulting from foreign currency
translations and write-ups of assets of a going concern business made within
twelve months after the acquisition of such business) subsequent to November 30,
1997, in the book value of any asset owned by the Borrower or a consolidated
Subsidiary and (ii) all unamortized debt discount and expense, unamortized
deferred charges, deferred acquisition costs, goodwill, patents, trademarks,
service marks, trade names, anticipated future benefit of tax loss
carry-forwards, copyrights, organization or developmental expenses and other
intangible assets.
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"Control Agreement" means the Control and Consent Acknowledgement and
Agreement Concerning Pledged Accounts, dated of even date herewith, by and
between X.L. Investments, the Lender, Mellon Bank, N. A., in its capacity as
Custodian under the Custody Agreement (as defined therein) and Mellon Bank, N.
A., in its capacity as Referral Agent for the Lender.
"Cost of Funds" means, with respect to any Settlement Period, an
amount, as notified in writing by the Lender to the Borrower on or prior to the
related Determination Date, equal to the interest, discount or carrying cost for
funding the Loans hereunder during such Settlement Period, either from the
issuance of Commercial Paper, the taking of loans, the sale of interests in the
Loans made hereunder or otherwise, computed by reference to the weighted average
Cost of Funds Rate for such Settlement Period.
"Cost of Funds Amount" means, with respect to each Settlement Period,
the sum of (a) the Cost of Funds for such Settlement Period, plus (b) the
product of (1) the Program Fee Rate times the average Outstanding Principal
Amount during such Settlement Period times (2) a fraction, the numerator of
which is the actual number of days in such Settlement Period and the denominator
of which is 360, plus (c) the product of (1) the Facility Fee Rate times the
average Commitment in effect during such Settlement Period and (2) a fraction,
the numerator of which is the actual number of days in such Settlement Period
and the denominator of which is 360.
"Cost of Funds Rate" means, with respect to the computation of the Cost
of Funds for a Settlement Period, (i) to the extent the funding for the Loans
during such Settlement Period is obtained through the issuance of Commercial
Paper, the effective yield of such Commercial Paper (including any dealer's
discount or fees) during such Settlement Period, (ii) to the extent funding for
the Loans during such Settlement Period is obtained through the sale of
interests in the Loans pursuant to the Funding Agreement, the sum of the LIBOR
Rate for such Settlement Period plus .625% per annum, and (iii) to the extent
funding for the Loans during such Settlement Period is obtained through the
taking of loans or otherwise or pursuant to any Program Support Agreement, the
rate provided in the operative documents governing the same during such
Settlement Period.
"Credit Parties" means the Borrower and the Guarantors and "Credit
Party" means any of them.
"Determination Date" means, with respect to any Settlement Date, the
second Business Day immediately preceding such Settlement Date.
"Dollar," "Dollars" and the symbol $ shall mean lawful money of the
United States of America.
"Dollar Equivalent" of an amount of a currency other than Dollars shall
mean the amount of Dollars which such amount of such currency could purchase at
11:00 o'clock A.M., New York City time on the date of determination, based upon
the quoted spot rates of Mellon at which its applicable branch or office offers
to exchange Dollars for such currency in the foreign exchange market and "Dollar
Equivalent" of an amount denominated in Dollars shall mean such amount of
Dollars.
"Dollar Equivalent Amount" of any Pledged Security shall mean (i) with
respect to any Pledged Security denominated in a currency other than Dollars,
the Dollar Equivalent of the market value of such Pledged Security as most
recently determined at the time in question in accordance with the Pledge
Agreement and (ii) with respect to a Pledged Security denominated in Dollars,
the market value of such Pledged Security as most recently determined at the
time in question in accordance with the Pledge Agreement.
"Environmental Concern Materials" shall mean (a) any flammable
substance, explosive, radioactive material, hazardous material, hazardous waste,
toxic substance, solid waste, pollutant, contaminant or any related material,
raw material, substance, product or by-product of any substance specified in or
regulated or otherwise affected by any Environmental Law (including but not
limited to any "hazardous substance" as defined in CERCLA or any similar Law),
(b) any toxic chemical or other substance from or related to
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industrial, commercial or institutional activities, and (c) asbestos, gasoline,
diesel fuel, motor oil, waste and used oil, heating oil and other petroleum
products or compounds, polychlorinated biphenyls, radon and urea formaldehyde.
"Environmental Law" shall mean any Law, whether now existing or
subsequently enacted or amended, relating to (a) pollution or protection of the
environment, including natural resources, (b) exposure of Persons, including but
not limited to employees, to Environmental Concern Materials, (c) protection of
the public health or welfare from the effects of products, by-products, wastes,
emissions, discharges or releases of Environmental Concern Materials or (d)
regulation of the manufacture, use or introduction into commerce of
Environmental Concern Materials, including their manufacture, formulation,
packaging, labeling, distribution, transportation, handling, storage or
disposal.
"Event of Termination" shall mean any of the Events of Termination
described in Section 7.01 hereof.
"Excluded Taxes" shall have the meaning given such term in Section 2.08
hereof.
"EXEL Limited" shall mean EXEL Limited, a corporation organized under
the laws of the Cayman Islands, British West Indies. EXEL Limited is the
indirect sole shareholder of X.L. Insurance Company, Ltd., except for a nominal
number of shares owned by two nominee shareholders required by the Bermuda
Companies Law.
"Facility Fee" means, with respect to any Settlement Date, the monthly
fee payable by the Borrower to the Lender on such Settlement Date computed on
the basis of the Facility Fee Rate and the Commitment with respect to the
related Settlement Period.
"Facility Fee Rate" means the rate per annum set forth in a separate
letter agreement between the Borrower and the Lender.
"Funding Agreement" means the Funding Agreement dated as of December
21, 1998 between Mellon and the Lender.
"GAAP" shall have the meaning set forth in Section 1.03 hereof.
"Guaranteed Obligations" shall have the meaning given that term in
Section 8.01 hereof.
"Guarantor" and "Guarantors" shall have the meaning given those terms
in the preamble to this Agreement.
"Guaranteed Obligations" shall have the meaning given that term in
Section 8.01 hereof.
"Guaranty Equivalents" means, with respect to any Person, without
duplication, any obligations of such Person (other than endorsements in the
ordinary course of business of negotiable instruments for deposit or collection)
guaranteeing or intended to guarantee any Indebtedness of any other Person in
any manner, whether direct or indirect, and including without limitation any
obligation, whether or not contingent, (i) to purchase any such Indebtedness or
any property constituting security therefor for the purpose of assuring the
holder of such Indebtedness, (ii) to advance or provide funds or other support
for the payment or purchase of any such Indebtedness or to maintain working
capital, solvency or other balance sheet condition of such other Person
(including without limitation keepwell agreements, maintenance agreements,
comfort letters or similar agreements or arrangements) for the benefit of any
holder of Indebtedness of such other Person, (iii) to lease or purchase
property, securities or services primarily for the purpose of assuring the
holder of such Indebtedness, or (iv) to otherwise assure or hold harmless the
holder of such Indebtedness against loss in respect thereof. The amount of any
Guaranty Equivalent hereunder shall (subject to any limitations set -forth
therein) be deemed to be an amount equal to
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the outstanding principal amount (or maximum principal amount, if larger) of the
Indebtedness in respect of which such Guaranty Equivalent is made.
"Indebtedness" of a Person shall mean (it being understood, for the
avoidance of doubt, that insurance payment liabilities, as such, and liabilities
arising in the ordinary course of such Person's business as an insurance company
or corporate member of Lloyds (other than in connection with the financing
activities of such Person or any of such Person's Affiliates) shall not be
deemed to constitute Indebtedness):
(i) all indebtedness or liability for or on account of money
borrowed by, or for or on account of deposits with or advances to (but
not including accrued pension costs, deferred income taxes or accounts
payable of) such Person;
(ii) all obligations (including contingent liabilities) of
such Person evidenced by bonds, debentures, notes, banker's acceptances
or similar instruments;
(iii) all indebtedness or liability for or on account of
property or services purchased or acquired by such Person;
(iv) any amount secured by a Lien on property owned by such
Person (whether or not assumed) and Capitalized Lease Obligations of
such Person (without regard to any limitation of the rights and
remedies of the holder of such Lien or the lessor under such
Capitalized Lease to repossession or sale of such property);
(v) the maximum available amount of all standby letters of
credit issued for the account of such Person and, without duplication,
all drafts drawn thereunder (to the extent unreimbursed; and
(vi) all Guaranty Equivalents of such Person.
"Insurance Subsidiary" means any, present or future, direct or indirect
Subsidiary of the Borrower that offers insurance products, including but not
limited to X.L. Europe Insurance.
"Law" shall mean any law (including common law), constitution, statute,
treaty, regulation, rule, ordinance, order, injunction, writ, decree or award of
any Official Body.
"LIBOR Rate" means, with respect to any date of determination, the rate
at which deposits in dollars for a period of thirty (30) days are offered to the
Referral Agent in the London Interbank market on such date in an amount
approximately equal to the principal amount of the Loan or Loans being funded by
a "funding institution" under the Funding Agreement.
"Lien" shall mean any mortgage, deed of trust, pledge, lien, security
interest, charge or other encumbrance or security arrangement of any nature
whatsoever, including but not limited to any conditional sale or title retention
arrangement, and any assignment, deposit arrangement or lease intended as, or
having the effect of, security.
"Loan" or "Loans" shall have the meaning given such terms in Section
2.01 hereof.
"Loan Documents" shall mean this Agreement, the Note, the Pledge
Agreement and the Control Agreement and any other documents or instruments
executed and delivered in connection herewith or therewith.
"Loan Request" shall have the meaning given that term in Section 2.03
hereof.
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"Material Adverse Effect" shall mean the occurrence of an event
(including any adverse determination in any litigation, arbitration, or
governmental investigation or proceeding), which has or could reasonably be
expected to have a materially adverse effect on: (a) the assets, business,
financial condition or operations of a Credit Party and its Subsidiaries taken
as a whole; or (b) the ability of a Credit Party to perform any of its payment
or other material obligations under this Agreement or the Note; or (c) the
legality, validity, binding effect or enforceability against a Credit Party of
any Loan Document that by its terms purports to bind such Credit Party.
"Mellon" shall mean Mellon Bank, N.A., a national banking association.
"Note" shall have the meaning set forth in Section 2.02 hereof.
"Obligations" shall mean the obligation of the Borrower to repay the
aggregate unpaid principal amount of all loans, and pay all interest accrued
thereon, all Facility Fees and Program Fees accruing and all other liabilities
of the Borrower arising pursuant to the terms of this Agreement or the other
Loan Documents.
"Office," when used in connection with the Lender, shall mean its
office located at Global Securitization Services, LLC, 25 West 43rd Street,
Suite 704, New York, New York 10036, or at such other office or offices of the
Lender or subsidiary or affiliate thereof as may be designated in writing from
time to time by the Lender to the Borrowers.
"Official Body" shall mean any government or political subdivision or
any agency, authority, bureau, central bank, commission, department or
instrumentality of either, or any court, tribunal, grand jury or arbitrator, in
each case whether foreign or domestic.
"Outstanding Principal Amount" means, with respect to any day, the
aggregate principal amount of the Loans outstanding on such day.
"Person" shall mean an individual, corporation, partnership, trust,
unincorporated association, joint venture, joint-stock company, government
(including political subdivisions), official body or agency, or any other
entity.
"Pledge Agreement" shall mean the Pledge Agreement, dated of even date
herewith, between X.L. Investments and the Lender.
"Pledged Securities" shall have the meaning given that term in the
Pledge Agreement.
"Pledged Securities Available Amount" at any time shall mean the amount
which is equal to the lesser of (i) 66 2/3% of the value of the Qualifying
Pledged Securities (as determined as a Dollar Equivalent Amount) and (ii) 100%
of the value of the Qualifying AA Pledged Securities (as determined as a Dollar
Equivalent).
"Private Act" shall mean separate legislation enacted in Bermuda with
the intention that such legislation applies specifically to a Borrower in whole
or in part.
"Program Fee" means, with respect to any Settlement Date, the monthly
fee payable by the Borrower to the Lender on such Settlement Date computed on
the basis of the Program Fee Rate and the Outstanding Principal Amount with
respect to the related Settlement Period.
"Program Fee Rate" means the rate per annum set forth in a separate
letter agreement between the Borrower and the Lender.
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"Program Support Agreement" means, collectively, all liquidity
agreements, funding agreements (other than the Funding Agreement), credit
agreements, letter of credit agreements, surety agreements, letter of credit and
all other agreements which may be in effect from time to time and which provide
liquidity or credit support in respect of the Commercial Paper.
"Qualifying Pledged Securities" means: (i) cash (including credit
balances treated as cash) and (b) debt securities rated at least A (or, in the
case of short-term debt securities A-1) or the equivalent by S&P (and not rated
lower than A (or, in the case of short-term debt securities P-1) by Moody's) or
at least A (or, in the case of short-term debt securities, P-1) or the
equivalent by Moody's (and not rated lower than A (or, in the case of short-term
securities, A-1) by S&P).
"Qualifying AA Pledged Securities" shall mean (a) cash (including
credit balances treated as cash) and (b) debt securities rated at least AA (or,
in the case of short-term debt securities, A-1) or the equivalent by S&P (and
not rated lower than Aa (or, in the case of short-term debt securities, P-1) by
Moody's) or at least Aa (or, in the case of short-term debt securities, P-1) or
the equivalent by Moody's (and not rated lower than AA (or, in the case of
short-term debt securities, A-1) by S&P).
"SAP" shall mean, as to the Borrower and each Insurance Subsidiary, the
statutory accounting practices prescribed or permitted by the relevant Official
Body for the Borrower's or such Insurance Subsidiary's domicile for the
preparation of Annual Statements and other Default reports by insurance
corporations of the same type as such Borrower or such Insurance Subsidiary in
effect on the date such statements or reports are to be prepared.
"Settlement Date" means the 3rd day of each calendar month or, if such
day is not a Business Day, the next succeeding Business Day.
"Settlement Period" means, with respect to a Settlement Date, the
calendar month (or portion thereof in the case of the first settlement period)
most recently ended.
"Subsidiary" of the Borrower at any time shall mean any corporation of
which a majority (by number of shares or number of votes) of any class of
outstanding capital stock normally entitled to vote for the election of one or
more directors (regardless of any contingency which does or may suspend or
dilute the voting rights of such class) is at such time owned directly or
indirectly by the Borrower or one or more Subsidiaries.
"Taxes" shall have the meaning set forth in Section 2.08 hereof.
"Total Funded Debt" of a Person at any time shall mean all Indebtedness
of such person which would at such time be classified in whole or in part as a
liability on the balance sheet of such person in accordance with GAAP.
"Unmatured Event" means an event or condition which, with the giving of
notice or the lapse of time or both, would be an Event of Termination.
1.02. Construction. Unless the context of this Agreement otherwise
clearly requires, "or" has the inclusive meaning represented by the phrase
"and/or. " References in this Agreement to "determination" by the Lender include
good faith estimates by the Lender (in the case of quantitative determinations)
and good faith belief of the Lender (in the case of qualitative determinations).
The words "hereof," "herein," "hereunder" and similar terms in this Agreement
refer to this Agreement as a whole and not to any particular provision of this
Agreement. The section and other headings contained in this Agreement are for
reference purposes only and shall not control or affect the construction of this
Agreement or the interpretation hereof in any respect. Section, subsection and
exhibit references are to this Agreement unless otherwise specified.
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1.03. Accounting Principles. (a) As used herein, "GAAP" shall mean
generally accepted accounting principles as such principles shall be in effect
in the United States of America at the Relevant Date, subject to the provisions
of this Section 1.03. As used herein, "Relevant Date" shall mean the date a
relevant computation or determination is to be made or the date of relevant
financial statements, as the case may be.
(b) Except as otherwise provided in this Agreement, all computations
and determinations as to accounting or financial matters shall be made, and all
financial statements to be delivered pursuant to this Agreement shall be
prepared, in accordance with GAAP or SAP, as the context requires (including
principles of consolidation where appropriate), and all accounting or financial
terms shall have the meanings ascribed to such terms by GAAP or SAP, as
appropriate.
(c) If any change in GAAP or SAP after the date of this Agreement is or
shall be required to be applied to transactions then or thereafter in existence,
and a violation of one or more provisions of this Agreement shall have occurred
(or in the opinion of the Lender would be likely to occur) which would not have
occurred or be likely to occur if no change in accounting principles had taken
place, the parties agree in such event to negotiate in good faith an amendment
of this Agreement which shall approximate to the extent possible the economic
effect of the original financial covenants after taking into account such change
in GAAP or SAP, as appropriate.
(d) Without in any manner limiting the provisions of this Section 1.03,
if any change in GAAP or SAP occurs after the date of this Agreement and such
change in GAAP or SAP could or would materially change the Borrower's financial
results or position from that reflected in such Borrower's financial statements
prior to such change, such Borrower shall notify the Lender as soon as
practicable.
ARTICLE II
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THE LOANS
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2.01. The Loans. Subject to the terms and conditions hereof, the Lender
hereby agrees that it will, from time to time prior to the Commitment Expiration
Date, make one or more loans (each a "Loan" and, collectively, the "Loans") to
the Borrower subject to the immediately succeeding sentence. Notwithstanding
anything contained in this Agreement to the contrary, the Lender shall not be
obligated to make any Loan if, after such Loan is made, the Outstanding
Principal Amount exceeds the lesser of (a) the Commitment and (b) the Pledged
Securities Available Amount. The Lender shall remit the proceeds of each Loan to
the Borrower at the principal office of Mellon in immediately available funds.
2.02. The Note. The Loans shall be evidenced by a promissory note of
the Borrower, substantially in the form of Exhibit A hereto (the "Note"). The
Note shall be payable to the order of the Lender and shall mature on the
Commitment Expiration Date. The Note shall be dated the Closing Date and provide
for the payment of principal and interest in accordance with Section 2.06. The
Borrower hereby authorizes the Lender to make the appropriate notations on the
schedule annexed to the Note for purposes of recording any Loan made thereon and
any payments or prepayments made with respect thereto (provided that any failure
by the Lender to make any such notation shall not affect the obligations of the
Borrower hereunder or under the Note in respect of such Loan). The Borrower
agrees that each notation made by the Lender on the schedule annexed to the Note
shall be final and conclusive absent demonstrable error. The Outstanding
Principal Amount at any time shall constitute the principal amount of the Note
at such time.
2.03. Loan Request. Whenever the Borrower desires the Lender to make a
Loan, the Borrower shall deliver to the Lender a written request, in
substantially the form of Exhibit B (a "Loan Request"), to the Borrower, no
later than 11:00 A.M., New York City time, at least two Business Days prior to
the date of such Loan. Each Loan Request shall specify the principal amount of
the Loan to be made on the such date (which shall be no less than $10,000,000 or
such lesser amount which the Lender shall have
8
approved). Each Loan Request submitted by the Borrower shall be an affirmation
by the Borrower that (x) the representations and warranties of the Borrower set
forth in Article III of this Agreement are on the date of such Loan Request, and
will be on the date of such Loan, true and correct in all material respects as
if made on and as of such dates, except to the extent any such representation or
warranty relates specifically to an earlier date, and (y) no Unmatured Event or
Event of Termination shall have occurred and be continuing on either of such
dates. Each Loan Request given pursuant hereto shall be irrevocable.
2.04. Commitment. (a) The Borrower may, upon at least thirty (30) days'
prior written notice to the Lender, terminate in whole or permanently reduce in
part the unused portion of the Commitment; provided, that (i) such termination
shall not be effective unless and until the Outstanding Principal Amount has
been reduced to zero and all Cost of Funds Amount and all other fees or amounts
due to the Lender hereunder have been paid in full, (ii) each partial reduction
shall be in the amount of at least $10,000,000 or an integral multiple thereof,
and (iii) any partial reduction of the Commitment which would result in the
remaining Commitment being less than $25,000,000 shall be deemed to be a
termination in whole of the Commitment.
(b) If any bank or financial institution which is a party to the
Funding Agreement does not consent to the extension of the expiration date of
its commitment under the Funding Agreement or its commitment thereunder expires
or is terminated for any reason, to the extent such bank or financial
institution is not replaced on or prior to such expiration date, then the
Commitment shall be reduced by such amount as shall be necessary to cause the
Commitment to be equal to the aggregate of all commitments of banks and/or
financial institutions under the Funding Agreement(s) after giving effect to
such termination or expiration.
(c) The Lender will not: (i) without the consent of the Borrower,
voluntarily agree to any termination of the Funding Agreement prior to its
stated expiration date; (ii) without the consent of the Borrower, voluntarily
agree to any reduction in the amount of any commitment under the Funding
Agreement; or (iii) without the consent of the Borrower, which will not be
unreasonably withheld, amend the Funding Agreement.
2.05. Mandatory and Optional Prepayments. (a) The Borrower may on a
Settlement Date prepay the Loans, in whole or in part, without premium or
penalty, upon at least 30 days' irrevocable prior written notice to the Lender
in the case of a prepayment in whole or at least three (3) Business Days'
irrevocable prior written notice to the Lender in the case of a partial
prepayment; provided, that each partial prepayment shall be in the amount of at
least $10,000,000 or an integral multiple thereof; provided, further, that the
Borrower shall (i) simultaneously pay to the Lender, and indemnify the Lender
and hold the Lender harmless from, all costs and expenses incurred by the Lender
in connection with such prepayment, and (ii) indemnify the Lender and hold the
Lender harmless from any funding loss (in an amount equal to the amount of
interest the Lender would have received (calculated with respect to the
applicable fixed interest, discount or carrying cost period with respect to the
relevant Cost of Funds) but for such prepayment less the interest earned on
investing such funds) and expense which the Lender may sustain or incur as a
consequence of such prepayment. Any such prepayment of the Loans shall be
accompanied by, without duplication of the preceding sentence, a payment of all
accrued but unpaid interest on the Loans through the date of prepayment, plus
all accrued but unpaid fees, expenses and other amounts due to the Lender
arising under or in connection with this Agreement and the Note through the date
of prepayment.
(b) If, after giving effect to any reduction of the Commitment pursuant
to Section 2.04(b) above, the Outstanding Principal Amount shall exceed the
Commitment, the Borrower shall, within one Business Day of its receipt of
written notice of the reduction of the Commitment, make a prepayment in respect
of the principal of the Loans in an amount equal to the excess of the
Outstanding Principal Amount over the Commitment as so reduced, accompanied by a
payment of all accrued but unpaid interest on such amount through the date of
such prepayment.
(c) If at any time the Pledged Securities Available Amount is less than
the Outstanding Principal Amount, the Borrower shall, within one Business Day of
its receipt of written notice thereof, make a
9
prepayment in respect of the principal of the Loans in an amount equal to the
excess of the Outstanding Principal Amount over the Pledged Securities Available
Amount accompanied by a payment of all accrued but unpaid interest on such
amount through the date of such prepayment.
2.06. Interest; Fees. On each Settlement Date, the Borrower
shall make the following cash payments:
(i) to the Lender as interest on the Loans, all accrued and
unpaid Cost of Funds Amount; and
(ii) to the Lender, all accrued and unpaid amounts due and
payable to the Lender under this Agreement not described in clause (i)
above, including without limitation, the Program Fee and the Facility
Fee.
2.07. Proceeds. The proceeds of each Loan shall be used by the
Borrower solely for general corporate purposes.
2.08. Taxes. All payments made by the Borrower under this Agreement and
the Note shall be made free and clear of, and without deduction or withholding
for or on account of, any present or future income, stamp or other taxes,
levies, imposts, duties, charges, fees, deductions or withholdings, hereafter
imposed, levied, collected, withheld or assessed by the Government of the United
States or any political subdivision thereof having taxing authority, excluding
(i) income and withholding taxes (including, without limitation, branch profits
taxes, minimum taxes and taxes computed under alternative methods, at least one
of which is based on net income) and franchise taxes (imposed in lieu of income
taxes) imposed on the net income of the Lender as a result of any present or
former connection between the jurisdiction imposing such tax or any political
subdivision or taxing authority thereof or therein and the Lender other than a
connection resulting solely from this Agreement and the transactions
contemplated hereby; and (ii) any Taxes that would not have been imposed but for
the failure of the Lender to provide and keep current any certification or other
documentation required to qualify for an exemption from or reduction in the rate
of any Tax (all such excluded taxes described in clause (i) or (ii) above being
hereinafter called "Excluded Taxes" and all such non-Excluded Taxes, levies,
imposts, duties, charges, fees, deductions and withholdings being hereinafter
called "Taxes"). If any Taxes are required to be deducted or withheld from any
amounts payable to or under the Note, the amounts so payable to the Lender shall
be increased to the extent necessary to yield to the Lender (after payment of
all Taxes on such increased amounts) the amount that would have been otherwise
been received by the Lender had not such deduction or withholdings been imposed.
Whenever any Taxes are payable by the Borrower, as promptly as possible
thereafter the Borrower shall send to the Lender a certified copy of an original
official receipt received by the Borrower showing payment thereof. If the
Borrower fails to pay any Taxes when due to the appropriate taxing authority or
fails to remit to the Lender the required receipts or other required documentary
evidence, the Borrower shall indemnify the Lender for any incremental Taxes,
interest or penalties that the Lender is legally required to pay as a result of
any such failure. Such indemnification shall be made within 30 days from the
date the Lender makes written demand therefor. If the Lender receives any refund
or credit in respect of any Taxes with respect to which the Borrower has made
full payment to the Lender pursuant to this Section 2.08, it shall pay over such
refund and remit such credit to the Borrower, net of all out-of-pocket expenses
incurred by the Lender in obtaining such refund or credit and without interest.
The agreements in this subsection shall survive the termination of this
Agreement and the payment of the Note.
2.09. Increased Cost and Reduced Return. (a) If any Affected Party
shall be charged any fee, expense or increased cost other than relating to Taxes
or Excluded Taxes on account of the adoption after the date hereof of any
applicable law, rule, regulation or guideline (including any applicable law,
rule, regulation or guideline regarding capital adequacy) or any change therein
after the date hereof, or any change after the date hereof in the interpretation
or administration thereof by any Official Body, central bank or comparable
agency: (i) which subjects such Affected Party to any charge or withholding on
or with respect to the Funding Agreement or a Program Support Agreement, as the
case may be, or such Affected
10
Party's obligations under the Funding Agreement or Program Support Agreement, as
the case may be, or on or with respect to this Agreement or the Loans, or
changes the basis of taxation to any Affected Party of any amounts payable under
the Funding Agreement, a Program Support Agreement or this Agreement (except for
changes in the rate of tax on the overall net income of such Affected Party), or
(ii) which imposes, modifies or deems applicable any reserve, assessment,
insurance charge, special deposit or similar requirement against assets of,
deposits with or for the account of, or credit extended by, an Affected Party
under the Funding Agreement or a Program Support Agreement, as the case may be,
or (iii) which imposes any other condition the result of which is (x) to
increase the cost to such Affected Party of performing its obligations, or (y)
to reduce the rate of return on such Affected Party's capital as a consequence
of its obligations, in each case under the Funding Agreement or a Program
Support Agreement, as the case may be, or to reduce the amount of any sum
received or receivable by such Affected Party, or to require any payment
calculated by reference to the amount of interests or loans held or interest
received by it, in each case under the Funding Agreement or a Program Support
Agreement, as the case may be, then, upon demand by the Lender, the Borrower
shall be obligated to immediately pay to the Lender, for the benefit of such
Affected Party, such amounts charged to such Affected Party or to compensate
such Affected Party for such increase, reduction or imposition; provided,
however, that, to the extent that any such amount with respect to an Affected
Party under a Program Support Agreement (other than Mellon Bank, N. A.) exceeds
the amount the Borrower would have been obligated to pay to Mellon Bank, N. A.
if Mellon Bank, N. A. had taken the place of such Affected Party under such
Program Support Agreement, the Borrower shall not be obligated to pay to the
Lender the amount of such excess.
(b) The Lender agrees that it shall use reasonable efforts to take any
action that will avoid the need to pay, or reduce the amount of, any increased
amounts referred to in this Section 2.09; provided that the Lender shall not be
obligated to take any actions that would, in the Lender's sole discretion, be
materially disadvantageous to the Lender. In the event that any Affected Party
claims any increased costs referred to in this Section 2.09, the Lender will
furnish to the Borrower a certificate setting forth the basis and amount of each
request by such Affected Party for any such increased amounts referred to in
paragraph (a) of this Section 2.09. Determinations by the Lender of any
increased amounts referred to in paragraph (a) of this Section 2.09 shall be
conclusive, absent manifest error. In the event that any Affected Party claims
any increased costs referred to in this Section 2.09 or payments under Section
2.08, the Borrower may, upon payment of such amounts and prepayment of Loans
equal to all amounts owing to such Affected Party with respect to its funding
under the Funding Agreement, and upon reduction of the Lender's commitment
hereunder by an amount equal to such Affected Party's commitment under the
Funding Agreement, and subject to the second proviso of Section 2.05(a) hereof,
require the Lender to cause such Affected Party to cease to be a party to the
Funding Agreement.
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES.
-------------------------------
Each Credit Party represents and warrants that:
3.01. Organization and Qualification. Such Credit Party and each of its
Subsidiaries are corporations duly organized, validly existing and in good
standing under the laws of their respective jurisdictions of incorporation; each
of such Credit Party and its Subsidiaries have the power and authority to own
its properties and assets, and to carry on its business as presently conducted
and is qualified to do business in those jurisdictions in which its ownership of
property or the nature of its business activities is such that failure to
receive or retain such qualification would have a Material Adverse Effect. A
list of such Credit Party's Subsidiaries setting forth their respective
jurisdictions of incorporation is set forth in Schedule 3.01 hereto. Such Credit
Party is not subject to any Private Act other than the X.L. Insurance Company,
Ltd. Act, 1989, a copy of which has been provided to Lender.
11
3.02. Corporate Power and Authorization. Such Credit Party has
corporate power and authority to make and carry out this Agreement and any other
Loan Document to which it is a party, in the case of the Borrower, to make the
borrowings provided for herein, to execute and deliver this Agreement and, in
the case of the Borrower, the Note, and to perform its obligations hereunder and
under any such Loan Documents and all such action has been duly authorized by
all necessary corporate proceedings on its part.
3.03. Financial Information. Such Credit Party has furnished to the
Lender copies of the audited consolidated financial statements and the
consolidating financial statements of such Credit Party and its consolidated
Subsidiaries including a consolidated and consolidating balance sheet and
related statements of income and retained earnings for the fiscal year ending
November 30, 1997. Such financial statements fairly present the financial
position of such Credit Party and its consolidated Subsidiaries as of the date
of such reports and the consolidated and consolidating results of their
operations and cash flows for the fiscal period then ended in conformity with
GAAP applied on a consistent basis, and such consolidated financial statements
have been examined and reported upon by independent, certified public
accountants.
3.04. Litigation. Except as disclosed to the Lender in writing prior to
the Closing Date (including by disclosure in the financial statements delivered
to the Lender referred to in Section 3.03 hereof), there is no litigation or
governmental proceeding by or against such Credit Party or any of its
Subsidiaries pending or, to its knowledge, threatened, which could reasonably be
expected (in light of reserves, and total shareholders' equity of such Credit
Party and after taking into account the nature of such Credit Party's business
and activities) to have a Material Adverse Effect if adversely determined.
3.05. No Adverse Changes. Since November 30, 1997, there has been no
occurrence or event which has had a Material Adverse Effect.
3.06. No Conflicting Laws or Agreements; Consents and Approvals. (a)
Neither the execution and delivery of this Agreement or any other Loan Document,
the consummation of the transactions herein or therein contemplated nor
compliance with the terms and provisions hereof or thereof will conflict with or
result in a breach of any of the terms, conditions or provisions of the articles
of incorporation or by-laws of such Credit Party or of any applicable Law or of
any material agreement or instrument to which such Credit Party is a party or by
which it is bound or to which it is subject, or constitute a default thereunder
or result in the creation or imposition of any Lien of any nature whatsoever
upon any of the property of such Credit Party pursuant to the terms of any such
agreement or instrument.
(b) No authorization, consent, approval, license, exemption or other
action by, and no registration, qualification, designation, declaration or
filing with, any Official Body is or will be necessary or advisable in
connection with (i) execution and delivery of this Agreement or any other Loan
Document, (ii) the consummation of the transactions herein or therein
contemplated, or (iii) the performance of or compliance with the terms and
conditions hereof or thereof.
3.07. Execution and Binding Effect. This Agreement has been duly and
validly executed and delivered by such Credit Party. This Agreement constitutes,
and the Note when duly executed and delivered by such Credit Party pursuant to
the provisions hereof will constitute, legal, valid and binding obligations of
such Credit Party enforceable in accordance with the terms thereof except, as to
the enforcement of remedies, for limitations imposed by (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally (excluding Laws with respect to
fraudulent conveyance), (ii) Laws limiting the right of specific performance or
(iii) general principles of equity.
3.08. Taxes. All tax returns required to be filed by such Credit Party
have been properly prepared, executed and filed. All taxes, assessments, fees
and other governmental charges upon such Credit Party or upon its properties,
income or sales which are due and payable have been paid. The reserves and
provisions for taxes, if any, on the books of such Credit Party are adequate for
all open years and for its current fiscal period as determined in accordance
with GAAP.
12
3.09. Use of Proceeds. The Borrower will use the proceeds from any
borrowing hereunder for general corporate purposes (which may include
acquisitions). The Borrower will make no borrowing hereunder for the purpose of
buying or carrying any "margin stock" as such term is used in Regulation U of
the Board of Governors of the Federal Reserve System in violation of such
regulation. The Borrower is not engaged in the business of extending credit to
others for the purposes of buying or carrying any "margin stock."
3.10. Permits, Licenses and Rights. Such Credit Party and each
Subsidiary of such Credit Party own or possess all the patents, trademarks,
service marks, trade names, copyrights, licenses, franchises, permits and rights
with respect to the foregoing necessary to own and operate their respective
properties and to carry on their respective businesses as presently conducted
and presently planned to be conducted without, to the best knowledge of such
Credit Party, conflict with the rights of others.
3.11. Accurate and Complete Disclosure. All information provided by or
on behalf of such Credit Party to Lender pursuant to or in connection with the
Loan Documents and the transactions contemplated thereby is true and accurate in
all material respects on the date such information is dated (or, if not dated,
on the date such information was received by Lender) and such information, taken
as a whole, which was provided on or prior to the time this representation is
made or remade, does not, to the best knowledge of such Credit Party, omit to
state any material fact necessary to make such information not misleading at
such time in light of the circumstances in which it was provided.
3.12. Absence of Violations. Such Credit Party and each Affiliate of
such Credit Party is not in violation of a any charter document, corporate
minute or resolution, any instrument or agreement, in each case binding on it or
affecting its property, or any Law, in a manner which could have a Materially
Adverse Effect.
3.13. Environmental Matters. Such Credit Party and each of its
Subsidiaries is and has been in full compliance with all applicable
Environmental Laws. Such Credit Party and each of its Subsidiaries have all
Approvals by Official Bodies charged with the enforcement of Environmental Laws
that are necessary or desirable for the ownership and operation of their
respective properties, facilities and businesses as presently owned and operated
and as presently proposed to be owned and operated.
3.14. Not an Investment Company. Such Credit Party is not an Investment
Company required to be registered under the Investment Company Act of 1940.
ARTICLE IV
----------
CONDITIONS OF LENDING
---------------------
4.01. Effectiveness. The effectiveness of this Agreement and the
closing of the transactions contemplated hereby shall be subject to the
following conditions:
(a) Proceedings and Incumbency. There shall have been delivered to
Lender a certificate with respect to each Credit Party in form and substance
satisfactory to Lender dated the Closing Date and signed on behalf of such
Credit Party by the Secretary or an Assistant Secretary of such Credit Party,
certifying as to: (a) true copies of all corporate action taken by such Credit
Party relative to this Agreement, and the other Loan Documents applicable to it,
including but not limited to that described in Section 3.02 hereof and (b) the
names, true signatures and incumbency of the officer or officers of such Credit
Party authorized to execute and deliver this Agreement and the other Loan
Documents applicable to it. Lender may conclusively rely on such certificates
unless and until a later certificate revising the prior certificate has been
furnished to Lender.
(b) Organizational Documents. There shall have been delivered to Lender
(i) certified copies of the articles of incorporation and by-laws for each
Credit Party, (ii) a certificate of good standing for each
13
Credit Party certified by the appropriate Official Body and (iii) a certificate
of good standing certified by the appropriate Official Body.
(c) Opinions of Counsel. There shall have been delivered to Lender
written opinions addressed to Lender, dated the Closing Date, of Cahill Gordon &
Reindel, Conyers, Dill & Pearman and Paul S. Giordano, Esq., respectively, the
Borrower's and Guarantors' counsel, which together are substantially to the
effects set forth in Exhibit C.
(d) Details, Proceedings and Documents. All legal details and
proceedings in connection with the transactions contemplated by this Agreement
shall be satisfactory to Lender, and Lender shall have received all such
counterpart originals or certified or other copies of the Loan Documents and
such other documents and proceedings in connection with such transactions, in
form and substance satisfactory to it, as Lender has reasonably requested.
(e) Fees and Expenses. The Borrower shall have paid all fees and other
compensation to be paid by it hereunder on or prior to the Closing Date.
(f) Representations and Warranties. The representations and warranties
contained in Article III hereof shall be true on and as of the Closing Date with
the same effect as though made on and as of the Closing Date.
(g) Pledge Agreement. The Pledge Agreement shall have been entered into
by the parties thereto.
(h) Funding Agreement. A funding agreement shall have been entered into
between the Lender and Mellon with respect to the transactions contemplated by
this Agreement.
4.02. Borrowings. The obligations of Lender to make any Loan hereunder
are subject to the accuracy as of the date hereof of the representations and
warranties herein contained, to the satisfaction of the condition set forth in
the second sentence of Section 2.01 hereof, to the performance by the Borrower
of its obligations to be performed hereunder on or before the date of such Loans
and to the satisfaction of the following further conditions:
(a) Representations and Warranties; Events of Termination and Unmatured
Events. The representations and warranties contained in Article III hereof shall
be true on and as of the date of each Loan hereunder with the same effect as
though made on and as of each such date (except to the extent they are expressly
stated to relate only to a prior date), and on the date of each Loan hereunder
no Event of Termination and no Unmatured Event shall have occurred and be
continuing or exist or shall occur or exist after giving effect to the Loans to
be made on such date. Failure of Lender to receive notice from the Borrower to
the contrary before any Loan is made or deemed made hereunder shall constitute a
representation and warranty that: (i) the representations and warranties
contained in Article III hereof are true and correct on and as of the date of
such Loan with the same effect as though made on and as of such date (except to
the extent they are expressly stated to relate only to a prior date) and (ii) on
the date of such Loan no Event of Termination or Unmatured Event has occurred
and is continuing or exists or will occur or exist after giving effect to such
Loan.
(b) Commitment. The fact that, immediately after such Borrowing, the
aggregate outstanding principal amount of the Loans will not exceed the
aggregate amount of the Commitment.
14
ARTICLE V
---------
AFFIRMATIVE COVENANTS
---------------------
Each Credit Party hereby covenants to the Lender as follows:
5.01. Reporting and Information Requirements. Such Credit Party shall
deliver to the Lender:
(a) Annual Reports. (i) As soon as practicable and in any event within
100 days after the close of each fiscal year of X. L. Insurance, audited
consolidated statements and unaudited consolidating statements of income,
retained earnings and cash flows of such Credit Party and its consolidated
Subsidiaries, for such fiscal year and a consolidated audited and consolidating
balance sheet of such Credit Party and its consolidated Subsidiaries, as of the
close of such fiscal year, and notes to each, all in accordance with GAAP,
setting forth in comparative form the corresponding figures for the preceding
fiscal year, with such consolidated statements and balance sheets to be
certified by independent public accountants of recognized national standing in
the United States selected by such Credit Party and not unacceptable to the
Lender, and the certificate or report of such accountants to be free of
exceptions or qualifications not reasonably acceptable to the Lender.
(b) Quarterly Statements. Within sixty days after the end of the first,
second and third quarterly accounting periods in each fiscal year of such Credit
Party, copies of the unaudited consolidated and consolidating balance sheets of
such Credit Party and its consolidated Subsidiaries as of the end of such
accounting period and of the consolidated and consolidating income statements of
such Credit Party and its consolidated Subsidiaries for the elapsed portion of
the fiscal year ended with the last day of such accounting period, all in
accordance with GAAP subject to year-end audit adjustments and certified by the
principal financial officer of such Credit Party to have been prepared in
accordance with generally accepted accounting principles consistently applied by
such Credit Party except as explained in such certificate.
(c) Compliance Certificates. Within 100 days after the end of each
fiscal year of such Credit Party and within sixty days after the end of each of
the first three quarters of each fiscal year, a certificate dated as of the end
of such fiscal year or quarter, signed on behalf of such Credit Party by a
principal financial officer thereof, (i) stating that as of the date thereof no
Event of Termination or Unmatured Event has occurred and is continuing or
exists, or if an Event of Termination or Unmatured Event has occurred and is
continuing or exists, specifying in detail the nature and period of existence
thereof and any action with respect thereto taken or contemplated to be taken by
such Credit Party, (ii) stating in reasonable detail the information and
calculations necessary to establish compliance with the provisions of Article VI
hereof, and (iii) stating that the signer has reviewed this Agreement and that
such certificate is based on an examination made by or under the supervision of
the signer sufficient to assure that such certificate is accurate.
(d) Further Information. All such other information and in such form as
the Lender may reasonably request in writing.
(e) Notice of Event of Termination. Immediately upon becoming aware of
any Event of Termination or Unmatured Event, written notice thereof, together
with a written statement of the president or a principal financial officer of
such Credit Party setting forth the details thereof and any action with respect
thereto taken or contemplated to be taken by such Credit Party.
(f) Notice of Material Adverse Change. Promptly upon becoming aware
thereof, written notice of any event or occurrence constituting or which could
reasonably be expected to have a Material Adverse Effect.
(g) Notice of Material Proceedings. Promptly upon becoming aware
thereof, written notice of the commencement, existence or threat of any
proceeding or a material change in any existing material proceeding by or before
any Official Body against or affecting such Credit Party which, if adversely
decided, could have a Material Adverse Effect.
15
(h) Notice of Certain Material Changes. Promptly upon adoption thereof,
notice of each material change in such Credit Party's investment policy,
underwriting policy or other business policy.
5.02. Preservation of Existence and Franchises. Such Credit Party
shall, and shall cause each of its Subsidiaries to, maintain its corporate
existence, rights and franchises in full force and effect in its jurisdiction of
incorporation. Such Credit Party shall, and shall cause each of its Subsidiaries
to, qualify and remain qualified as a foreign corporation in each jurisdiction
in which failure to receive or retain such qualification would have a Material
Adverse Effect.
5.03. Insurance. Such Credit Party shall, and shall cause each of its
Subsidiaries to, maintain with financially sound and reputable insurers,
insurance with respect to its properties in such amounts as is customary in the
case of corporations engaged in the same or a similar business having similar
properties similarly situated.
5.04. Maintenance of Properties. Such Credit Party shall, and shall
cause each of its Subsidiaries to, maintain or cause to be maintained in good
repair, working order and condition the properties now or hereafter owned,
leased or otherwise possessed by and used or useful in its business and shall
make or cause to be made all needful and proper repairs, renewals, replacements
and improvements thereto so that the business carried on in connection therewith
may be properly conducted at all times, provided, however, that the foregoing
shall not impose on such Credit Party or any Subsidiary of such Credit Party any
obligation in respect of any property leased by such Credit Party or such
Subsidiary in addition to such Credit Party 's obligations under the applicable
document creating such Credit Party 's or such Subsidiary's lease or tenancy.
5.05. Payment of Taxes and Other Potential Charges and Priority Claims
Payment of Other Current Liabilities. Such Credit Party shall, and shall cause
each of its Subsidiaries to, pay or discharge:
(a) on or prior to the date on which penalties attach thereto, all
taxes, assessments and other governmental charges or levies imposed upon it or
any of its properties or income;
(b) on or prior to the date when due, all lawful claims of materialmen,
mechanics, carriers, warehousemen, landlords and other like Persons which, if
unpaid, might result in the creation of a Lien upon any such property; and
(c) on or prior to the date when due, all other lawful claims which, if
unpaid, might result in the creation of a Lien upon any such property (other
than Liens not forbidden by Section 6.03 hereof) or which, if unpaid, might give
rise to a claim entitled to priority over general creditors of such Credit Party
in any proceeding under the Bermuda Companies Law or Bermuda Insurance Law, or
any insolvency proceeding, liquidation, receivership, rehabilitation,
dissolution or winding-up involving such Credit Party or such Subsidiary;
provided that, unless and until foreclosure, distraint, levy, sale or similar
proceedings shall have been commenced, such Credit Party need not pay or
discharge any such tax, assessment, charge, levy or claim so long as the
validity thereof is contested in good faith and by appropriate proceedings
diligently conducted and so long as such reserves or other appropriate
provisions as may be required by GAAP and SAP shall have been made therefor and
so long as such failure to pay or discharge does not have a Material Adverse
Effect.
5.06. Financial Accounting Practices. Such Credit Party shall, and
shall cause each of its Subsidiaries to, make and keep books, records and
accounts which, in reasonable detail, accurately and fairly reflect its
transactions and dispositions of its assets and maintain a system of internal
accounting controls sufficient to provide reasonable assurances that
transactions are recorded as necessary to permit preparation of financial
statements required under Section 5.01 hereof in conformity with GAAP and SAP,
as applicable, and to maintain accountability for assets.
16
5.07. Compliance with Applicable Laws. Such Credit Party shall, and
shall cause each of its Subsidiaries to, comply with all applicable Laws
(including but not limited to the Bermuda Companies Law and Bermuda Insurance
Laws) in all respects; provided that such Credit Party or any Subsidiary of such
Credit Party shall not be deemed to be in violation of this Section 5.07 as a
result of any failure to comply with any such Law which would not (i) result in
fines, penalties, injunctive relief or other civil or criminal liabilities
which, in the aggregate, would have a Materially Adversely Effect or (ii)
otherwise impair the ability of such Credit Party to perform its obligations
under this Agreement or the Note.
5.08. Use of Proceeds. Such Credit Party shall use the proceeds of all
Loans hereunder for its general corporate purposes (including to fund
acquisitions).
5.09. Continuation Of and Change In Business. Such Credit Party and its
Subsidiaries shall continue to engage in substantially the same business and
activities it currently engages in on the date of this Agreement.
5.10. Visitation. Such Credit Party shall permit such Persons as the
Lender may reasonably designate to visit and inspect any of the properties of
such Credit Party, to discuss its affairs with its financial management, and
provide such other information relating to the business and financial condition
of such Credit Party at such times as the Lender may reasonably request. Such
Credit Party hereby authorizes its financial management to discuss with the
Lender the affairs of such Credit Party.
ARTICLE VI
----------
NEGATIVE COVENANTS
------------------
Each Credit Party covenants to the Lender as follows:
6.01. Mergers and Acquisitions. (a) Such Credit Party shall not merge
with or into or consolidate with any other Person, or agree to do any of the
foregoing, except that if no Event of Termination or Potential Event of
Termination shall occur and be continuing or shall exist at the time of such
merger or consolidation or immediately thereafter and after giving effect
thereto:
(i) such Credit Party may merge with any other corporation,
including a Subsidiary, if such Credit Party shall be the surviving
corporation; and
(ii) if the written consent of the Lender is obtained, such
Credit Party may merge into or consolidate with any other corporation
if the corporation into which such Credit Party is merged or which is
formed by such consolidation shall expressly assume all obligations of
such Credit Party under this Agreement.
(b) Such Credit Party shall not acquire the stock or other equity
interests, or all or any substantial portion of the properties or assets of any
other Person, or agree to do any of the foregoing, unless such Person is engaged
primarily in the insurance business or the financial services business.
6.02. Dispositions of Assets. Such Credit Party shall not , and nor
shall it permit any Subsidiary to, sell, convey, assign, lease, abandon or
otherwise transfer or dispose of, voluntarily or involuntarily (any of the
foregoing being referred to in this Section 6.02 as a "transaction" and any
series of related transactions constituting but a single transaction), any of
its properties or Assets, tangible or intangible (including but not limited to
sale, assignment, discount or other disposition of accounts, contract rights,
chattel paper or general intangibles with or without recourse), except:
(a) Transactions in the ordinary course of business involving current
assets or other assets classified on such Credit Party's balance sheet as
available for sale.
17
(b) Sales, conveyances, assignments or other transfers or dispositions
in immediate exchange for cash or tangible assets, provided that any such sales,
conveyances or transfers shall not individually, or in the aggregate, exceed
$50,000,000 in any calendar year; or
(c) Dispositions of equipment or other property which is obsolete or no
longer used or useful in the conduct of the business of such Credit Party or its
Subsidiaries.
6.03. Liens. Such Credit Party shall not, nor shall it permit any
Subsidiary to, at any time create, incur, assume or suffer to exist any Lien on
any of its property or assets, tangible or intangible, now owned or hereafter
acquired or agree or become liable to do so, except:
(a) Liens existing on the date hereof (and extension, renewal and
replacement Liens upon the same property, provided the amount secured by each
Lien constituting such an extension, renewal or replacement Lien shall not
exceed the amount secured by the Lien theretofore existing) and listed on
Schedule 6.03(a) hereto;
(b) Liens arising from taxes, assessments, charges, levies or claims
described in Section 5.05 hereof that are not yet due or that remain payable
without penalty or to the extent permitted to remain unpaid under the provision
of such Section 5.05;
(c) Liens on property securing all or part of the purchase price
thereof to such Credit Party and Liens (whether or not assumed) existing on
property at the time of purchase thereof by such Credit Party (and extension,
renewal and replacement Liens upon the same property), provided --
(i) each such Lien is confined solely to the property so
purchased, improvements thereto and proceeds thereof, and
(ii) the aggregate amount of the obligations secured by all
such Liens on any particular property at any time purchased by such
Credit Party, as applicable, shall not exceed 100% (if such obligations
are not subject when created to United States income taxes) or 90% (in
all other cases) of the lesser of the fair market value of such
property at such time or the actual purchase price of such property;
(d) Zoning restrictions, easements, minor restrictions on the use of
real property, minor irregularities in title thereto and other minor Liens that
do not in the aggregate materially detract from the value of a property or asset
to, or materially impair its use in the business of, such Credit Party;
(e) Liens securing Indebtedness permitted by Section 6.08 (c) hereof
covering assets whose market value is not materially greater than the amount of
the Indebtedness secured thereby plus a commercially reasonable margin;
(f) Liens on cash and securities of such Credit Party or its
Subsidiaries incurred as part of the management of its investment portfolio in
accordance with customary portfolio management practice and not in violation of
such Credit Party's investment policy as in effect on the date of this
Agreement; or
(g) Liens created under the Pledge Agreement.
6.04. Transactions With Affiliates. Such Credit Party shall not, nor
shall it permit any Subsidiary to, enter into or carry out any transaction with
(including, without limitation, purchase or lease property or services to, loan
or advance to or enter into, suffer to remain in existence or amend any
contract, agreement or arrangement with) any Affiliate of such Credit Party, or
directly or indirectly agree to do any of the foregoing, except transactions
among such Credit Party and its wholly-owned Subsidiaries and transactions with
Affiliates in good faith in the ordinary course of such Credit Party's business
consistent with past
18
practice and on terms no less favorable to such Credit Party or any Subsidiary
than those that could have been obtained in a comparable transaction on an arm's
length basis from an unrelated Person.
6.05. Business. Such Credit Party will not, nor will it permit any
Subsidiary to, engage (directly or indirectly) in any businesses other than the
businesses substantially the same as those in which such Credit Party and its
Subsidiaries are engaged on the Closing Date and any businesses reasonably
related thereto or in the financial services industry. X.L. Insurance will not
permit, at any time, its net premiums earned from insurance operations to
comprise less than 50% of its gross revenues (on a consolidated basis exclusive
of net gains and losses from investments and investment income).
6.06. Ratio of Total Funded Debt to Consolidated Tangible Net Worth.
X.L. Insurance will not permit its ratio of Total Funded Debt to Consolidated
Tangible Net Worth to be greater than 0.35 at any time.
6.07. Consolidated Net Worth. X.L. Insurance will not permit its
Consolidated Net Worth to be less than $1,200,000,000 at any time.
6.08. Indebtedness. X.L. Insurance shall not, nor shall it permit any
Subsidiary to, at any time create, incur, assume or suffer to exist any
Indebtedness, or agree, become or remain liable (contingent or otherwise) to do
any of the foregoing, except:
(a) Indebtedness to the Lender pursuant to this Agreement and the
other Loan Documents;
(b) Indebtedness of such Credit Party or any Subsidiary in an aggregate
principal amount not exceeding $300,000,000 at any time outstanding;
(c) Reimbursement obligations or guaranty obligations with respect to
letters of credit not exceeding $500,000,000 in the aggregate, of which not more
than $500,000,000 may be secured;
(d) Indebtedness described on Schedule 6.08(d);
(e) Accounts or claims payable and accrued and deferred compensation
(including options) incurred in the ordinary course of business by such Credit
Party or any Subsidiary of such Credit Party; and
(f) Indebtedness incurred in transactions described in Section 6.03(f).
6.09. Operating Leverage. X.L. Insurance will not permit its ratio of
net premiums written to statutory capital and surplus, in each case as reflected
in the notes to its consolidated financial statements, to be greater than 1.2 to
1.0 at any time.
6.10. Private Act. Such Credit Party shall not become subject to a
Private Act other than the X.L. Insurance Company, Ltd. Act, 1989.
ARTICLE VII
-----------
EVENTS OF TERMINATION
---------------------
7.01. Events of Termination. An Event of Termination shall mean the
occurrence or existence of one or more of the following events or conditions
(for any reason, whether voluntary, involuntary or effected or required by Law):
(a) The Borrower shall default in the payment when due of the
principal of any Loan;
19
(b) The Borrower shall default in the payment when due of any interest,
Facility Fee, Program Fee, or any other fee or amount payable hereunder which
default shall continue for a period of three days from the due date thereof;
(c) A Credit Party shall default in the observance, performance or
fulfillment of any covenant contained in Article VI hereof;
(d) A Credit Party shall default in the observance, performance or
fulfillment of any other covenant, condition or provision hereof and such
default shall not be remedied for a period of twenty days after written notice
thereof to the Borrower from the Lender or the holder of the Note;
(e) A Credit Party, or any Subsidiary of a Credit Party or EXEL Limited
shall default (i) in any payment of principal of or interest on any other
obligation for borrowed money in principal amount of $10,000,000 or more beyond
any period of grace provided with respect thereto, or (ii) in the performance of
any other agreement, term or condition contained in any such agreement under
which any such obligation in principal amount of $ 10,000,000.00 or more is
created, if the effect of such default is to cause or permit the holder or
holders of such obligation (or trustee on behalf of such holder or holders) to
cause such obligation to become due prior to its stated maturity or to terminate
its commitment under such agreement;
(f) One or more judgments for the payment of money shall have been
entered against a Credit Party which judgments exceed $50,000,000 in the
aggregate and such judgments shall remain undischarged or uncontested or
appealed in good faith for a period of thirty consecutive days;
(g) Any representation or warranty herein made by a Credit Party, or
any certificate or financial statement furnished pursuant to the provisions
hereof, shall prove to have been false or misleading in any material respect as
of the time made or furnished;
(h) X.L. Insurance shall cease to own, beneficially and of record,
directly or indirectly, 100% of the voting shares of common stock of each other
Credit Party.
(i) EXEL Limited shall cease to own, beneficially and of record,
directly or indirectly all of the outstanding voting shares of capital stock of
X.L. Insurance, except for a nominal number of shares owned by two nominee
shareholders required by the Bermuda Companies Law;
(j) A Change in Control shall occur;
(k) The guarantee contained in Article VIII hereof shall terminate or
cease, in whole or material part, to be a legally valid and binding obligation
of X.L. Insurance or X.L. Investments , or the Borrower or any Person acting for
or on its behalf contests such validity or binding nature of such guarantee
itself or the transactions contemplated by this Agreement and the Note, or any
other Person shall assert any of the foregoing, or the Pledge Agreement shall
terminate or cease, in whole or in part, to be a legally valid and binding
obligation of X.L. Investments, or any Credit Party or any Person acting for or
on behalf of any such parties contests such validity or binding nature of the
Pledge Agreement itself or the transactions contemplated thereby (including the
security interest granted thereunder);
(l) A decree or order by a court having jurisdiction in the premises
shall have been entered adjudging a Credit Party a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization of such Credit
Party under the Bermuda Companies Law, or any other similar applicable Law, and
such decree or order shall have continued undischarged or unstayed for a period
of sixty days; or a decree or order of a court having jurisdiction in the
premises for the appointment of a receiver or liquidator or trustee or assignee
in bankruptcy or insolvency of such Credit Party or a substantial part of its
property, or for the winding up or liquidation of its affairs, shall have been
entered, and such decree or order shall have remained in force undischarged and
unstayed for a period of sixty days; or
20
(m) A Credit Party or EXEL Limited shall institute proceedings to be
adjudicated a voluntary bankrupt, or shall consent to the filing of a bankruptcy
proceeding against it, or shall file a petition or answer or consent seeking
reorganization under the Bermuda Companies Law or any other similar applicable
Law, or shall consent to the filing of any such petition, or shall consent to
the appointment of a receiver or liquidator or trustee or assignee in bankruptcy
or insolvency of it or of a substantial part of its property, or shall make an
assignment for the benefit of creditors, or shall admit in writing its inability
to pay its debts generally as they become due, or corporate action shall be
taken by such Credit Party in furtherance of any of the aforesaid purposes.
7.02. Remedies. At any time after the occurrence of an Event of
Termination and so long as such Event of Termination is continuing, the Lender
may, in accordance with applicable law, take one or more of the following
actions: (i) give notice (which may be telephone notice confirmed in writing) to
the Borrower of the occurrence of such Event of Termination, and the Lender's
election to terminate the Commitment under this Agreement, whereupon the
Lender's obligation to make Loans shall be terminated (except that in the case
of the occurrence of any Event of Termination described in Section 7.01(l) or
(m) hereof, no such notice shall be required and such termination shall be
automatic), (ii) by notice to the Borrower declare the unpaid principal amount
and interest under the Note, the Loans and all other amounts payable to the
Lender by the Borrower hereunder to be forthwith due and payable, whereupon such
amounts shall become forthwith due and payable, both as to principal and
interest, without presentment, demand, protest or any other notice of any kind,
all of which are hereby expressly waived, anything contained herein or in the
Note to the contrary notwithstanding (except that in the case of the occurrence
of any Event of Termination described in Section 7.01(l) or (m) hereof, no such
notice shall be required and such termination and acceleration shall be
automatic), and (iii) to do any and all other and further acts and actions which
the Lender may take pursuant to this Agreement or under applicable law.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition, or other
judicial proceeding relative to the Borrower or either Guarantor, the
obligations secured hereby or relating to the property of the Borrower, the
Lender (irrespective of whether the Obligations shall then be due and payable as
therein expressed or by declaration or otherwise and irrespective of whether the
Lender shall have made any demand on the Borrower or either Guarantor for the
payment of overdue principal or interest or any such other obligation) shall be
entitled and empowered, by intervention in such proceeding or otherwise,
(i) to file and prove a claim for the whole amount of
principal, interest, if any, owing and unpaid in respect of the
Obligations and any other obligation secured hereby and to file such
other papers or documents as may be necessary or advisable in order to
have the claims of the Lender (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Lender, its
agents and counsel) and of the Lender allowed in such judicial
proceeding, and
(ii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator, or
other similar official in any such judicial proceeding is hereby authorized by
the Borrower to make such payments to the Lender and to pay to the Lender any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Lender, its agents and counsel.
ARTICLE VIII
------------
GUARANTEE
---------
8.01. The Guarantee. Each of the Guarantors guarantee to the Lender as
hereinafter provided the prompt payment of the Obligations of the Borrower (the
"Guaranteed Obligations") in full when due
21
(whether at stated maturity, by acceleration, or otherwise) strictly in
accordance with the terms thereof. Each Guarantor hereby further agrees that if
any of the Guaranteed Obligations are not paid in full when due (whether at
stated maturity, by acceleration, or otherwise), the Guarantor will promptly pay
the same, without any demand or notice whatsoever (except as expressly provided
herein), and that in the case of any extension of time of payment or renewal of
any of the Guaranteed Obligations, the same will be promptly paid in full when
due (whether at extended maturity, by acceleration or otherwise) in accordance
with the terms of such extension or renewal.
Notwithstanding any provision to the contrary contained herein or in any other
of the Loan Documents, to the extent the obligations of either Guarantor shall
be adjudicated to be invalid or unenforceable for any reason (including, without
limitation, because of any applicable law, including the insolvency laws,
relating to fraudulent conveyances or transfers) then the obligations of such
Guarantor hereunder automatically shall be limited to the maximum amount that is
permissible under applicable law.
8.02. Obligations Unconditional. The obligations of each Guarantor
under this Article are absolute and unconditional (to the fullest extent
permitted by applicable law), irrespective of the value, genuineness, validity,
regularity or enforceability of any of the Loan Documents, or any other
agreement or instrument referred to therein, or any substitution, release or
exchange of any other guarantee of or security for any of the Guaranteed
Obligations, and, to the fullest extent permitted by applicable law,
irrespective of any other circumstance whatsoever which might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
it being the intent of this Article that the obligations of each Guarantor
hereunder shall be absolute and unconditional under any and all circumstances.
Each Guarantor agrees that such Guarantor shall have no right of subrogation,
indemnity, reimbursement or contribution against the Borrower for amounts paid
under his Guarantee until such time as the Lender has been paid in full, the
Commitment under the Credit Agreement has been terminated and no Person or
Official Body shall have any right to request any return or reimbursement of
funds from the Lender in connection with monies received under the Loan
Documents. Without limiting the generality of the foregoing, it is agreed that,
to the fullest extent permitted by applicable law, the occurrence of any one or
more of the following shall not alter or impair the liability of either
Guarantor hereunder which shall remain absolute and unconditional as described
above:
(i) at any time or from time to time, without notice to the
Guarantors, the time for any performance of or compliance with any of
the Guaranteed Obligations shall be extended, or such performance or
compliance shall be waived;
(ii) any of the acts mentioned in any of the provisions of any
of the Loan Documents, or any other agreement or instrument referred to
in the Loan Documents shall be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations shall
be accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under any of the
Loan Documents, or any other agreement or instrument referred to in the
Loan Documents shall be waived or any other guarantee of any of the
Guaranteed Obligations or any security therefor shall be released or
exchanged in whole or in part or otherwise dealt with;
(iv) any Lien granted to, or in favor of, the Lender as
security for any of the Guaranteed Obligations shall be void or
violable, or shall fail to attach or be perfected; or
(v) any of the Guaranteed Obligations shall be determined to
be void or voidable (including, without limitation, for the benefit of
any creditor of either Guarantor) or shall be subordinated to the
claims of any Person (including, without limitation, any creditor of
either Guarantor).
With respect to its obligations hereunder, each Guarantor hereby expressly
waives diligence, presentment, demand of payment, protest and all notices
whatsoever (except notices expressly required hereunder), and
22
any requirement that the Lender exhaust any right, power or remedy or proceed
against any Person under any of the Loan Documents, or any other agreement or
instrument referred to in the Loan Documents, or against any other Person under
any other guarantee of, or security for, any of the Guaranteed Obligations.
8.03. Reinstatement. The obligations of the Guarantors under this
Article shall be automatically reinstated if and to the extent that for any
reason any payment by or on behalf of any Person in respect of the Guaranteed
Obligations is rescinded or must be otherwise restored by any holder of any of
the Guaranteed Obligations, whether as a result of any proceedings in
bankruptcy, receivership, or reorganization or otherwise, and each Guarantor
agrees that it will indemnify the Lender on demand for all reasonable
out-of-pocket costs and expenses (including, without limitation, reasonable fees
and expenses of counsel) incurred by the Lender in connection with such
rescission or restoration, including any such reasonable costs and expenses
incurred in defending against any claim alleging that such payment constituted a
preference, fraudulent transfer or similar payment under any bankruptcy,
insolvency, receivership, reorganization or similar law.
8.04. Remedies. Each Guarantor agrees that, to the fullest extent
permitted by applicable law, as between such Guarantor, on the one hand, and the
Lender, on the other hand, the Guaranteed Obligations may be declared to be
forthwith due and payable as provided in Section 7.01 hereof (and shall be
deemed to have become automatically due and payable in the circumstances
provided in said Section 7.01) for purposes of Section 8.01 hereof
notwithstanding any stay, injunction or other prohibition preventing such
declaration (or preventing the Guaranteed Obligations from becoming
automatically due and payable) as to any other Person and that, in the event of
such declaration (or Guaranteed Obligations being deemed to have become
automatically due and payable), the Guaranteed Obligations (whether or not due
and payable by any other Person) shall forthwith become due and payable by such
Guarantor for purposes of said Section 8.01.
8.05. Continuing Guarantee. The guarantee in this Article is a
continuing guarantee, and shall apply to all of the Guaranteed Obligations
whenever arising.
8.06. No Restrictions. Except for restrictions under the Loan
Documents, neither Guarantor shall be or become subject to any restriction of
any nature (whether arising by operation of Law, by agreement, by its articles
of incorporation, by-laws or other constituent documents of such Guarantor, or
otherwise) on the right of such Guarantor from time to time to (x) pay any
indebtedness, obligations or liabilities from time to time owed to the Borrower,
or (y) make loans or advances to the Borrower, or (z) transfer any of its
properties or assets to the Borrower.
ARTICLE IX
----------
MISCELLANEOUS
-------------
9.01. Amendments and Waivers. None of this Agreement or the Note or any
other Loan Document to which the Lender, the Guarantors or the Borrower is a
party, nor any terms hereof or thereof, may be amended, supplemented or modified
except in accordance with the provisions of this subsection. Subject to
obtaining the consent of any other party required hereunder or thereunder, the
Lender, the Guarantors and the Borrower may, from time to time, enter into
written amendments, supplements or modifications hereto and to the Note and any
other Loan Document to which they are parties for the purpose of adding any
provisions to this Agreement or the Note or such other Loan Document or changing
in any manner the rights of Lender or the Borrower or the Guarantors hereunder
or thereunder and, in addition, waiving, on such terms and conditions as Lender
may specify in such instrument, any of the requirements of this Agreement or the
Note or such other Loan Document or any Unmatured Event or Event of Termination
and its consequences. Any such waiver and any such amendment, supplement or
modification shall be binding upon the Lender and all future holders of the
Note. In the case of any waiver,
23
the Lender and the Borrower and the Guarantors shall be restored to their former
position and rights hereunder and under the Note and any other Loan Document to
which they are parties, and any Unmatured Event or Event of Termination waived
shall be deemed to be cured and not continuing; but no such waiver shall extend
to any subsequent or other Unmatured Event or Event of Termination, or impair
any right consequent thereon.
9.02. Notices, etc. Any notice or other communication in connection
with this Agreement shall be deemed to have been given or made when received by
the party to whom directed. All such notices and other communications shall be
in writing unless otherwise provided herein and shall be directed, if to the
Lender, at the Lender's address on the signature pages hereof; and if to the
Borrower, at Cumberland House, One Victoria Street, P.O. Box HM 2245, Hamilton
HMJX Bermuda, Attention: Chief Financial Officer, or in accordance with the
latest unrevoked written direction from any party to the other parties hereto.
9.03. Survival of Representations and Warranties. All representations
and warranties made hereunder and in any document, certificate or statement
delivered pursuant hereto or in connection herewith shall survive the execution
and delivery of this Agreement and the Note.
9.04. Payment of Expenses and Taxes. The Borrower agrees, on demand,
to(a) pay or reimburse the Lender for all its reasonable out-of-pocket costs and
expenses incurred in connection with the preparation and execution of any
amendment, supplement or modification to, this Agreement, the Note and the other
Loan Documents and any other agreements prepared in connection herewith or
therewith, and the consummation of the transactions contemplated hereby and
thereby, including, without limitation, any and all reasonable collateral audit
fees, and the reasonable fees and disbursements of counsel to the Lender, (b)
pay or reimburse the Lender for all its costs and expenses incurred in
connection with the enforcement or preservation of any rights under this
Agreement, the Note and the other Loan Documents, including, without limitation,
the reasonable fees and disbursements of counsel to the Lender and (c) pay,
indemnify, and hold the Lender harmless from, any and all recording and filing
fees and any and all liabilities with respect to, or resulting from any delay in
paying, any registration tax, stamp, duty and other similar taxes or duties, if
any, which may be payable or determined to be payable in connection with the
execution and delivery of, or consummation of any of the transactions
contemplated by, or any amendment, supplement or modification of, or any waiver
or consent under or in respect of, this Agreement, the Note and the other Loan
Documents, and (d) pay, indemnify, and hold the Lender harmless from and against
any and all other liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements to the extent arising from
the execution, delivery and administration of, and the enforcement against the
Borrower of, this Agreement, the Note and the other Loan Documents (all the
foregoing, collectively, the "indemnified liabilities"), provided that the
Borrower shall not have any obligation hereunder to the Lender with respect to
indemnified liabilities arising from the gross negligence or willful misconduct
of the Lender. Without limitation of the generality of this Section 9.04(d), the
Borrower shall pay on demand to the Lender any and all amounts necessary to
indemnify the Lender from and against any and all indemnified liabilities
relating to or resulting from any of the following:
(i) reliance on any representation or warranty made or deemed
made by the Borrower (or any of its officers) under or in connection
with this Agreement, any Loan Document, any Loan Request or any other
information or report delivered by the Borrower pursuant hereto, which,
in any such case, shall have been false or incorrect in any material
respect when made or deemed made or delivered, except to the extent it
specifically relates to an earlier date:
(ii) the failure by the Borrower to comply with any term,
provision or covenant contained in this Agreement or any Loan Document.
The agreements in this subsection shall survive repayment of the Loans, the Note
and all other amounts payable hereunder. Notwithstanding anything in this
Section 9.04 to the contrary, the Borrower shall not
24
have any obligation hereunder to the Lender with respect to indemnified
liabilities arising from the gross negligence or willful misconduct of the
Lender.
9.05. Successors and Assigns; Participations.
--------------------------------------
(a) This Agreement shall be binding upon and inure to the benefit of
the Borrower, the Lender, the Guarantors and all future holders of the Note and
their respective successors and assigns, except that neither the Borrower nor
any Guarantor may assign or transfer any of its rights or obligations under this
Agreement without the prior consent of the Lender, and the Lender may not assign
or transfer any of its rights or obligations under this Agreement without the
prior consent of the Borrower (which consent shall not be unreasonably
withheld). The parties to this Agreement acknowledge that the Lender has
assigned and shall be permitted to continue to assign (without consent) to the
Collateral Agent, as collateral agent for the benefit of the holders of any debt
instruments issued by the Lender, its rights under this Agreement and the other
Loan Documents (including its rights in the Collateral under the Pledge
Agreement).
(b) The Borrower and the Lender agree that the Lender may, from time to
time, with the prior consent of the Borrower (which consent shall not be
unreasonably withheld), sell a portion of the Lender's obligation to make Loans
hereunder and of the Lender's rights hereunder and under the Loans and the Note,
or grant participations herein and in the Loans and the Note. Any such assignee
or participant may have the same rights as the Lender in respect of the rights
granted to the Lender hereunder. In such connection, it is agreed that the
Lender shall not be responsible for a failure by any such assignee or
participant, and that each such assignee or participant shall not be responsible
for a failure by the Lender (or another such assignee or participant), to make
or fund, as the case may be, its pro rata portion of any Loan.
(c) Every participant or assignee of the Lender shall provide the
Borrower (A) prior to becoming a participant or assignee (i) if the participant
or assignee is incorporated or established under the laws of a jurisdiction
outside of the United States, two duly completed copies of the United States
Internal Revenue Form 4224 or 1001 (or, if the assignee or participant is not a
bank, Form W-8) or successor applicable or required forms, in each case
entitling the participant or assignee to receive payments under this Agreement
without deduction or withholding of any United States Federal income taxes and
demonstrating the participant's or assignee's exemption from backup withholding
tax, (ii) a duly completed copy of the Internal Revenue Service Form W-8 or W-9
or successor applicable or required forms, and (iii) such other forms and
information as may be reasonably required to confirm the availability of any
applicable exemption from United States Federal, state or local withholding
taxes, and (B) to the extent possible, each potential participant or assignee
must also agree to provide the Borrower on or before the date that any such form
expires or becomes obsolete, or upon the occurrence of any event requiring an
amendment, resubmission or change in the most recent form previously delivered
by it, and such extensions or renewals as may be reasonably requested by the
Borrower. Notwithstanding any provision of this Agreement to the contrary, the
Borrower shall be entitled to withhold or cause withholding, and no amount shall
be payable under Section 2.8, to the extent such amount would otherwise be
payable as the result of such participant's or assignee's failure to deliver the
forms required by this paragraph (c) on a timely basis.
(d) The Lender shall not grant to any assignee or participant the right
to consent to any amendment or waiver entered into in accordance with subsection
9.01 except for any such amendment or waiver which would reduce the amount or
extend the due date of any principal of or interest on the Note.
9.06. Set-Off. In case any one or more of the Events of Termination
described in Article VII hereof shall occur, the holder of the Note shall have
the right, in addition to all other rights and remedies available to it, to
set-off against the unpaid balance of the Note any debt owing by such holder to
the Borrower, including without limitation any funds in any deposit account
maintained by the Borrower with such holder, and such holder shall have and
there is hereby created in favor of such holder a security interest in all
deposit accounts maintained by the Borrower with such holder. Any sums obtained
by the holder of the Note issued hereunder by way of counterclaim, set-off,
banker's lien or other lien for application upon the Note shall be shared pro
rata with the holders of an interest in the Note or this
25
Agreement. Nothing in this Agreement shall be deemed any waiver or prohibition
of any right of banker's lien or set-off under applicable Law.
9.07. Counterparts. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument.
9.08. Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
9.09. Integration. This Agreement represents the agreement of the
Borrower and the Lender with respect to the subject matter hereof, and there are
no promises, undertakings, representations or warranties by Lender relative to
the subject matter hereof not expressly set forth or referred to herein or in
the other Loan Documents.
9.10. GOVERNING LAW. THIS AGREEMENT AND THE NOTE AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
COMMONWEALTH OF PENNSYLVANIA.
9.11. SUBMISSION TO JURISDICTION WAIVERS. EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY AND UNCONDITIONALLY:
(a) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH IT
IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT
THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE
COMMONWEALTH OF PENNSYLVANIA AND THE STATE OF NEW YORK, THE COURTS OF THE UNITED
STATES OF AMERICA FOR THE WESTERN DISTRICT OF PENNSYLVANIA AND THE SOUTHERN
DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF;
(b) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH
COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE
OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR
PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM
THE SAME;
(c) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY
BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY
SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO ITS ADDRESS AS PROVIDED
IN SECTION 9.02 OR AT SUCH OTHER ADDRESS OF WHICH ALL OF THE OTHER PARTIES
HERETO SHALL HAVE BEEN NOTIFIED PURSUANT THERETO; AND
(d) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE
OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE
IN ANY OTHER JURISDICTION.
9.12. Acknowledgments. The Borrower hereby acknowledges that:
26
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement, the Note and the other Loan Documents;
(b) the Lender has no fiduciary relationship to the Borrower, and the
relationship between the Lender and the Borrower is solely that of debtor and
creditor; and
(c) no joint venture exists between the Borrower and the Lender.
9.13. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR THE NOTE OR ANY OTHER LOAN DOCUMENT AND
FOR ANY COUNTERCLAIM THEREIN.
9.14. No Bankruptcy Petition Against Lender. The Borrower covenants and
agrees that it will not institute against, or join any other Person in
instituting against, the Lender any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings under any federal or
state bankruptcy or similar law.
9.15. No Recourse. The obligations of the Lender under this Agreement
are solely the corporate obligations of the Lender. No recourse shall be had for
the payment of any amount owing in respect to this Agreement or for the payment
of any fee hereunder or for any other obligation or claim arising out of or
based upon this Agreement against any stockholder, employee, officer, director
or incorporator of the Lender or against Mellon or any stockholder, employee,
officer, director, incorporator or affiliate thereof.
9.16. Holidays. Unless otherwise specified herein, whenever any payment
or action to be made or taken hereunder or under the Note shall be stated to be
due on a Saturday, Sunday or public holiday under the laws of the Commonwealth
of Pennsylvania or Bermuda, such payment or action shall be made or taken on the
next succeeding Business Day and such extension of time shall in such case be
included in computing interest, if any, in connection with such payment or
action.
9.17. Judgment Currency. In the event of a judgment or order being
rendered by any court or tribunal for the payment of any amounts owing to the
Lender under this Agreement or any other Loan Document or for the payment of
damages in respect of any breach of this Agreement or any other Loan Document or
under or in respect of a judgment or order of another court or tribunal for the
payment of such amounts or damages, such judgment or order being expressed in a
currency (the "Judgment Currency") other than Dollars the party against whom the
judgment or order is made shall indemnify and hold the Lender harmless against
any deficiency in terms of Dollars in the amounts received by the Lender arising
or resulting from any variations as between (i) the exchange rate at which
Dollars are converted into the Judgment Currency for the purposes of such
judgment or order and (ii) the exchange rate at which the Lender is able to
purchase Dollars with the amount of the Judgment Currency actually received by
the Lender on the date of such receipt. The indemnity in this section shall
constitute a separate and independent obligation from the other obligations of
the Borrower hereunder and shall apply irrespective of any indulgence granted by
the Lender.
9.18. Records. The unpaid principal amount of the Loans owing to the
Lender, the unpaid interest accrued thereon, the interest rate or rates
applicable to such unpaid principal amount, the duration of such applicability,
the Lender's Commitment and the accrued and unpaid Facility Fees and Program
Fees shall at all times be ascertained from the records of the Lender, which
shall be conclusive absent manifest error.
9.19. Confidentiality. The Lender agrees to keep confidential any
information relating to the Borrower received by it pursuant to or in connection
with this Agreement which is (a) information which the Lender reasonably expect
that the Borrower would want to keep confidential or (b) information which is
clearly marked "CONFIDENTIAL"; provided, however, that this Section 9.19 shall
not be construed to prevent the Lender from disclosing such information (i) to
any affiliate that shall agree in writing for the benefit of the Borrower to be
bound by this obligation of confidentiality, (ii) upon the order of any court or
27
administrative agency of competent jurisdiction, (iii) upon the request or
demand of any regulatory agency or authority having jurisdiction over the Lender
which request or demand has the force of Law or is made by a bank regulatory
agency, (iv) that has been publicly disclosed, other than from a breach of this
provision by the Lender, (v) that has been obtained from any person that is
neither a party to this Agreement nor an affiliate of any such party, but only
to the extent that the Lender does not know or have reason to know that such
disclosure violates a confidentiality agreement between such person and the
Borrower (vi) in connection with the exercise of any right or remedy hereunder
or under any other Loan Document, (vii) as expressly contemplated by this
Agreement or any other Loan Document, (viii) to any prospective purchaser of all
or any part of the interest of the Lender which shall agree in writing for the
benefit of the Borrower to be bound by the obligation of confidentiality in this
Agreement or the other Loan Documents if such prospective purchaser is a
financial institution or has been consented to by the Borrower, which consent
will not be withheld if such purchaser is not a competitor of the Borrower or an
affiliate of a competitor of the Borrower or (ix) to its liquidity or credit
providers under the Funding Agreement, which agrees in writing to maintain the
confidentiality of such information in accordance with this Section 9.19, or a
rating agency rating the securities of the Lender.
28
IN WITNESS WHEREOF, the parties hereto, by their respective officers
thereunto duly authorized, have executed this Agreement as of the day and year
first above written.
X.L. AMERICA, INC., as Borrower
By: _______________________________
(Signature)
Name: _____________________________
Title: ____________________________
X.L. INSURANCE COMPANY, LTD., as a Guarantor
By: _______________________________
(Signature)
Name: _____________________________
Title: ____________________________
X.L. INVESTMENTS LTD., as a Guarantor
By: _______________________________
(Signature)
Name: _____________________________
Title: ____________________________
THREE RIVERS FUNDING CORPORATION, as Lender
By: _______________________________
(Signature)
Name: _____________________________
Title: ____________________________
Notice Address:
c/o Global Securitization Services, LLC
25 West 43rd Street, Suite 704
New York, New York 10036
Attention: Mr. Bernard J. Angelo
Telephone: (212) 302-5151
Facsimile: (212) 302-8767
29
EXHIBIT "A"
PROMISSORY NOTE
$______________________
December , 1998
FOR VALUE RECEIVED, the undersigned, X.L. America, Inc., a Delaware
corporation (the "Borrower"), hereby promises to pay to the order of Three
Rivers Funding Corporation, (the "Lender") on the Commitment Expiration Date for
each Loan made by the Lender to the Borrower pursuant to the Agreement described
below the lesser of (i) the principal sum of ________________ Dollars
($______________) and (ii) the unpaid principal amount of all such Loans made by
the Lender maturing on such Commitment Expiration Date. The Borrowers further
promise to pay to the order of the Lender interest on the unpaid principal
amount hereof from time to time outstanding at the rate or rates per annum
determined pursuant to Section 2.06 of, or as otherwise provided in, the
Agreement, payable on the dates set forth in the Agreement.
This Promissory Note is the Note referred to in the Loan Agreement
dated as of December ,1998 among the Borrower, X.L. Investments Ltd., X.L.
Insurance Company, Ltd. and the Lender (as the same may have been or may
hereafter be amended or modified, the "Agreement" which Agreement, among other
things, contains provisions for prepayments on account of principal hereof prior
to the maturity hereof and also for acceleration of the maturity hereof upon the
happening of certain stated events, upon the terms and conditions therein
specified. Terms defined in the Agreement shall have the same meanings herein.
The Borrower hereby expressly waive presentment, demand, protest, and
all other demands and notices in connection with the delivery, acceptance,
performance, default or enforcement of this Note and the Agreement, and an
action for amounts due hereunder or thereunder shall immediately accrue upon the
expiration of any grace period.
This Note shall be governed by, construed and enforced in accordance
with the laws of the Commonwealth of Pennsylvania, without regard to conflict of
laws principles.
X.L. AMERICA, INC.
By: _____________________________
(Signature)
Name: ___________________________
Title: __________________________
[REVERSE OF NOTE OR SCHEDULE THERETO]
This Note evidences Loans made by the Lender under Section 2.1 of the Loan
Agreement dated as of December 22, 1998, as from time to time amended, between
X.L. America, Inc. and the Lender, in the principal amounts and on the dates set
forth below, subject to the payments and prepayments of principal set forth
below:
Principal Principal Amount Principal Balance
Date Amount Loaned Paid or Prepaid Outstanding
- ---- ------------- --------------- -----------
2