Exhibit 10.20
CREDIT AGREEMENT
BY AND BETWEEN
LASALLE BANK NATIONAL ASSOCIATION
AND
HUB INTERNATIONAL LIMITED
JULY 19, 2001
TABLE OF CONTENTS
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SECTION 1. DEFINITIONS .......................................................................... 1
SECTION 2. CREDIT FACILITY .......................................................................... 11
Section 2.A. Revolving Loans and Revolving Note......................................... 11
2.A.1. Revolving Loans............................................................ 11
2.A.2. Revolving Note............................................................. 11
SECTION 3. GENERAL PROVISIONS APPLICABLE TO ALL LOANS................................................ 12
Section 3.A. Applicable Interest Rates.................................................. 12
Section 3.B. Minimum and Maximum Borrowing Amounts...................................... 13
Section 3.C. Borrowing Procedures....................................................... 13
Section 3.D. Interest Periods........................................................... 14
Section 3.E. Maturity of LIBOR Loans.................................................... 14
Section 3.F. Prepayments................................................................ 14
Section 3.G. Default Rate............................................................... 15
Section 3.H. Note....................................................................... 16
Section 3.I. Funding Indemnity.......................................................... 16
Section 3.J. Change in Circumstances, Etc............................................... 17
SECTION 4. FEES...................................................................................... 19
Section 4.A. Revolving Commitment Fees.................................................. 19
Section 4.B. Non-Utilization Fee........................................................ 19
SECTION 5. PLACE AND APPLICATION OF PAYMENTS......................................................... 19
Section 5.A. Place and Application of Payments.......................................... 19
SECTION 6. CONDITIONS PRECEDENT AND SUBSEQUENT....................................................... 19
Section 6.A. Delivery of Documents as Conditions Precedent.............................. 20
6.A.1. Agreement.................................................................. 20
6.A.2. Note....................................................................... 20
6.A.3. Evidence of Insurance...................................................... 20
6.A.4. Articles of Incorporation.................................................. 20
6.A.5. Good Standing.............................................................. 20
6.A.6. Secretary's Certificate.................................................... 20
6.A.7. Solvency Certificate....................................................... 20
6.A.8. Opinion.................................................................... 20
6.A.9. Environmental Data......................................................... 20
6.A.10. Officer's Certificate...................................................... 21
6.A.11. Guarantees................................................................. 21
6.A.12. Financial Statements of Guarantors......................................... 21
6.A.13. Other Documents............................................................ 21
6.A.14. Subordinated Debentures................................................... 21
Section 6.B. Fees....................................................................... 21
Section 6.C. Conditions Precedent....................................................... 21
6.C.1. Materially Adverse Effect.................................................. 21
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6.C.2. Representations and Warranties............................................. 21
6.C.3. Covenants.................................................................. 21
6.C.4. Event of Default........................................................... 22
6.C.5. Revolving Commitments...................................................... 22
6.C.6. No Violations.............................................................. 22
6.C.7. Note; Notice of Borrowing.................................................. 22
6.C.8. Satisfactory Completion of Due Diligence................................... 22
SECTION 7. REPRESENTATIONS AND WARRANTIES............................................................ 22
Section 7.A. Corporate Existence and Related Matters.................................... 22
Section 7.B. Corporate Authority........................................................ 23
Section 7.C. Consents, Approvals, etc................................................... 23
Section 7.D. Binding Effect and Enforceability.......................................... 23
Section 7.E. Default of Debt, Licenses, Permits, Orders and Other Agreements............ 24
Section 7.F. Financial Condition and Litigation......................................... 24
Section 7.G. Title and Liens............................................................ 24
Section 7.H. Employee Plans............................................................. 24
Section 7.I. Taxes...................................................................... 25
Section 7.J. Compliance with Laws....................................................... 25
Section 7.K. Corporate Structure and Affiliates......................................... 25
Section 7.L. Corporate Names............................................................ 25
Section 7.M. Solvency................................................................... 25
Section 7.N. Margin Regulations......................................................... 25
Section 7.O. Indebtedness to and Transactions with Affiliates........................... 25
Section 7.P. Acts of God................................................................ 26
Section 7.Q. Labor Controversies; Union Contracts, Etc.................................. 26
Section 7.R. Surety Obligations; Financial Assurances................................... 26
Section 7.S. Business Relations......................................................... 26
Section 7.T. Accuracy of Information.................................................... 26
Section 7.U. Hazardous Materials........................................................ 27
Section 7.V. Ranking.................................................................... 27
Section 7.W. Business Loan.............................................................. 27
Section 7.X. Complete Information....................................................... 27
Section 7.Y. Intellectual Property...................................................... 28
SECTION 8. COVENANTS................................................................................. 28
Section 8.A. Affirmative Covenants...................................................... 28
8.A.1. Financial Covenants........................................................ 28
8.A.2. Financial Information and Reporting........................................ 29
8.A.3. Corporate Existence and Conduct of Business................................ 30
8.A.4. Taxes and Laws............................................................. 31
8.A.5. Inspection................................................................. 31
8.A.6. Lender Costs............................................................... 31
8.A.7. Employee Plans............................................................. 31
8.A.8. Use of Proceeds of Loans................................................... 32
8.A.9. Financial Assurance........................................................ 32
8.A.10. Compliance with Laws....................................................... 32
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8.A.11. Maintenance of Insurance................................................... 32
Section 8.B. Negative Covenants......................................................... 33
8.B.1. Liens...................................................................... 33
8.B.2. Fiscal Year, Name Changes, Mergers and Acquisitions........................ 33
8.B.3. Restricted Payments........................................................ 33
8.B.4. Transactions with Affiliates............................................... 33
8.B.5. Capital Structure.......................................................... 33
8.B.6. Change in Nature of Business............................................... 34
8.B.7. Prepayment or Modification of Debt......................................... 34
8.B.8. False Statements........................................................... 34
8.B.9. Inconsistent or Restrictive Agreements..................................... 34
8.B.10. Investments................................................................ 34
8.B.11. Indebtedness............................................................... 34
SECTION 9. EVENTS OF DEFAULT......................................................................... 35
Section 9.A. Obligations................................................................ 35
Section 9.B. Breach or Default Under Loan Documents..................................... 35
Section 9.C. Representation and Warranties.............................................. 35
Section 9.D. Judgments.................................................................. 35
Section 9.E. Insolvency and Related Proceedings......................................... 36
Section 9.F. Other Material Agreements.................................................. 36
Section 9.G. State Action............................................................... 36
Section 9.H. ERISA Matters.............................................................. 36
Section 9.I. Tax Liens.................................................................. 37
Section 9.J. Failure of Lien............................................................ 37
Section 9.K. Environmental or Other Remediation Costs................................... 37
Section 9.L. Operating Permits and Licenses............................................. 37
Section 9.M. Material Adverse Change.................................................... 37
Section 9.N. Change in Control.......................................................... 37
SECTION 10. RIGHTS AND REMEDIES...................................................................... 38
Section 10.A. Termination of Commitment and Acceleration................................. 38
Section 10.B. Rescission................................................................. 38
Section 10.C. Application of Payments.................................................... 38
Section 10.D Attorney-in-Fact........................................................... 39
SECTION 11. MISCELLANEOUS............................................................................ 39
Section 11.A. Assignments and Participations............................................. 39
Section 11.B. Withholding Taxes.......................................................... 39
Section 11.C. Amendment and Waivers...................................................... 40
Section 11.D. Merger and Integration Clause.............................................. 40
Section 11.E. Applicable Law............................................................. 40
Section 11.F. Severability............................................................... 40
Section 11.G. Section Headings........................................................... 40
Section 11.H. Binding Effect............................................................. 40
Section 11.I. Notices.................................................................... 41
Section 11.J. Counterparts............................................................... 42
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Section 11.K. Indemnification............................................................ 42
Section 11.L. Independence of Covenants.................................................. 42
Section 11.M. Limitation of Liability.................................................... 43
Section 11.N. Consent to Jurisdiction and Waiver of Jury Trial and Personal Service...... 43
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EXHIBITS
Exhibit A. Form of Revolving Note
Exhibit B. Form of Borrowing Notice
Exhibit C. Form of Compliance Certificate
Exhibit D. New Subsidiary Certificate
Exhibit E. Form of Guaranty
SCHEDULES
Schedule 1.A. Exclusions to Definition of "Contingent Liability"
Schedule 1.B. Historical Pro Forma Basis
Schedule 1C. Current Loans and Advances
Schedule 7.A. Corporate organizational, ownership and related matters for
Borrower
Schedule 7.C. Required Third Party Consents
Schedule 7.F. Pending or threatened litigation and government proceedings
Schedule 7.G. Existing Liens (which are included as Permitted Liens)
Schedule 7.H. Employee Plans
Schedule 7.I. Deficiency or additional tax assessments
Schedule 7.O. Indebtedness to/from Affiliates
Schedule 7.R. Financial Assurances
Schedule 8.A.8. Capital Expenditures and Acquisitions
Schedule 8.B.2. Existing Investments (permitted to be maintained by Borrower)
Schedule 8.B.4. Transactions with Affiliates
Schedule 8.B.11. Indebtedness
CREDIT AGREEMENT
This Credit Agreement is made as of July 19, 2001, by and between LASALLE
BANK NATIONAL ASSOCIATION, a national banking association with its principal
offices located in Chicago, Illinois, ("Lender"), and Hub International Limited,
a corporation incorporated under the laws of Ontario, Canada ("Borrower").
WITNESSETH:
WHEREAS, the Borrower desires to borrow from the Lender certain amounts for
the purposes set forth in Section 8.A.8 below;
WHEREAS, the Lender is agreeable to extending said credit facility on the
terms and conditions provided herein;
WHEREAS, certain financial covenants of the Borrower hereinafter set forth
relate to the financial condition and results of Borrower, and the financial
condition and results of Borrower are a material inducement to the Lender's
willingness to enter into this Credit Agreement and extend the financial
accommodations referred to herein;
WHEREAS, as a condition for extending such financial accommodations, the
Lender requires that Borrower enter into this Credit Agreement establishing the
terms and conditions thereof;
NOW THEREFORE, for and in consideration of the foregoing premises and the
mutual agreements contained herein, the parties hereto, intending to be legally
bound, do hereby agree as follows:
SECTION 1. DEFINITIONS.
Section 1.A. In addition to the terms that are elsewhere defined herein,
when used herein, the following terms have the meanings as set forth below:
"Act" or "Acts" means, collectively, the Laws of any state or governmental
subdivision thereof which apply to the conduct of business by the Borrower.
"Adjusted LIBOR" is defined in Section 3.A hereof.
"Affiliate" of any Person means any other Person that directly or
indirectly, through one or more intermediaries, controls or is controlled by or
is under common control with such Person and includes, without limitation, each
shareholder, director and any Subsidiaries of such Person. For purposes of this
definition, "control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or by contract or otherwise.
For purposes of this Agreement, all Subsidiaries of Borrower are Affiliates of
Borrower.
"Agreement" means, collectively, this Credit Agreement, together with any
and all exhibits, appendices, schedules and amendments hereto and modifications,
renewals, extensions, restatements and substitutions thereof and therefor.
"Applicable LIBOR Margin," for purposes of determining the interest rate on
a LIBOR Loan, means 1.50%.
"Authorized Officer" means one or more officers of the Borrower duly
authorized (and so certified to the Lender by the corporate Secretary of the
Borrower involved pursuant to a certificate of authority and incumbency from
time to time satisfactory to the Lender), acting alone, to request Loans
hereunder and execute and deliver documents, instruments, agreements, reports,
statements and certificates in connection herewith.
"Borrowing" means the total of Loans made by Lender to the Borrower on a
single date and for a single Interest Period.
"Borrowing Notice" means the request of the Borrower for Loans as further
described in Section 3.C hereof.
"Business Day" means any day other than a Saturday, Sunday or other day on
which banks are authorized or required to be closed in Chicago, Illinois, and
with respect to LIBOR Loans, a day on which dealings in United States Dollars
may be carried on by the Lender or the Reference Bank in the London interbank
eurodollar market.
"Capital Expenditures" means all payments, expenditures and the obligations
incurred by a Person for the purchase, creation, improvement, replacement,
substitution, addition, renovation or lease of a fixed or capital asset with a
useful life of more than one year and which are required to be classified or
accounted for as a capital asset or capital lease on the balance sheet or
statement of cash flow of such Person, as determined in accordance with GAAP,
including equipment which is purchased simultaneously with the trade-in of
existing equipment owned by such Person to the extent of the gross amount of the
purchase price of such purchased equipment less the book value of the equipment
being traded in at such time, but excluding (a) expenditures made in connection
with the replacement or restoration of assets, to the extent such replacement or
restoration is financed out of (i) insurance proceeds paid on account of the
loss of or damage to the assets so replaced or restored or (ii) awards or
compensation arising from the taking by condemnation or eminent domain of the
assets so replaced, (b) any portion of capital lease obligations that is not
required to be capitalized on such Person's balance sheet, and (c) interest
capitalized during construction.
"Capital Lease" shall mean, as to any Person, any lease of (or other
agreement conveying the right to use) immovable or real property or movable or
personal property, which would be required to be classified and accounted for as
a capital lease on a balance sheet of such Person under GAAP;
"Closing Date" means the later of the date hereof or the date on which all
of the conditions precedent to the Loans set forth in Section 6 hereof have been
fully satisfied.
"Commitment" means the Revolving Commitment.
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"Consolidated" means the consolidation of accounts in accordance with GAAP,
including principles of consolidation.
"Contingent Liability" or "Contingent Liabilities" means any agreement,
undertaking or arrangement by which any Person (i) guarantees, endorses or
otherwise becomes or is contingently liable upon (by direct or indirect
agreement, contingent or otherwise, to provide funds for payment, to supply
funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor
against loss) the debt, obligation or other liability of any other Person (other
than by endorsement of instruments G18 in the course of collection), or (ii)
guarantees the payment of dividends or other distributions upon the shares of
any other Person, or (iii) undertakes or agrees (contingently or otherwise) (a)
to purchase, repurchase, or otherwise acquire any Debt, obligation or liability
or any security therefor, or (b) to provide funds for the payment or discharge
thereof (whether in the form of loans, advances, stock purchases, capital
contributions or otherwise), or (c) to maintain solvency, assets, level of
income or other financial condition, or (d) to make payment other than for
values received; provided, however, that Contingent Liability shall not include
those items listed on Schedule 1.A. The amount of any Person's obligation under
any Contingent Liability shall (subject to any limitation set forth herein) be
deemed to be the outstanding principal amount (or maximum permitted principal
amount, if larger) of the debt, obligation or other liability guaranteed or
supported thereby.
"Debt" of any Person means all items of indebtedness, obligation or
liability of any kind or nature, whether matured or unmatured, liquidated or
unliquidated, direct or contingent, joint or several, of such Person, including
without limitation and without duplication: Contingent Liabilities of such
Person; any indebtedness secured by a Lien on or payable out of the proceeds or
production from any property of such Person regardless of whether such
indebtedness has been assumed by such Person; obligations representing the
deferred purchase price of property; obligations which are evidenced by notes,
acceptances, or other instruments; capitalized lease obligations; and
obligations in respect of letters of credit.
"Default" means any event which, with the giving of notice or the passage
of time or both, would constitute, become or mature into an Event of Default.
"Default Rate" is as defined at Section 3.G hereof.
"EBITDA" means, for any period, on a Consolidated basis for the Borrower,
for the Measurement Period, the sum for such period of (a) Net Income, plus (b)
depreciation and amortization expense deducted in the determination of such Net
Income, plus (c) Interest Expense deducted in the determination of such Net
Income, plus (d) federal and state income taxes as determined in accordance with
GAAP and deducted in the determination of such Net Income, and minus (e) any
items of gain which are extraordinary items as defined in GAAP to the extent
reflected in the determination of such Net Income.
"Employee Plan" means any pension, retirement, disability, medical, dental
or other health plan, life insurance or other death benefit plan, profit
sharing, deferred compensation, stock option, bonus or other incentive plan,
vacation benefit plan, severance plan, or other employee benefit plan or
arrangement, including, without limitation, those pension, profit-sharing and
retirement plans of the Borrower described from time to time in the Financial
Statements and any pension plan, welfare plan, Defined Benefit Pension Plans (as
defined in ERISA) or any multi-employer plan, maintained
3
or administered by the Borrower or any Affiliate of the Borrower, to which the
Borrower or any Affiliate of the Borrower is a party or may have any liability
or by which the Borrower or any Affiliate is bound.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with all rules and regulations issued
thereunder or in connection therewith.
"Eurodollar Reserve Percentage" is defined in Section 3.A hereof.
"Event of Default" means an event or occurrence described in Section 9 of
this Agreement.
"Executive Share Purchase Plan" refers to the plan described in Schedule
1.A.
"Expiration Date" is defined at Section 2.A.1 hereof.
"Financial Assurance" means the financial assurance (whether in the form of
a bond, letter of credit, cash or otherwise) required pursuant to any Act.
"Financial Hedge" means a swap, collar, floor, cap, or other contract which
is intended to reduce or eliminate the risk of fluctuations in interest rates;
"Financial Statements" means all of the balance sheets, statements of
operations, statements of cash flow and statements of changes in shareholders'
equity of the Borrower for each Fiscal Year or each month or quarter thereof
which have been delivered to the Lender on or prior to the date hereof and which
are to be delivered to the Lender pursuant to Section 8.A.2 of this Agreement.
"Fiscal Quarter" means any quarter of a Fiscal Year.
"Fiscal Year" means the fiscal year of Borrower ending on December 31 for
each year.
"Funded Debt" means Debt for or with respect to borrowed money with an
ultimate maturity greater than one (1) year from the date of determination,
provided in any event that for all purposes hereof all Loans shall be considered
as and included in Funded Debt.
"Funded Senior Debt" means (without duplication), with respect to the
Borrower and Affiliates on a consolidated basis, the sum of the following senior
debt: (a) all liabilities, obligations, and indebtedness which in accordance
with GAAP should be classified upon their balance sheet as senior liabilities in
respect of (i) money borrowed, including, without limitation, the debt incurred
pursuant to this Credit Agreement and (ii) obligations under Capital Leases; (b)
senior obligations under reimbursement agreements for advances made by an issuer
of a letter of credit but only if such obligation is payable over more than, or
outstanding longer than, thirty (30) days from the date such obligation arises;
(c) senior obligations with respect to Financial Hedges, but only following the
occurrence of a default under the applicable Financial Hedge or an Event of
Default hereunder; and (d) senior obligations with respect to Debt for which a
Company is responsible or liable solely as a guarantor, but only from and after
the date demand for payment is made under the applicable guaranty. Funded Senior
Debt shall not include those debentures listed in Section 6.A.14 herein.
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"Funded Total Debt" means (without duplication), with respect to the
Borrower and Affiliates on a consolidated basis, the sum of the following: (a)
all liabilities, obligations, and indebtedness which in accordance with GAAP
should be classified upon their balance sheet as liabilities in respect of (i)
money borrowed, including, without limitation, the debt incurred pursuant to
this Credit Agreement and (ii) obligations under Capital Leases; (b) obligations
under reimbursement agreements for advances made by an issuer of a letter of
credit but only if such obligation is payable over more than, or outstanding
longer than, thirty (30) days from the date such obligation arises; (c)
obligations with respect to Financial Hedges, but only following the occurrence
of a default under the applicable Financial Hedge or an Event of Default
hereunder; and (d) obligations with respect to Debt for which a Company is
responsible or liable solely as a guarantor, but only from and after the date
demand for payment is made under the applicable guaranty;
"GAAP" means generally accepted accounting principles, applied on a basis
consistent with prior periods, as required in the United States or Canada
depending on the country of reporting; provided, however, that GAAP with respect
to any interim financial statements or reports shall be deemed subject to
year-end adjustments and footnotes made in accordance with GAAP.
"Guarantor" means, individually, each of the following companies: 798676
Alberta Ltd., a corporation incorporated under the laws of Alberta, Canada,
805977 Alberta Ltd., a corporation incorporated under the laws of Alberta,
Canada, Hubacq Inc., a corporation incorporated under the laws of Ontario,
Canada, Hub U.S. Holdings, Inc., a Delaware corporation. "Guarantors" means,
collectively, the four (4) Guarantors.
"Guaranty" means a guaranty in the form of Exhibit E delivered by a
Guarantor. "Guarantees" means, collectively, the four (4) separate Guarantees
delivered by the four (4) Guarantors.
"Hazardous Materials" is defined in Section 7.U hereof.
"Historical Pro Forma Basis" means, for any Measurement Period, ending as
at the end of the Fiscal Quarter or month, as the case may be, the relevant
financial terms (i.e. those included in calculating the financial covenants in
Section 8.A.1) as calculated and determined for the Borrower and any
Subsidiaries acquired during the Measurement Period and/or to be acquired and
with respect to which the calculation of the various financial covenants on a
Historical Pro Forma Basis is being made, all determined in accordance with GAAP
and calculated as if all such acquired and to be acquired Subsidiaries had been
owned by the Borrower and Guarantors through the Measurement Period involved,
and adjusted for nonrecurring acquisition expenses reflected on Schedule 1.B.
"Interest Expense" means, with respect to any Person, for any period, the
aggregate interest expense for such period (including, without duplication, all
commissions, discounts, and other fees and charges owed with respect to letters
of credit, the portion of any capitalized lease obligations allocable to
interest expense, and capitalized interest) determined in accordance with GAAP
(but in any event excluding interest on tax assessments to the extent such
interest is included in deferred taxes).
"Interest Period" is defined at Section 3.D hereof.
5
"Laws" means all ordinances, statutes, rules, regulations, codes, orders,
injunctions, writs or decrees of any government, whether federal, state,
municipal, local or foreign, of any political subdivision or agency thereof, or
of any court, board or similar entity established by any of the foregoing.
"LIBOR" is defined in Section 3.A hereof.
"LIBOR Loan" means a Loan bearing interest at the rate specified in Section
3.A(b) hereof.
"Lien" means any security interest, mortgage, pledge, hypothecation,
collateral assignment, lien (statutory or otherwise), charge or encumbrance of
any kind or nature whatsoever, any deposit or preferential arrangement of any
kind or nature whatsoever, including, without limitation, any conditional sale
or other title retention agreement, or any financing lease involving
substantially the same economic effect as any of the foregoing.
"Loan" means a Revolving Loan and "Loans" means the Revolving Loans,
collectively and in the aggregate.
"Loan Documents" means, collectively, all of those documents set forth and
described in Section 6 hereof, as amended, modified, supplemented or restated
from time to time, and any facilities or agreements in replacement thereof.
"Materially Adverse Effect" means, relative to any occurrence, event,
condition or circumstance, or any change therein, of whatever nature (including
any adverse determination in any litigation, arbitration, or governmental
investigation or proceeding), a materially adverse effect on: (i) the assets of
or the business, revenues, financial condition, operations of the Borrower on a
consolidated basis or any Guarantor; or (ii) the ability of the Borrower or any
Guarantor to timely or fully perform any of the payment or other material
obligations involving any of its Debt.
"Measurement Period" means with respect to each quarter then ending,
beginning with the quarter ending December 31, 2000 and thereafter, the rolling
period of the four fiscal quarters then ending.
"Monies" means (i) all cash at any time on deposit with or held by the
Lender or any other bank or institution for the account of the Borrower, (ii)
all accounts of the Borrower with the Lender or any other bank or institution,
(iii) all investments and reinvestments of amounts from time to time credited to
such accounts, and (iv) all interest, dividends, distributions and other
proceeds payable on or with respect to such investments and reinvestments and
such accounts.
"Net Income" means, for any period, the net income of Borrower and its
Subsidiaries on a consolidated basis for such period, before the payment of
dividends on all capital stock, determined in accordance with GAAP.
"Net Worth" means, with respect to the Borrower on a consolidated basis, as
calculated at any date of determination, the amount of Stockholder's Equity of
Borrower, determined on a consolidated basis at such date in accordance with
GAAP but exclusive of any adjustments under FASB 115.
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"Note" means the Revolving Note.
"Obligations" means each and every promise, agreement, covenant, debt and
all other liabilities, obligations and indebtedness of the Borrower, its
successors or assigns, to the Lender, whether primary, secondary, contingent,
direct, or indirect, howsoever incurred, created, arising or evidenced, whether
presently or hereafter existing, evidenced, arising or becoming due, which such
promise, agreement, covenant, debt, liabilities, obligations or indebtedness
arises from or in connection with the Loans or under this Agreement, the Note,
or any other Loan Documents, or any refinancings, substitutions, extensions,
renewals, replacements and modifications for or of the foregoing, or the
enforcement by the Lender of its rights and remedies under any or all of the
foregoing (including all costs, expenses and reasonable attorneys' and
paralegals' fees and expenses incurred by the Lender), including any of the
foregoing that arises after the filing of a petition by or against the Borrower
under any insolvency or related proceeding, even if the obligations do not
accrue because of the automatic stay under bankruptcy laws or otherwise.
"Outstanding Principal Obligations" means, at any time, the sum of the
aggregate principal amount of all Loans advanced to the Borrower outstanding and
unpaid at such time, all expressed in U.S. Dollars;
"Permitted Investments" means (i) cash, (ii) readily marketable securities
issued or guaranteed by the government of the United States of America or any
agency thereof or by the government of Canada or any province thereof having a
maturity at the time of issuance of not exceeding one year, (iii) commercial
paper rated at least A-1 by Standard & Poor's Corporation or P-1 by Moody's
Investors Service, Inc., having a maturity at the time of issuance not exceeding
one year, and money market funds invested in short-term securities rated at
least as provided in the preceding clause, (iv) certificates of deposit of or
demand or time deposits with or repurchase agreements of any commercial bank
which is organized under the laws of the United States of America or any state
thereof or of any Canadian national chartered bank or trust company and has
capital and surplus of in excess of $100,000,000, and demand deposits or local
operating accounts with the Lender or any other financial institutions
acceptable to the Lender, (v) property used in the ordinary course of business,
the purchase of which does not otherwise violate or cause or result in a
violation of any provision hereof, (vi) current assets arising from the sale of
goods and services in the ordinary course of business, (vii) current loans or
advances to employees in the ordinary course of business, which are set forth in
Schedule 1.C, and future loans to officers or employees not in excess of $50,000
in the aggregate at any time outstanding or loans or guarantees under the
Executive Share Purchase Plan not exceeding $10,000,000 or under the Restricted
Stock Plan not to exceed $ 1,000,000, and (viii) existing investments in
existing Subsidiaries or Affiliates of Borrower.
"Permitted Liens" means any Liens (i) provided for hereunder or under the
Loan Documents in favor of the Lender; (ii) for taxes or assessments not yet due
and payable; (iii) of vendors incurred in the ordinary course of business,
payment with respect to which is not then due and payable; (iv) which arise out
of pledges or deposits under any Laws relating to workers' compensation,
unemployment insurance, old age pensions or other social security or retirement
benefits; (v) which are being contested in good faith by appropriate and lawful
proceedings, so long as levy and execution thereon have been and continue to be
stayed and which do not materially impair or adversely affect the value or use
of the assets and properties of the Borrower or the operation or
7
condition of the business of the Borrower; (vi) which are existing on Equipment,
Fixtures and/or real property of the Borrower and are set forth on Schedule 7.G
hereto, provided, however, that the Debt secured by existing Liens on Equipment,
Fixtures and/or real property shall not be increased and such Debt shall not be
secured by any Equipment, Fixtures and/or real property other than that securing
such Debt as of the date hereof; (vii) which are purchase money security
interests on Equipment and/or Fixtures (exclusive of any such Liens referred to
in subparagraph (vi) above) securing the deferred purchase price thereof
hereinafter; provided, however, that any such Lien shall attach only to the
Equipment and/or Fixture financed by the holder of such Lien; (viii) which are
currently existing on Accounts of the Borrower and are set forth on Schedule 7.G
hereto; or (ix) with respect to the property (other than Accounts) of any new
Subsidiary of the Borrower which becomes a Subsidiary after the date hereof, so
long as such Liens are either incurred in connection with an acquisition by the
Borrower permitted under Section 8.B.2 hereof or were in existence prior to such
acquisition, and, if incurred in connection with such an acquisition, are
subordinated to the Liens in favor of the Lender. "Equipment", "Fixture" and
"Accounts" shall be defined as in the Uniform Commercial Code of Illinois, as
amended from time to time.
"Person" means any individual, sole proprietorship, joint venture,
partnership, association, unincorporated organization, joint-stock company or
association, limited liability company, trust, corporation, entity, institution
or government body (or agency or political subdivision thereof).
"Pro Forma EBITDA" means EBITDA calculated on a Historical Pro Forma Basis.
"Prime Rate" means the rate of interest announced or referred to by the
Lender from time to time as its prime or reference rate for interest rate
determinations, with each change in such Prime Rate to take effect on the same
day such change is announced by the Lender. The use of the term "Prime Rate"
herein or in the Note is not intended nor does it imply that said rate of
interest is a preferred rate of interest or one which is offered by the Lender
to its most creditworthy customers.
"Prime Rate Loan" means a Loan bearing interest at the rate specified in
Section 3.A(a) hereof.
"Reference Bank" means ABN/AMRO Bank.
"Refunding Borrowing" is defined in Section 3.C.(c) hereof.
"Restricted Payments" means (i) any dividend payment or other distribution,
direct or indirect, of assets, properties, cash, rights, obligations or
securities on account of any shares of any class of capital stock of the
Borrower which is not a wholly-owned Subsidiary of Borrower except Canadian
$0.07/share quarterly dividend if Event of Default has not occurred, or (ii) any
exchange, conversion, repurchase, purchase, redemption, retirement, sinking fund
or other similar acquisition for value, direct or indirect, of any shares of any
class of capital stock of the Borrower or any warrants, rights or options to
acquire any such shares, now or hereafter outstanding, or (iii) any earn-out
under any acquisition agreement, unless permitted by the terms thereunder and
approved by Lender.
"Restricted Stock Plan" refers to the plan described in Schedule 1.A.
8
"Revolving Commitment" is defined in Section 2.A.1 hereof.
"Revolving Loans" is defined in Section 2.A.1 hereof.
"Revolving Note" means the promissory note of the Borrower evidencing the
Revolving Loans.
"Revolving LIBOR Loan" means a Revolving Loan which is also a LIBOR Loan.
"Revolving Prime Rate Loan" means a Revolving Loan which is also a Prime
Rate Loan.
"SEC" means the Securities and Exchange Commission.
"Stockholder's Equity" means the sum of the capital stock, additional
paid-in-capital and retained earnings (after deducting treasury stock) as
determined in accordance with GAAP.
"Subsidiary" with respect to any Person means any corporation or other
business entity of which more than fifty percent (50%) of the outstanding common
stock or other ownership interests is owned, directly or indirectly, by such
Person.
"Termination Date" means the earlier of (a) July 17, 2002 , and (b) the
date on which the Obligations shall automatically, or by virtue of a declaration
by the Lender made in accordance with this Agreement, become due and payable.
"UCC" means the version of the Uniform Commercial Code as enacted in
Illinois, as amended from time to time.
Section 1.B. Any accounting terms used but not otherwise defined herein
shall have their customary meanings as defined in, pursuant to, or in accordance
with GAAP. All other terms used but not otherwise defined herein shall have the
meanings provided by the UCC to the extent said terms are used or defined
therein.
Section 1.C. Unless otherwise defined or the context otherwise requires,
terms for which meanings are provided in this Agreement shall have such meanings
when used in the other Loan Documents.
Section 1.D. In this Agreement and each other Loan Document, unless a clear
contrary intention appears: (i) the singular number includes the plural number,
and vice versa; (ii) reference to any Person includes such Person's successors
and assigns but, if applicable, only if such successors and assigns are
permitted by this Agreement, and reference to a Person in a particular capacity
excludes such Person in any other capacity or individually; (iii) reference to
any gender includes each other gender; (iv) references to any agreement
(including this Agreement and the Schedules, Appendices and Exhibits hereto),
document or instrument means such agreement, document or instrument as amended
or modified and in effect from time to time in accordance with the terms thereof
and, if applicable, the terms hereof and reference to any promissory note
includes any promissory note which is an extension or renewal thereof or a
substitute or replacement therefor; (v) unless the context indicates otherwise,
reference to any Article, Section, Appendix, Schedule or
9
Exhibit means such Article or Section hereof or Schedule, Appendix or Exhibit
hereto; (vi) "hereunder," "hereof," "hereto" and words of similar import shall
be deemed references to this Agreement as a whole and not to any particular
Article, Section or other provision hereof; (vii) "including" (and with
correlative meaning "include") means including without limiting the generality
of any description preceding such term; and (viii) relative to the determination
of any period of time, "from" means "from and including" and "to" and "through"
means "to but excluding."
Section 1.E. If, after the date of this Agreement, there shall occur any
change in GAAP from those used in the preparation of the Borrower's audited
financial statements for the Fiscal Year ending December 31, 2000, and such
change shall result in a change in the method of calculation of any financial
covenant, standard or term found in this Agreement, either Borrower or the
Lender may by notice to the other require that the Lender and the Borrower
negotiate in good faith to amend such covenant, standard or term so as equitably
to reflect such change in GAAP, with the desired result being that the criteria
for evaluating the financial condition of the Borrower shall be the same as if
such change had not been made.
SECTION 2. CREDIT FACILITY.
Section 2.A. Revolving Loans and Revolving Note. Subject to the terms and
conditions of this Agreement, the Lender agrees to lend to the Borrower the
Revolving Loans as provided in this Section.
2.A.1. Revolving Loans. Subject to the terms and conditions of this
Agreement, the Lender agrees to lend to the Borrower from time to time until the
earlier of the Termination Date or the occurrence of either a Default or an
Event of Default hereunder (the earlier of such date being hereinafter referred
to as the "Expiration Date"), such sums, in a minimum amount(s) as set forth in
Section 3.B hereof, as Borrower may request from time to time by a Borrowing
Notice pursuant to Section 3.C hereof; provided, however, that the aggregate
principal amount of all loans outstanding under this Section 2.A.1
(individually, a "Revolving Loan" or "Loan" or, collectively, the "Revolving
Loans" or "Loans") at any one time shall not exceed Twenty-Five Million Dollars
($25,000,000) less any amounts committed and/or outstanding under Lender's
credit facilities for J.P. Flanagan Corporation, pursuant to a credit agreement
between Lender and J.P. Flanagan dated October 31, 2000, and Burnham Stewart
Group, Inc. pursuant to a credit agreement between Michigan National Bank dated
November 20, 2000, at the Closing Date (such amount hereinafter referred to as
the "Revolving Commitment"). Subject to the terms and conditions hereof, the
Borrower may borrow or repay and reborrow hereunder, from the date hereof until
the Expiration Date, either the full amount of the Revolving Commitment or any
lesser sum in the minimum amounts referred to herein. If, at any time, the
Revolving Loans exceed the Revolving Commitment, the Borrower shall immediately
notify the Lender of the existence of and pay to the Lender the amount of such
excess. For all purposes of this Agreement, where a determination of the unused
or available amount of the Revolving Commitment is necessary, the Revolving
Loans shall be deemed to utilize the Revolving Commitment.
2.A.2. Revolving Note. In order to evidence the Revolving Loans, at the
time of the making of the initial Revolving Loan, the Borrower will execute and
deliver a promissory note, substantially in the form of Exhibit A hereto
(together with any and all amendments, modifications, supplements,
10
substitutions, renewals, extensions and restatements, thereof and therefor, the
"Revolving Note"). The Revolving Loans shall bear and pay interest and mature on
the date as set forth therein and herein.
SECTION 3. GENERAL PROVISIONS APPLICABLE TO ALL LOANS.
Section 3.A. Applicable Interest Rates. The Borrower may elect that each
Borrowing of each Loan be made by means of a Prime Rate Loan or a LIBOR Loan.
(a) Prime Rate Loans. Each Prime Rate Loan by the Lender shall bear
interest (computed on the basis of a year of 360 days and actual days elapsed)
on the unpaid principal amount thereof from the date such Loan is made until
maturity (whether by acceleration or otherwise) at a rate per annum equal to the
Prime Rate from time to time in effect. Interest on all Prime Rate Loans is
payable on the last day of each calendar month and at maturity (whether by
acceleration or otherwise), commencing July 31, 2001.
(b) LIBOR Loans. Each LIBOR Loan made by the Lender shall bear interest
(computed on the basis of a year of 360 days and actual days elapsed) on the
unpaid principal amount thereof from the date such Loan is made until maturity
(whether by acceleration or otherwise) at a rate per annum equal to the sum of
the Applicable LIBOR Margin plus the Adjusted LIBOR, payable on the last day of
the applicable Interest Period and at maturity (whether by acceleration or
otherwise), and, if the applicable Interest Period is longer than three months,
on each day occurring every three months after the date such Loan is made.
"Adjusted LIBOR" means, for any Borrowing of LIBOR Loans, a rate per annum
determined in accordance with the following formula:
LIBOR
-----------------------------
Adjusted LIBOR = 100% - Eurodollar Reserve Percentage
"LIBOR" means, for an Interest Period for a Borrowing of LIBOR Loans, the
rate of interest per annum (rounded upwards, if necessary, to nearest 1/100 of
1%) at which deposits in U.S. dollars in immediately available funds are offered
by the Lender or the Reference Bank at approximately 11:00 a.m. (London, England
time) two (2) Business Days before the beginning of such Interest Period by
prime banks in the interbank eurodollar market for a period equal to such
Interest Period and in an amount equal or comparable to the principal amount of
the LIBOR Loan scheduled to be made by the Lender as part of such borrowing.
"Eurodollar Reserve Percentage" means, for any Borrowing of LIBOR Loans,
the daily average for the applicable Interest Period of the maximum rate at
which reserves (including, without limitation, any supplemental, marginal and
emergency reserves) are imposed during such Interest Period by the Board of
Governors of the Federal Reserve System (or any successor) under Regulation D on
"eurocurrency liabilities", as defined in such Board's Regulation D, (or in
respect of any other category of liabilities that includes deposits by reference
to which the interest rate on LIBOR Loans is determined or any category of
extension of credit or other assets that include loans by non-United States
offices of Lender to United States residents) subject to any amendments of such
reserve requirement by such Board or its successor, taking into account any
transitional
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adjustments thereto. For purposes of this definition, the LIBOR Loans shall be
deemed to be "eurocurrency liabilities" as defined in Regulation D.
(c) Margin, Rate and Fee Determinations. The Lender shall determine each
interest rate applicable to the Loans hereunder and its determination thereof
shall be conclusive and binding except in the case of manifest error.
Section 3.B. Minimum and Maximum Borrowing Amounts. Each Borrowing shall be
in an amount not less than $1,000,000 or any larger amount that is an integral
multiple of $1,000,000.
Section 3.C. Borrowing Procedures.
(a) Notice to the Lender. The Borrower shall give telephonic or telecopy
notice to the Lender in the form attached hereto as Exhibit B (the "Borrowing
Notice") (which notice shall be irrevocable once given and, if by telephone,
shall be promptly confirmed in writing) by no later than 12:00 noon (Chicago
time) (i) on the date at least three (3) Business Days prior to the date of each
requested Borrowing of LIBOR Loans and (ii) on the date of any requested
Borrowing of Prime Rate Loans. Each such notice shall specify the date of the
requested Borrowing (which shall be a Business Day), the amount of the requested
Borrowing, the type of Loans to comprise such Borrowing (if no election as to
type of Borrowing is specified in any such notice, then the requested Borrowing
shall be of Prime Rate Loans) and, if such Borrowing is to be comprised of LIBOR
Loans, the Interest Period applicable thereto. The Borrower agrees that the
Lender may rely on any such telephonic or telecopy notice given by any person
the Lender in good faith believes is an Authorized Officer without the necessity
of independent investigation and in the event any notice by such means conflicts
with the written confirmation, such notice shall govern if the Lender has acted
in reliance thereon.
(b) Borrower's Failure to Notify. In the event the Borrower fails to give
notice pursuant to Section 3.C.(a) above of the reborrowing of the principal
amount of any maturing Borrowing and has not notified the Lender by 12:00 noon
(Chicago time) on the day such Borrowing matures that it intends to repay such
Borrowing with funds not borrowed hereunder, the Borrower shall be deemed to
have requested a Borrowing of Prime Rate Loans on such day in the amount of the
maturing Borrowing then due, in each case subject to Section 6.C hereof, which
new Borrowing shall be applied to pay, as the case may be, the maturing
Borrowing then due.
(c) Disbursement of Loans. Not later than 2:00 p.m. (Chicago time) on the
date of any Borrowing (a "Funding Date") of LIBOR Loans or Prime Rate Loans,
Lender shall make available its Loan in funds immediately available in Chicago,
Illinois, except to the extent such Borrowing is either a reborrowing, in whole
or in part, of the principal amount of a maturing Borrowing of Loans (a
"Refunding Borrowing") in which case Lender shall record the Loan made by it as
a part of such Refunding Borrowing on its books or records or on a schedule to
the appropriate Note, as provided in Section 3.H.(b) hereof, and shall effect
the repayment, in whole or in part, as appropriate, of its maturing Loan through
the proceeds of such new Loan. Subject to Section 6 hereof, the Lender shall
make the proceeds of each Borrowing available to the Borrower at the Lender's
principal office in Chicago, Illinois.
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Section 3.D. Interest Periods. As provided in Section 3.C hereof, at the
time of each request for the Borrowing of LIBOR Loans hereunder the Borrower
shall select an Interest Period applicable to such Loans from among the
available options. The term "Interest Period" means the period commencing on the
date a Borrowing of LIBOR Loans is made and ending on the date, as the Borrower
may select, 1, 2, 3 or 6 months thereafter; provided, however, that:
(a) the Borrower may not select an Interest Period that extends beyond the
Termination Date;
(b) whenever the last day of any Interest Period would otherwise be a day
that is not a Business Day, the last day of such Interest Period shall be
extended to the next succeeding Business Day, provided that, if such extension
would cause the last day of such Interest Period to occur in the following
calendar month, the last day of such Interest Period shall be the immediately
preceding Business Day; and
(c) for purposes of determining the Interest Period for a Borrowing of
LIBOR Loans, a month means a period starting on one day in a calendar month and
ending on the numerically corresponding day in the next calendar month;
provided, however, that if there is no numerically corresponding day in the
month in which such an Interest Period is to end or if such an Interest Period
begins on the last Business Day of a calendar month, then such Interest Period
shall end on the last Business Day of the calendar month in which such Interest
Period is to end.
Section 3.E. Maturity of LIBOR Loans. Each LIBOR Loan shall mature and
become due and payable by the Borrower on the last day of the Interest Period
applicable thereto.
Section 3.F. Prepayments.
(a) Generally. The Borrower shall have the privilege of prepaying without
premium or penalty and in whole or in part (but, if in part, then: (i) in an
amount not less than $1,000,000 or any larger amount that is an integral
multiple of $1,000,000 in the case of Prime Rate Loans, and in an amount not
less than $1,000,000 or any larger amount that is an integral multiple of
$1,000,000 in the case of LIBOR Loans and (ii) in an amount such that the
minimum amount required for a Borrowing pursuant to Section 3.B hereof remains
outstanding) on any Business Day upon prior notice to the Lender which must be
received by the Lender by no later than 12:00 noon (Chicago time) on the date of
such prepayment in the case of Prime Rate Loans and by no later than 12:00 noon
(Chicago time) on the date three Business Days in advance of the date of such
prepayment in the case of LIBOR Loans, such prepayment to be made by the payment
of the principal amount to be prepaid and accrued interest thereon and, in the
case of LIBOR Loans, any compensation required by Section 3.I hereof. Partial
prepayments of any outstanding type of Loan shall be applied to the various
Borrowings and various installments of principal thereof in the inverse order of
their maturity.
(b) Reborrowings. Any amount paid or prepaid on the Revolving Loans before
the Expiration Date may, subject to the terms and conditions of this Agreement,
be borrowed, repaid and borrowed again.
(c) Mandatory Repayments.
13
(i) Subject to the terms and conditions hereof, the Outstanding
Principal Obligations under the Credit Facility shall be repaid forthwith,
upon demand by or on behalf of the Lender, to the extent that the
Outstanding Principal Obligations under the Credit Facility exceed the then
current Commitment in respect of the Credit Facility, whether as a result
of oversight or otherwise, together with all accrued interest to the date
of such repayment on the principal amount so repaid and any other amounts
payable to the Lender by the Borrower hereunder in respect thereof
including, without limitation, pursuant to Section 11.K.
(ii) The Loans shall be immediately repaid in and by an amount equal
to the percentage thereof which is equal to a fraction, the numerator of
which is the amount of any permanent repayment of all or any portion of the
credit facilities of the Borrower with Bank of Montreal and/or Bank of
America dated June 21, 2001 and July 19, 2001, respectively, and the
denominator of which is the then current aggregate amount of Loans
outstanding hereunder and credit extended under said credit facilities with
Bank of Montreal and Bank of America at the time of said repayment.
Section 3.G. Default Rate. If any Event of Default has occurred and is
continuing, then each Loan or other monetary Obligation shall bear interest,
after as well as before judgment (computed on the basis of a year of 360 days
and actual days elapsed) from the date of such Event of Default until such Loan
or other monetary Obligation is paid in full, payable on demand, at a rate per
annum (the "Default Rate") equal to:
(a) with respect to any Prime Rate Loan, the sum of two percent (2%) plus
the Prime Rate from time to time in effect; and
(b) with respect to any LIBOR Loan, the sum of two percent (2%) plus the
rate of interest in effect thereon at the time of such default until the end of
the Interest Period applicable thereto and, thereafter, at a rate per annum
equal to the sum of two percent (2%) plus the Prime Rate from time to time in
effect; and
(c) with respect to other monetary Obligations for which a Default Rate is
not otherwise specified, the sum of two percent (2%) plus the Prime Rate from
time to time in effect.
Section 3.H. Note.
(a) The Loan made to the Borrower by Lender shall be evidenced by a
promissory note of the Borrower, dated the date hereof, payable to the order of
Lender in the principal amount of the Commitment, and otherwise be in the form
of Exhibit A hereto.
(b) Lender shall record on its books or records or on a schedule to the
appropriate Note the amount of each Loan made by it to the Borrower, the
Interest Period thereof (if applicable), all payments of principal and interest
and the principal balance from time to time outstanding thereon, the interest
rate applicable thereto, and, in respect of any Loan, the type of such Loan;
provided that prior to the transfer of the Note all such amounts shall be
recorded on a schedule to the Note. The record thereof, whether shown on such
books or records of Lender or on a schedule to the Note, shall be prima facie
evidence as to all such amounts; provided, however, that the failure of Lender
to
14
record any of the foregoing or any error in any such record shall not limit or
otherwise affect the obligation of the Borrower to repay all Loans made
hereunder together with accrued interest thereon. At the request of Lender and
upon Lender tendering to the Borrower the Note to be replaced, the Borrower
shall furnish a new Note to Lender to replace any outstanding Note and at such
time the first notation appearing on a schedule on the reverse side of, or
attached to, the Note shall set forth the aggregate unpaid principal amount of
all Loans, if any, then outstanding thereon.
Section 3.I. Funding Indemnity. In the event Lender shall incur any loss,
cost or expense (including, without limitation, any loss of profit, and any
loss, cost or expense incurred by reason of the liquidation or re-employment of
deposits or other funds acquired by Lender to fund or maintain any LIBOR Loan or
the relending or reinvesting of such deposits or amounts paid or prepaid to
Lender) as a result of:
(a) any payment (including prepayment) of a LIBOR Loan on a date other than
the last day of its Interest Period for any reason, whether before or after
default, and whether or not such payment is required by any provisions of this
Agreement, or
(b) any failure (because of a failure to meet the conditions of Section 6
or otherwise) by the Borrower to borrow a LIBOR Loan on the date specified in a
notice given pursuant to Section 3.C hereof,
then, upon the demand of Lender, the Borrower shall pay to Lender such amount as
will reimburse Lender for such loss, cost or expense. If Lender makes such a
claim for compensation, it shall provide to the Borrower a certificate executed
by an officer of Lender setting forth the amount of such loss, cost or expense
in reasonable detail (including an explanation of the basis for and the
computation of such loss, cost or expense) and the amounts shown on such
certificate shall be deemed rebuttably presumptive evidence of the correctness
thereof.
Section 3.J. Change in Circumstances, Etc.
(a) Change of Law. Notwithstanding any other provisions of this Agreement
or the Note, if at any time after the date hereof any change in applicable Law
or in the interpretation thereof makes it unlawful for Lender to make or
continue to maintain LIBOR Loans or to give effect to its obligations as
contemplated hereby, Lender shall promptly give notice thereof to the Borrower,
and Lender's obligations to make or maintain LIBOR Loans under this Agreement
shall terminate until it is no longer unlawful for Lender to make or maintain
LIBOR Loans. The Borrower shall prepay on demand the outstanding principal
amount of any such affected LIBOR Loans, together with all interest accrued
thereon and all other amounts then due and payable to Lender under this
Agreement; provided, however, subject to all of the terms and conditions of this
Agreement, the Borrower may then elect to borrow the principal amount of the
affected LIBOR Loan from Lender by means of a Prime Rate Loan from Lender.
(b) Unavailability of Deposits or Inability to Ascertain, or Inadequacy of,
LIBOR. If on or prior to the first day of any Interest Period for any Borrowing
of LIBOR Loans:
(i) the Lender advises the Borrower that deposits in United States
Dollars (in the applicable amounts) are not being offered to it or the
Reference Bank in the interbank eurodollar market, for such Interest
Period, or
15
(ii) Lender advises the Borrower that LIBOR as determined by the
Lender will not adequately and fairly reflect the cost to Lender of funding
LIBOR Loans for such Interest Period,
then, until the Lender notifies the Borrower that the circumstances giving rise
to such suspension no longer exist, the obligation of the Lender to make LIBOR
Loans shall be suspended.
(c) Increased Cost and Reduced Return.
(1) If on or after the date hereof, the adoption of any applicable Law, or
any change therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by Lender with
any request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency:
(i) shall subject Lender to any tax, duty or other charge with respect
to the Loans, the Note or its obligation to make Loans, or shall change the
basis of taxation of payments to Lender of the principal of or interest on
the Loans or any other amounts due under this Agreement in respect of its
Loans or its obligation to make Loans (except for changes in the rate of
tax on the overall net income of Lender imposed by the jurisdiction in
which Lender's principal executive office is located); or
(ii) shall impose, modify or deem applicable any reserve, special
deposition or similar requirement (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve
System, but excluding with respect to any LIBOR Loans any such requirement
included in an applicable Eurodollar Reserve Percentage) against assets of,
deposits with or for the account of, or credit extended by, Lender or shall
impose on Lender or on the interbank market any other condition affecting
the Loans, the Note or Lender's obligation to make Loans;
and the result of any of the foregoing is to increase the cost to Lender of
making or maintaining any Loan, or to reduce the amount of any sum received or
receivable by Lender under this Agreement or under the Note with respect
thereto, by an amount deemed by Lender to be material, then, within fifteen (15)
days after demand by Lender, the Borrower shall be obligated to pay Lender such
additional amount or amounts as will compensate Lender for such increased cost
or reduction (computed commencing on the effective date of any event mentioned
herein). Lender agrees to use its best efforts to give the Borrower notice of
the occurrence of any event mentioned herein.
(2) If Lender shall determine that the adoption after the date hereof of
any applicable Law regarding capital adequacy, or any change in any existing
Law, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by Lender (or any of its
branches or any corporation controlling Lender (or any of its branches or any
corporation controlling Lender) with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, has or would have the
16
effect of reducing the rate of return on Lender's or such corporation's capital,
as the case may be, as a consequence of Lender's obligations hereunder or for
the credit which is the subject matter hereof to a level below that which Lender
or such corporation could have achieved but for such adoption, change or
compliance (taking into consideration Lender's or such corporation's policies
with respect to liquidity and capital adequacy) by an amount deemed by Lender to
be material, then from time to time, within fifteen (15) days after demand by
Lender, the Borrower shall pay to the Lender such additional amount or amounts
reasonably determined by Lender as will compensate Lender for the reduction.
(d) Discretion of Lender as to Manner of Funding. Notwithstanding any other
provision of this Agreement, Lender shall be entitled to fund and maintain its
funding of all or any part of the Loans in any manner it sees fit, it being
understood, however, that for the purposes of this Agreement all determinations
hereunder shall be made as if Lender had actually funded and maintained each
LIBOR Loan through the purchase of deposits in the relevant market having a
maturity corresponding to such Loan's Interest Period and bearing an interest
rate equal to LIBOR, for such Interest Period.
(e) Implementation of European Economic and Monetary Union ("EMU"). This
Agreement (including, without limitation, the definition of LIBOR and related
definitions) will be amended to the extent determined by the Lender (acting
reasonably and in consultation with the Borrower) to be necessary to reflect
implementation of the EMU and change in currency and to put the Lender and the
Borrower in the same position, so far as possible, that they would have been in
if such implementation and change in currency had not occurred.
SECTION 4. FEES.
Section 4.A. Revolving Commitment Fees. The Borrower shall pay to the
Lender such fees as set forth in the letter agreement dated the date hereof
between Borrower and Lender with respect to the Revolving Commitment
("Commitment Fees").
Section 4.B. Non-Utilization Fee. The Borrower agrees to pay to the Lender
a non-utilization fee equal to one-fifth of one percent (0.2%) of the total of
(a) the Revolving Loan Commitment, less (b) the daily average of the aggregate
principal amount of all Revolving Loans outstanding which non-utilization fee
shall be (A) calculated on the basis of a year consisting of 360 days, (B) paid
for the actual number of days elapsed, and (C) payable quarterly in arrears on
the last day of each Fiscal Quarter and on the Revolving Loan Maturity Date.
17
SECTION 5. PLACE AND APPLICATION OF PAYMENTS.
Section 5.A. Place and Application of Payments. All payments of principal
of and interest on the Loans and all payments of fees and all other amounts
payable under this Agreement shall be made to the Lender no later than 12:00
Noon (Chicago time) at the principal office of the Lender in Chicago, Illinois
(or such other location in the State of Illinois as the Lender may designate to
the Borrower). Any payments received after such time shall be deemed to have
been received by the Lender on the next Business Day. All such payments shall be
made in lawful money of the United States of America, in immediately available
funds at the place of payment, without setoff or counterclaim. Alternatively, at
its sole discretion, the Lender may charge against or debit any deposit account
or other Monies of the Borrower on deposit with or in possession of the Lender,
all or any part of any amount due hereunder or under the Note. The Lender's
right from time to time after the occurrence or happening of an Event of Default
hereunder (which has not been cured or waived in a writing signed by the Lender)
to set off indebtedness owing by Borrower to the Lender against the Borrower's
Monies, deposits, credits, accounts or other property now or at any time in the
possession or control of the Lender, except as provided herein, is hereby
acknowledged and agreed to by the Borrower.
SECTION 6. CONDITIONS PRECEDENT AND SUBSEQUENT.
Notwithstanding any other provisions of this Agreement, the Lender, at its
sole option and in its sole discretion, need not make any Loans to the Borrower
for the account of the Borrower, unless the conditions precedent described below
are fulfilled:
Section 6.A. Delivery of Documents as Conditions Precedent. The delivery of
each of the following documents, each of which shall be satisfactory to the
Lender in substance and form, by or on behalf of the Borrower to the Lender
shall constitute separate and distinct conditions precedent to the effectiveness
of this Agreement and the making of any Loans:
6.A.1. Agreement. A copy of this Agreement duly executed by Borrower.
6.A.2. Note. The Revolving Note dated as of the Closing Date duly executed
by the Borrower and payable to the Lender.
6.A.3. Evidence of Insurance. Evidence that the Borrower has insurance as
required by Section 8.A.11, including property, casualty and liability insurance
satisfactory to the Lender, together with: (i) loss payable/mortgagee
endorsements naming the Lender as loss payee and mortgagee with respect to
property and casualty insurance; and (ii) certificate(s) of insurance(s) and
binder(s) naming the Lender as additional insured with respect to liability
insurance.
6.A.4. Articles of Incorporation. Articles of Incorporation or similar
document, and each and every amendment thereto, of the Borrower and each
Guarantor, certified of recent date by the Secretary of State or appropriate
government official in the State or Canadian Province in which the Borrower is
incorporated.
6.A.5. Good Standing. Certificate of the appropriate Secretary of State or
government official of recent date and certificate of non-restriction, as to the
good standing or status of the
18
Borrower and each Guarantor in the State of its incorporation and where it is
qualified to do business.
6.A.6. Secretary's Certificate. Certificate of Secretary of the Borrower
and each Guarantor as to (i) resolutions authorizing entry into, execution,
delivery and performance of its obligations under this Agreement and related
Loan Documents to which it is a party, (ii) the incumbency and signatures of the
officers authorized to execute on its behalf the Loan Documents to which it is a
party, (iii) its Articles of Incorporation, and (iv) its bylaws.
6.A.7. Solvency Certificate. Certificate of Solvency duly executed by the
Borrower and each Guarantor, with pro forma balance sheet and cash flow
projections provided for thereunder.
6.A.8. Opinion. The satisfactory opinion letters of Torys, counsel for the
Borrower and the Guarantors, and W. Kirk James, general counsel of the Borrower
dated as of the Closing Date and addressed to the Lender as to the matters
referred to in Sections 7.A., 7.B., 7.C., 7.D., 7.E., 7.F. (as far as litigation
is concerned), 7.J., of this Agreement, and Guaranties of the Guarantors.
6.A.9. Environmental Data. All environmental data, information and reports
concerning any real estate or any other property which the Lender may request.
6.A.10. Officer's Certificate. A certificate of the President of Borrower
certifying: (i) that the conditions herein insofar as they relate to the
Borrower have been satisfied, (ii) as to the truth of the representations and
warranties herein contained, and (iii) that no Materially Adverse Effect has
occurred since March 31, 2001.
6.A.11. Guarantees. Each of the four (4) Guarantees dated as of the Closing
Date duly executed by the respective Guarantor in favor of the Lender.
6.A.12. Financial Statements of Guarantors. Internally prepared financial
statements as of December 31, 2000 for each of the Guarantors, including a
balance sheet and income statements, which are the basis for the consolidated
statements previously delivered.
6.A.13. Other Documents. In form and substance satisfactory to the Lender,
any other documents which the Lender may reasonably request from or to be
delivered by the Borrower from time to time to effect the intent of this
Agreement and the Loan Documents.
6.A.14. Subordinated Debentures. Borrower has provided Lender with
satisfactory evidence that the Subordinated Debentures in the amounts of
$17,500,000 from Odyssey Reinsurance Corporation, a Delaware Corporation,
$17,500,000 from United States Fire Insurance Company, a New York corporation
and Cdn $42,500,000 from Royal Trust Corporation of Canada as Trustee for Zurich
Insurance Company, a corporation incorporated under the laws of Switzerland have
been executed and funded.
Section 6.B. Fees. All fees referred to in Section 4 hereof which are then
due shall have been paid to the Lender on the Closing Date.
19
Section 6.C. Conditions Precedent. The following conditions are conditions
precedent to the obligation of the Lender to make or disburse any Loan hereunder
at any time requested by the Borrower, and each request by the Borrower for a
Loan hereunder shall be deemed to constitute the Borrower's representation and
warranty to the Lender that, as of the dates of such request and on which such
Loan is disbursed, these conditions have been satisfied:
6.C.1. Materially Adverse Effect. No Materially Adverse Effect shall have
occurred, as determined by the Lender in its sole and complete discretion, since
the date hereof.
6.C.2. Representations and Warranties. The representations and warranties
set forth in Section 7 hereof and in each Loan Document to which the Borrower is
a party shall be true and correct in all material respects.
6.C.3. Covenants. The affirmative and negative covenants set forth herein
(including, without limitation, those covenants set forth in Section 8 hereof)
and in any other Loan Documents to which the Borrower is a party, are not being
breached and are inviolate in all material respects.
6.C.4. Event of Default. No Default or Event of Default shall have occurred
and then be continuing or would occur as a result of making such Loan.
6.C.5. Revolving Commitments. After giving effect to the Loan (if it is a
Revolving Loan), the aggregate principal amount of all such Loans outstanding
hereunder shall not exceed the applicable Revolving Commitment.
6.C.6. No Violations. Such Loan shall not violate any order, judgment or
decree of any court or other authority or any provision of Law applicable to
Lender (including, without limitation, Regulation U of the Board of Governors of
the Federal Reserve System) as then in effect.
6.C.7. Note; Notice of Borrowing. The Lender shall have received the Note
of the Borrower and the notice required by Section 3.C hereof.
6.C.8. Satisfactory Completion of Due Diligence. In the case of the initial
draw only, the Lender shall have satisfactorily completed its due diligence
examination of the Borrower and any related parties, their respective operations
and properties, including historical and pro forma financial information, and
projections and business plans.
SECTION 7. REPRESENTATIONS AND WARRANTIES.
As further inducement to the Lender to enter into this Agreement and make
the Loans hereunder, the Borrower represents and warrants, as of the date
hereof, and as of the date of each disbursement of each of the Loans, the
following, which shall survive the execution and delivery of this Agreement, the
Note and the Loan Documents and until all of the Obligations have been paid,
satisfied or discharged in full, regardless of any investigation by the Lender
of the Borrower's financial condition or assets:
Section 7.A. Corporate Existence and Related Matters. Each of the Borrower
and each Guarantor is a corporation duly organized, validly existing and in good
standing under the Laws of
20
the State, province, or country of its incorporation and is duly qualified to do
and transact business and is in good standing as a foreign corporation in each
and every state, province, or country in which the conduct of its business or
the location of its properties requires such qualification and the failure to so
qualify would have a Materially Adverse Effect. As of the date hereof, the only
Subsidiaries or Affiliates of Borrower are designated in Schedule 7.A hereto.
Schedule 7.A hereto correctly sets forth, as to each such Subsidiary or
Affiliate, whether or not it is a Consolidated Subsidiary, the jurisdiction of
its incorporation, the percentage of issued and outstanding shares of each class
of its capital stock owned by Borrower and the Subsidiaries and, if such
percentage is not 100%, a description of each class of its authorized capital
stock and the number of shares of each class issued and outstanding. All of the
issued and outstanding shares of capital stock of each Subsidiary are validly
issued and outstanding and fully paid and nonassessable and all such shares
indicated in Schedule 7.A as owned by Borrower or a Subsidiary are owned,
beneficially and of record, by Borrower or such Subsidiary, free of any Lien.
Schedule 7.A contains all assumed or business names utilized by the Borrower or
Affiliate, the jurisdiction of incorporation of the Borrower, and all
jurisdictions where the Borrower is qualified to do business. The information in
Schedule 7.A hereto is true and complete.
Section 7.B. Corporate Authority. Each of the Borrower and Guarantors has
all corporate power and authority to own its property and assets and to carry on
and engage in its business as it is presently being conducted, and has all
licenses, permits, franchises, consents, approvals and authorizations required
in connection with the foregoing, including without limitation all of the
foregoing required under applicable Laws. The execution, issuance, delivery, and
performance of all documents in connection with this Agreement, the Note and the
Loan and other Loan Documents to which either the Borrower or each Guarantor is
a party or signatory and the incurrence and performance of the Obligations
hereunder and thereunder (i) are within the corporate power and authority of the
Borrower, (ii) have been duly and properly authorized by all necessary
corporate, director, shareholder and any other action of the Borrower, and (iii)
have not resulted in and will not result in:
(a) the creation or imposition of any Lien of any nature whatsoever (except
in favor of the Lender) upon the Borrower's property or assets; or
(b) the violation or contravention of, the occurrence of a default, event
of default or event, which with the passage of time or giving of notice or both,
would constitute, mature into or become a default or event of default under, (1)
any term or provision of the Borrower's Articles of Incorporation or bylaws, (2)
any licenses, permits, franchises, consents, approvals or authorizations
referred to above, (3) any certificates of authority to do or transact business,
(4) any applicable order of any court or government or administrative agency, or
(5) any material contract, agreement (including any loan or credit agreement),
mortgage, indenture, instrument, judgment or Laws to which the Borrower is a
party or signatory or by which it or its properties or assets are, or may be,
bound.
Section 7.C. Consents, Approvals, etc. No consent, approval or
authorization or order of, or filing, registration or qualification with, any
Person (governmental, regulatory, or otherwise) is required to be obtained or
effected by the Borrower in connection with the execution, issuance, delivery
and performance of all documents in connection with this Agreement, the Note and
the Loan and other Loan Documents to which the Borrower is a party or signatory
or the incurrence or
21
performance of the Obligations or, if so required, has been duly obtained or
effected before the date hereof and are indicated on Schedule 7.C hereto.
Section 7.D. Binding Effect and Enforceability. Upon delivery hereof and
thereof, this Agreement, the Note and the Loan and other Loan Documents to which
the Borrower or any Guarantor is a party or signatory will be its respective
legal, valid and binding obligations enforceable in accordance with their
respective terms and provisions (except as limited by bankruptcy, insolvency or
other laws or equitable principles of general application relating to the
enforcement of creditors' rights generally) and, on the date of said delivery,
neither the Borrower nor any Guarantor will be in violation or contravention of,
and no Default or Event of Default will exist under, any of the foregoing.
Section 7.E. Default of Debt, Licenses, Permits, Orders and Other
Agreements. The Borrower is not in breach or default of (in any material
respect), and no event of default or event, which with the passage of time or
giving of notice or both, would constitute, mature into or become a default or
event of default, has occurred and is continuing with respect to (i) any Debt of
any kind or nature, (ii) any license, permit, franchise, approval, consent or
authorization referred to in Section 7.B above, (iii) any order of any court or
governmental or administrative agency, or (iv) any agreement to which it is a
party, which breach or default might have a Materially Adverse Effect.
Section 7.F. Financial Condition and Litigation. The Financial Statements
of the Borrower delivered to the Lender (including, without limitation, the
audited financial statements of Borrower as at/of December 31, 2000, and the
unaudited financial statements of Borrower for the period ended March 31, 2001,
have been prepared in accordance with GAAP, are true and correct in all material
respects and fairly present the financial condition of the Borrower as at the
dates thereof and results of operations for the periods covered thereby. Since
the ending date of the period covered by the most recent Financial Statements
dated March 31, 2001, delivered to the Lender and received thereby, no
Materially Adverse Effect has occurred and no dividends on or redemptions of the
Borrower's common or preferred stock have been made. Except as disclosed to the
Lender on said most recent Financial Statements: (i) the Borrower has no Debt,
except as permitted hereunder, or liabilities, contingent or otherwise; and (ii)
except as disclosed on Schedule 7.F, no proceedings, suits, orders, claims,
investigations, or other actions which individually or in the aggregate
exceeding $100,000 are pending before any court or governmental authority or, to
the best knowledge of Borrower, threatened against the Borrower that are not
fully covered by insurance. With respect to any representation and warranty
which is deemed to be made after the date hereof by the Borrower, the Financial
Statements which as of such date shall most recently have been furnished by the
Borrower to the Lender for purposes of or in connection with this Agreement
shall have been prepared in accordance with GAAP, shall be true and correct in
all material respects, and shall fairly present the financial condition of the
Borrower as of the dates thereof and results of operations for the periods
covered thereby.
Section 7.G. Title and Liens. The Borrower has good and marketable title to
all of its property and assets, including all such property and assets listed on
the most recent Financial Statements and, except as set forth on Schedule 7.G,
the assets of the Borrower are not subject to any liens, claims, security
interests, mortgages, pledges, charges or other encumbrance of any Person,
except the holders of the Permitted Liens.
22
Section 7.H. Employee Plans. All of the Borrower's Employee Plans are
listed on Schedule 7.H hereto and are in material compliance with all provisions
of ERISA and meet the minimum funding standards of Section 302 of ERISA where
applicable. No withdrawal liability has been incurred under any such Employee
Plans. No Prohibited Transaction or Reportable Event, as defined in ERISA, has
occurred with respect to any such Employee Plans. No proceedings have been
instituted to terminate or appoint a trustee to administer any such Employee
Plans.
Section 7.I. Taxes. Except as listed on Schedule 7.I. hereto, the Borrower
has filed all federal, state and local tax returns and reports required by Law,
has paid all taxes, assessments, penalties, interest and any other governmental
charges which are or were due and payable, has made adequate provision for the
payment of all taxes, assessments, penalties, interest and other governmental
charges which are accruing but are not yet due and payable, and has no knowledge
and are not aware of any deficiency or additional assessment which may have or
has arisen in connection of the foregoing.
Section 7.J. Compliance with Laws. To the best knowledge of the Borrower,
the Borrower has complied in all material respects with all Laws applicable to
it or to the conduct of its business, noncompliance with which could have a
Materially Adverse Effect, and the Borrower has not received any notice of any
kind from any Person claiming or alleging, directly or indirectly, a violation
of any Law, noncompliance with which could have a Materially Adverse Effect.
Section 7.K. Corporate Structure and Affiliates. Borrower has no
Subsidiaries and no Affiliates, except as identified on Schedule 7.A hereto,
which shall include the directors and shareholders of the Borrower. Borrower's
authorized and outstanding capital stock is as set forth in Schedule 7.A hereto.
Section 7.L. Corporate Names. The Borrower has no assumed corporate names
and is not doing business under any corporate name, other than as identified on
Schedule 7.A hereto.
Section 7.M. Solvency. The Borrower (i) is solvent and will not be rendered
insolvent by the incurrence of the Obligations, by the execution of this
Agreement, the Note, and any other Loan or other Loan Documents to which it is a
party or signatory, or by any transactions contemplated hereunder or thereunder,
(ii) is able to pay its debts as they come due and does not intend to incur, or
believe that it will incur, debts beyond its ability to pay such debts as they
mature or come due, (iii) has capital sufficient to carry on its business and
any business in which it intends or is about to engage, and (iv) owns property
and assets having a value in excess of its liabilities and debts.
Section 7.N. Margin Regulations. No portion of the proceeds of the Loans
shall be used by the Borrower, or any Affiliates of the Borrower, either
directly or indirectly, for the purpose of purchasing or carrying any margin
stock, within the meaning of Regulation U as adopted by the Board of Governors
of the Federal Reserve System.
Section 7.O. Indebtedness to and Transactions with Affiliates. Except as
set forth on Schedule 7.O hereto, there are no outstanding loans from any
Affiliate to the Borrower, or from the Borrower to any Affiliate. Except as set
forth on Schedule 7.O hereto, the Borrower is not a party to a material
transaction with any of its Affiliates, other than transactions in the ordinary
course of business and upon fair and reasonable terms not materially less
favorable than such company could
23
obtain or could become entitled to in an arm's length transaction with a Person
that was not its Affiliate.
Section 7.P. Acts of God. Neither the business nor properties of the
Borrower are presently affected by any fire, explosion, accident, drought,
storm, hail, earthquake, embargo, act of God or of the public enemy or of
political unrest, or potential expropriation, or other casualty (whether or not
covered by insurance) which could have a Materially Adverse Effect.
Section 7.Q. Labor Controversies; Union Contracts, Etc. There are no labor
controversies pending or, to the knowledge of the Borrower, threatened against
the Borrower, which if adversely determined could have a Materially Adverse
Effect. There are no pending or, to the Borrower's knowledge, threatened or
anticipated (i) employment discrimination charges or complaints against or
involving the Borrower before any governmental Person, (ii) unfair labor
practice charges or complaints, disputes or grievances or arbitration
proceedings or controversies affecting the Borrower, (iii) union representation
petitions respecting the employees of the Borrower, or (v) strikes, slowdowns,
work stoppages, or lockouts or threats thereof affecting the Borrower. There are
no collective bargaining agreements covering any of the employees of the
Borrower. The Borrower has not breached or otherwise failed to comply with any
provision of any collective bargaining agreement or other labor union contract
applicable to any of its employees.
Section 7.R. Surety Obligations; Financial Assurances. The Borrower is not
obligated as surety or indemnitor under any surety or similar bond or other
contract, or issued or entered into any agreement to assure payment, performance
or completion of performance of any undertaking or obligation of any Person. The
Borrower has not posted or placed any Financial Assurance except as indicated in
Schedule 7.R hereto.
Section 7.S. Business Relations. There exists no actual or threatened
termination, cancellation, or adverse limitation of, or any adverse modification
or change in, the contractual and/or business relationship between the Borrower
and any owner/lessor of any facility utilized in the Borrower's business,
municipality, customer and/or supplier, and there exists no present condition or
state of facts or circumstances in such relations, which in each case would have
a Materially Adverse Effect.
Section 7.T. Accuracy of Information. All factual information heretofore,
or contemporaneously furnished by or on behalf of the Borrower in writing to the
Lender for purposes of or in connection with this Agreement or any transaction
contemplated hereby, and all other such factual information hereafter furnished
by or on behalf of the Borrower to the Lender will be, true and accurate in
every material respect on the date as of which such information is dated, or
certified, and to the best knowledge of Borrower such information is not, or
shall not be, as the case may be, incomplete by omitting to state any material
fact necessary to make such information not misleading. To the best knowledge of
the Borrower there is no fact which has a Materially Adverse Effect or in the
future may (so far as the Borrower may now foresee), have a Materially Adverse
Effect, which has not been set forth herein or in written materials,
certificates or statements furnished to the Lender prior to the date hereof.
Section 7.U. Hazardous Materials. Borrower has not caused or permitted any
Hazardous Material to be disposed of or incorporated into, either on or under
real property legally or
24
beneficially owned or operated by Borrower, and no such real property has ever
been used as a dump site or long-term storage site for any Hazardous Materials
which would be reasonably likely to (a) give rise to present or future legal
liability, and (b) have a material adverse effect on the business or financial
condition of Borrower. The failure, if any, of Borrower in connection with the
operation of their business, to obtain or be in compliance with any permit,
certificate, license, approval and other authorization, or to file any
notification or report relating to chemical substances, air emissions, effluent
discharges and Hazardous Material storage, treatment, transport and disposal has
not had, nor will it have, a Materially Adverse Effect, and no facts or
circumstances exist which could give rise to liabilities with respect to
Hazardous Materials on the business or financial condition of Borrower which
would be reasonably likely to have a Materially Adverse Effect.
"Hazardous Materials" means and includes (a) any friable asbestos (or
asbestos which becomes friable), PCBs or dioxins or insulation or other material
composed of or containing friable asbestos (or asbestos which becomes friable),
PCBs or dioxins and (b) any petroleum or any fraction thereof and any hazardous
or toxic waster, substance or material defined as such in (or for purposes of)
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, any applicable so-called "superfund" or "superlien" law, or any other
applicable law regulating or pertaining to any such waste, substance or
material, as now or at any time hereafter in effect.
Section 7.V. Ranking. The Obligations will rank at least pari passu with
all Debt of the Borrower including but not limited to any credit facilities of
the Bank of Montreal and Bank of America, except Debt secured by Permitted
Liens, provided that such Permitted Liens shall not at any time secure Debt of
the Borrower and all of its Subsidiaries exceeding at any time $20,000,000, in
the aggregate.
Section 7.W. Business Loan. The Loans, including interest rate, fees and
charges as contemplated hereby, (i) are business loans within the purview of 815
ILCS 205/4(1)(c), as amended from time to time, (ii) are an exempted transaction
under the Truth in Lending Act, 12 U.S.C. 1601 et seq., as amended from time to
time, and (iii) do not, and when disbursed shall not, violate the provisions of
the Illinois usury laws, any consumer credit laws or the usury laws of any state
which may have jurisdiction over the transaction or the Borrower.
Section 7.X. Complete Information. This Agreement and all financial
statements, schedules, certificates, confirmations, agreements, contracts, and
other materials submitted to the Lender in connection with or in furtherance of
this Agreement by or on behalf of the Borrower fully and fairly state the
matters with which they purport to deal, and neither misstate any material fact
nor, separately or in the aggregate, fail to state any material fact necessary
to make the statements made not misleading.
Section 7.Y. Intellectual Property. The Borrower owns or has sufficient and
legally enforceable rights to use all material licenses, patents, patent
applications, copyrights, service marks, trademarks, trademark applications, and
trade names necessary to continue to conduct its businesses as heretofore
conducted by it, now conducted by it, and now proposed to be conducted by it.
The Borrower is conducting its business without infringement or claim of
infringement of any license, patent, copyright, service mark, trademark, trade
name, trade secret, or other intellectual property right of others, other than
any such infringements or claims which, if successfully asserted against or
determined adversely to the Borrower, could not, individually or collectively
reasonably be expected to be a Material Adverse Event.
25
SECTION 8. COVENANTS.
The Borrower hereby covenants and agrees with the Lender that, until the
Obligations have been satisfied and discharged in full, the Borrower will comply
and/or cause compliance with the following covenants, unless the Lender shall
give its prior written consent to the contrary:
Section 8.A. Affirmative Covenants.
8.A.1. Financial Covenants. The Borrower shall maintain compliance with the
following financial covenants measured on a consolidated basis during the
periods indicated below:
(a) Net Worth. The Borrower's Net Worth shall not at any time be less than
$150,000,000, excluding the Subordinated Debentures listed in Section 6.A.14
herein.
(b) Consolidated Interest Coverage Ratio. As of the end of each Measurement
Period the Borrower and Affiliates shall maintain a ratio of EBITDA to Interest
Expense of not less than 3.0 to 1.0.
(c) Leverage Ratios.
(i) The ratio of Funded Senior Debt plus Contingent Liabilities to
total Pro Forma EBITDA shall not exceed the following with
respect to the Measurement Periods:
Measurement Period Ratio
------------------ -----
Ending September 30, 2001 3.00 to 1.00
Thereafter 2.75 to 1.00
(ii) The ratio of Funded Total Debt plus Contingent Liabilities to
total Pro Forma EBITDA shall not exceed the following with
respect to the Measurement Periods:
Measurement Period Ratio
------------------ -----
Ending September 30, 2001 4.25 to 1.00
Thereafter 4.00 to 1.00
8.A.2. Financial Information and Reporting. The Borrower shall keep and
cause to be kept proper books and records in which full and true entries will be
made, in accordance with GAAP, of all dealings or transactions relating to its
business and affairs, and the Borrower shall cause to be furnished to the
Lender:
(i) As soon as practicable and, in any event, within sixty (60) days
after the end of each quarter of each Fiscal Year, all of the Borrower's
consolidated and consolidating statements of income and retained earnings
and of cash flows through the quarter then ended and a balance sheet of the
Borrower as of the end of such quarter, all in reasonable detail and
certified by Borrower's president or chief financial officer as fairly
presenting the financial
26
condition and operations of the Borrower as of and for the period then
ending and being accurate in all material respects and having been prepared
in accordance with GAAP;
(ii) As soon as practicable and, in any event, within one hundred
twenty (120) days after the end of each Fiscal Year, all of the Borrower's
consolidated and consolidating audited and unaudited statements of income
and retained earnings and of cash flows through the Fiscal Year then ended
and a balance sheet of the Borrower as of the end of such Fiscal Year, in
each case with comparable information at the close of and for the prior
Fiscal Year, all in reasonable detail, containing no qualifications
unacceptable to the Lender and audited by an independent certified public
accountant selected by the Borrower and acceptable to the Lender and
prepared in accordance with GAAP;
(iii) Together with the Financial Statements for each quarter of each
Fiscal Year, (a) a certificate executed by the chief financial officer of
Borrower in the form of Exhibit C hereto certifying to the Lender that the
Borrower is in compliance with each of the financial covenants set forth in
Section 8.A.1 hereof and setting forth in detail satisfactory to the Lender
the calculations and computations showing such compliance, and (b) a
certificate executed by the president or chief financial officer of
Borrower stating whether any Default or Event of Default currently exists
and is continuing and what action, if any, the Borrower is taking or
proposes to take with respect thereto;
(iv) When and as so furnished, such other financial information
concerning the Borrower, its business, financial condition or assets as may
be furnished to the holders of the Borrower's common or preferred stock
(including all financial statements, reports and proxy statements), or as
the Lender may reasonably request from time to time;
(v) Promptly upon discovery thereof, notice of any action, suit,
arbitration, investigation, administrative or other proceeding instituted,
commenced or threatened against or affecting the Borrower which may
reasonably be expected to cause the Borrower to incur or be liable for
claims, damages and/or costs of any kind (including, without limitation,
attorneys' fees, expert witness fees and court, judgment, settlement and
compliance or remedial costs), aggregating in excess of $100,000;
(vi) Promptly upon the Borrower's becoming aware thereof, notice of
any proposed Laws, or amendments thereto, which would regulate, restrict or
prohibit the Borrower in such a way as might have a Materially Adverse
Effect;
(vii) Notice of the occurrence or existence of any Default or Event of
Default immediately upon the Borrower's becoming aware thereof; and
promptly upon discovery thereof, notice of any development, financial or
otherwise, which might have a Materially Adverse Effect;
(viii) Upon request of the Lender from time to time, any information
concerning the Borrower's compliance with any and all Laws;
(ix) Promptly upon the Borrower becoming aware thereof, notice of any
claim of violation of any Law, and notice of any violation or breach by the
Borrower of the terms of,
27
or any revocation or suspension or threatened revocation or suspension of,
any license or permit of the Borrower;
(x) Notice of the cancellation or expiration of any bond, letter of
credit or similar instrument issued as Financial Assurance and the terms of
any replacement or renewal bond, letter of credit or similar instrument if
not issued by the Lender;
(xi) Within forty-five (45) days after the end of each six-month
period, regardless of whether any New Subsidiary has been acquired during
such period, a New Subsidiary Certificate substantially in the form of
Exhibit D hereto; and
(xii) Within sixty (60) days of the end of each Fiscal Year, updated
annual budgets, financial projections (rolling three years) and business
plans for the ensuing Fiscal Year.
8.A.3. Corporate Existence and Conduct of Business. The Borrower will
maintain and preserve its corporate existence, good standing, certificates of
authority, licenses, permits, franchises, patents, trademarks, trade names,
service marks, copyrights, leases and all other contracts and rights necessary
or desirable to continue its operations and business on a profitable basis and
will generally continue the same line of business as that being presently
conducted, except that the Borrower intends to sell Old Lyme Insurance Company
of Rhode Island, a Rhode Island corporation, and Old Lyme Insurance Company
Limited, a corporation incorporated under the laws of Bermuda, for approximately
$40,000,000 on or before October 31, 2001.
8.A.4. Taxes and Laws. The Borrower will pay and shall cause each Guarantor
to pay when due, all taxes, assessments, charges and levies imposed on the
Borrower or each Guarantor or any of its property or assets or which it is
required to withhold and pay out and will comply in all material respects with
all applicable present and future Laws applicable to the Borrower or each
Guarantor or any of its property or assets, unless the Borrower or any Guarantor
is contesting in good faith, by an appropriate proceeding, the validity, amount,
imposition or applicability of the above while maintaining reserves therefor
which are appropriate and adequate as determined in accordance with GAAP, and
such contest does not have or cause a Materially Adverse Effect.
8.A.5. Inspection. Upon the Lender's request, the Borrower will allow and
shall cause each Guarantor to allow the Lender, and any of its officers,
employees or agents, to visit, during normal business hours, for inspection and
review, the Borrower's or any Guarantor's premises and will make available and
furnish to the Lender the Borrower's or any Guarantor's books and records and
such financial information concerning the Borrower's or any Guarantor's property
or assets, business, affairs, operations or financial condition as reasonably
requested by the Lender.
8.A.6. Lender Costs. The Borrower shall pay upon demand, all reasonable
out-of-pocket fees, costs and expenses (including those of outside counsel,
auditors, appraisers, accountants, insurance and environmental advisors, title
companies, surveyors, and other consultants and agents) incurred or paid by the
Lender in connection with the preparation, negotiation, documentation,
administration (including periodic field and collateral audits and site visits),
amendment, modification, waiver, interpretation, collection or enforcement of
this Agreement, the Note, or any other Loan Documents and the credit and
security therefor. In addition, the Borrower shall pay upon
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demand all such costs and expenses of the Lender in connection with any Default
or Event of Default by the Borrower hereunder, or in connection with the
collection or enforcement of any of the terms hereof or of the other Loan
Documents and the credit therefor, or any "work-out," refinancing or
restructuring of the credit arrangement set forth herein. Any attorneys' fees
due hereunder are to be calculated at the attorneys' customary hourly rates, and
not as a percentage of the indebtedness or of the amount recovered. The Borrower
agrees to indemnify the Lender, its successors and assigns, and its respective
officers, directors and employees, from and hold each of them harmless against
(i) any transfer taxes, documentary taxes and any other taxes, penalties,
assessments or charges made by any governmental authority by reason of the
execution, delivery and performance of the Loan Documents and any security
therefor, and (ii) any and all losses, claims, damages, liabilities and
expenses, including all expenses of litigation or preparation therefor, which
any of them may incur or which may be asserted against any of them in connection
with or arising out of the direct or indirect application of the proceeds of
Loans. The obligations under this Section 8.A.6 shall survive repayment of the
Loans and the assignment of any rights hereunder.
8.A.7. Employee Plans. The Borrower shall and shall cause each Guarantor to
(i) keep in full force and effect any and all Employee Plans which are presently
in existence or may, from time to time, come into existence under ERISA, and not
withdraw from any such Employee Plans, unless such withdrawal can be effected or
such Employee Plans can be terminated without material liability to the Borrower
or each Guarantor; (ii) make contributions to all of such Employee Plans in a
timely manner and in a sufficient amount to comply with the requirements of
ERISA, including the minimum funding standards of Section 302 of ERISA; (iii)
comply with all material requirements of ERISA which relate to such Employee
Plans; (iv) notify the Lender immediately upon receipt of any notice concerning
the imposition of any withdrawal liability or of the institution of any
proceeding or other action which may result in the termination of any such
Employee Plans or the appointment of a trustee to administer such Employee
Plans; and (v) promptly advise the Lender of the occurrence of any Reportable
Event or Prohibited Transaction, as defined in ERISA, with respect to any such
Employee Plans.
8.A.8. Use of Proceeds of Loans. The Borrower shall use the proceeds of the
Loans for general corporate purposes, including working capital, repayment of
the Advance Request for $40,000,000 between Borrower and Bank of Montreal, dated
as of June 26, 2001, the acquisition of Burnham Stewart Group, Inc. and
permitted capital expenditures and acquisitions as listed on Schedule 8.A.8.
8.A.9. Financial Assurance. The Borrower shall timely comply or cause
compliance with the requirements of any Act or any other Law concerning
Financial Assurance. If any funds are drawn on any Financial Assurance at any
time, the Borrower shall promptly notify the Lender in writing of the amount of
and the reason for the draw. The Borrower shall not maintain more in Financial
Assurance than is required pursuant to any Act or any Law at any time. At the
earliest available opportunity under any Act or other Law, the Borrower shall
request that the amount of Financial Assurance be reduced if and as permitted
under the Act, or such other Law.
8.A.10. Compliance with Laws. Borrower shall comply or cause compliance
with all applicable building codes, zoning ordinances, environmental protection,
health and safety laws and regulations and other laws and regulations governing
it.
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8.A.11. Maintenance of Insurance. The Borrower shall maintain insurance
with financially sound and respectable insurance companies or associations in
such companies or associations in such amounts and covering such casualties and
risks as are customary in accordance with prudent business practice in the case
of companies engaged in the same or a similar business and similarly situated,
which insurance may provide for reasonable deductibility from coverage thereof.
The Borrower will, upon request, furnish to the Lender at reasonable intervals a
certificate of an Authorized Officer setting forth the nature and extent of all
insurance maintained by the Borrower. The Borrower shall retain all incidents of
ownership of the insurance maintained pursuant hereto and shall not borrow upon
or otherwise impair its rights to receive the proceeds of such insurance. In the
event the Borrower either fails to provide the Lender with evidence of the
insurance coverage required by this Section or at any time hereafter shall fail
to obtain or maintain any of the policies of insurance required above, or to pay
any premium in whole or in part relating thereto, then the Lender, without
waiving or releasing any obligation or default by the Borrower hereunder, may at
any time (but shall be under no obligation to act), obtain and maintain such
policies of insurance and pay such premium and take any other action with
respect thereto, which the Lender deems advisable. The Borrower may later cancel
any such insurance purchased by the Lender, but only after providing the Lender
with evidence that the Borrower has obtained the insurance coverage required by
this Section. The costs of such insurance obtained by the Lender, through and
including the effective date such insurance coverage is canceled or expires,
shall be payable on demand by the Borrower to the Lender, together with interest
at the Default Rate on such amounts until repaid and any other charges by the
Lender in connection with the placement of such insurance. The costs of such
insurance, which may be greater than the cost of insurance which the Borrower
may be able to obtain on its own, together with interest thereon at the Default
Rate and any other charges by the Lender in connection with the placement of
such insurance may be added to the total Obligations due and owing.
Section 8.B. Negative Covenants.
8.B.1. Liens. The Borrower shall not directly or indirectly create, assume,
grant, pledge, incur, permit or suffer to exist, any Lien or change of any kind
or character upon any assets of the Borrower whether owned at the date hereof or
hereafter acquired, except Permitted Liens.
8.B.2. Fiscal Year, Name Changes, Mergers and Acquisitions. The Borrower
shall not (i) change its Fiscal Year or its corporate name or without prior
written notice to Lender and adopt an assumed corporate name other than as set
forth in Schedule 8.B.2, (ii) consolidate or merge with any Person, (iii)
acquire any stock in, or acquire all or substantially all of the assets or
properties of, or make any investment in, any Person, except that the existing
investments listed on Schedule 8.B.2 and any acquisitions not exceeding
$2,000,000 individually or $5,000,000 in the aggregate, provided that such
acquisition(s) would not cause the Borrower to be in Default hereunder are
permitted hereunder, or (iv) create any Subsidiaries.
8.B.3. Restricted Payments. The Borrower shall not declare or make any
Restricted Payments.
8.B.4. Transactions with Affiliates. Except as set forth in Schedule 8.B.4,
the Borrower shall not enter into any transaction with its Affiliates or any of
its or its Affiliates' shareholders, directors, officers or employees, except in
the ordinary course of business and upon fair and
30
reasonable terms which are no less favorable to the Borrower than those that
would be available at the time of such transaction in a comparable arm's length
transaction with a Person not an Affiliate. The Borrower shall not pay any
management fee to any Affiliate other than Borrower.
8.B.5. Capital Structure. The Borrower shall not have outstanding or issue
any shares of preferred stock. The Borrower shall not make any changes in its
capital structure (including the terms of its outstanding stock), amend its
articles of incorporation, certificate of designation, or bylaws, or make any
changes in any of its business objectives, purposes or operations if such change
has a reasonable likelihood of having a Materially Adverse Effect. The Borrower
shall not be permitted to issue any stock. Notwithstanding the foregoing,
Borrower may issue stock for acquisitions pursuant to Section 8.B.2 provided
that such acquisitions do not cause an Event of Default and Borrower may issue
stock pursuant to the Executive Share Purchase Plan and, when finalized, the
Restricted Stock Plan provided that such issuance does not cause an Event of
Default.
8.B.6. Change in Nature of Business. The Borrower shall not engage in any
business unrelated to, or make any material change in the nature of, its
business as carried on at the date hereof.
8.B.7. Prepayment or Modification of Debt. The Borrower will not (i) prepay
any Funded Debt owing to, or any indebtedness for money borrowed by the Borrower
from a Person other than the Lender, or any Debt secured by any of its assets,
except: (x) Debt to the Lender or to any holder of Permitted Liens, (y)
prepayment of Debt secured by an asset if a replacement asset of equal or
greater value is purchased in connection therewith and (z) prepayment of
revolving Debt, the amount of which may be subsequently reborrowed, or (ii)
enter into or modify any agreement as a result of which the terms of payment of
any of the foregoing Debt are amended or modified.
8.B.8. False Statements. The Borrower will not furnish the Lender any
certificate or other document that knowingly contains any untrue statement of
material fact or that omits to state a material fact necessary to make it not
misleading in light of the circumstances under which it was furnished.
8.B.9. Inconsistent or Restrictive Agreements. The Borrower shall not enter
into any agreement which would violate or cause a breach of or under this
Agreement or any Loan Documents or the performance by the Borrower of any
obligation hereunder or thereunder.
8.B.10. Investments. The Borrower shall not make any loan or advance to any
Person, or purchase or otherwise acquire any capital stock, assets, obligations,
or other securities of, make any capital contribution to, or otherwise invest in
or acquire any interest in any Person, or participate as a partner or joint
venturer with any other Person, except for Permitted Investments and
acquisitions contemplated by Section 8.B.2.
8.B.11. Indebtedness. The Borrower shall not, directly or indirectly,
create, assume, incur or have outstanding any Debt (including purchase money
indebtedness), or become liable, whether as an endorser, guarantor, surety or
otherwise, for any debt or obligation of any other Person, except:
(a) the Obligations;
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(b) endorsement for collection or deposit of any commercial paper
secured in the ordinary course of business;
(c) obligations of the Borrower for taxes, assessments, municipal or
other governmental charges;
(d) obligations of the Borrower for accounts payable, other than for
money borrowed, incurred in the ordinary course of business;
(e) obligations existing on the date hereof which are disclosed on the
financial statements referred to in Section 7; and
(f) those noted on Schedule 8.B.11.
SECTION 9. EVENTS OF DEFAULT.
The following events shall constitute and be deemed Events of Default
hereunder:
Section 9.A. Obligations. Failure by the Borrower (i) to make any payment
of principal on any Loan or Note on the date such payment Obligation is due, or
(ii) to make any payment of interest on any Loan or Note or any payment of any
fee due hereunder within 3 Business Days after such payment Obligation is due.
Section 9.B. Breach or Default Under Loan Documents. (i) failure or neglect
of the Borrower to perform, keep or observe any of the covenants at Sections
8.A.1, 8.A.2, 8.A.6, 8.A.8, or 8.B hereof; or (ii) failure or neglect of the
Borrower or Guarantor to perform, keep or observe any of its respective other
covenants, conditions, promises or agreements contained herein or in any other
Loan Document to which it is a party or signatory and the Borrower or Guarantor
fails to cure the foregoing within thirty (30) days after notice from the Lender
to the Borrower or Guarantor thereof; or (iii) an Event of Default occurs under
any other Loan Document; or (iv) at any time any notice is given by the Borrower
of the discontinuance, invalidity or unenforceability of or the Borrower's
obligations thereunder.
Section 9.C. Representation and Warranties. Any warranty or representation
now or hereafter made by the Borrower or by any Guarantor hereunder or under any
Loan Document, is untrue or incorrect in any material respect or fails to state
a material fact necessary to make such warranty or representation not misleading
in light of the circumstances in which it was made, or any schedule,
certificate, statement, report, financial data, notice or writing furnished to
the Lender at any time by the Borrower is untrue or incorrect in any material
respect or fails to state a material fact needed to make the foregoing not
misleading in light of the circumstances in which the foregoing were furnished,
in each case on the date as of which the facts set forth therein are stated or
certified and the Borrower or each Guarantor fails to cure any of the foregoing
within thirty (30) days after the Borrower should have become aware of the same.
Section 9.D. Judgments. A final and non-appealable judgment or order, or an
aggregate of final and non-appealable outstanding judgments or orders, requiring
payment in excess of $150,000, either not fully covered by insurance or the
insurance for which is disputed or contested,
32
shall have been entered against the Borrower, and such judgments or order(s)
shall remain unsatisfied or undischarged and in effect for thirty (30)
consecutive days without a stay of enforcement or execution thereof.
Section 9.E. Insolvency and Related Proceedings. If the Borrower or
Guarantor (i) is dissolved; (ii) authorizes or makes an assignment for the
benefit of creditors; (iii) generally shall not pay its debts as they become
due; (iv) shall admit in writing its inability to pay its debts generally; or
(v) shall authorize or commence (whether by the entry of an order for relief or
the appointment of a receiver, trustee, examiner, custodian or other similar
official therefor or for any substantial part of its property) any proceeding or
voluntary case under any bankruptcy, reorganization, insolvency, dissolution,
liquidation, adjustment or arrangement of debt, receivership or similar Laws or
if such proceedings are commenced or instituted, or an order for relief or
approving any petition commencing such proceedings is entered against the
Borrower and such party, by any action or failure to act, authorize, approve,
acquiesce, or consent to the commencement or institution of such proceedings, or
such proceedings are not dismissed within sixty (60) days after the date of
filing, commencement or institution.
Section 9.F. Other Material Agreements. If the Borrower defaults or a
default or an event of default occurs under or in the performance of its
obligations under (i) any other agreement with the Lender, or (ii) under any
other material exceeding $100,000 agreement, document or instruments for
borrowed money, and such default, breach, or event of default continues beyond
any applicable grace period thereunder and the effect of which shall be to allow
the holder of such agreement, document or instrument to terminate the foregoing,
or the Person to whom such obligation is owed to cause such obligation to become
due prior to its stated maturity or otherwise accelerated, including, but not
limited to any credit facility with Bank of Montreal or Bank of America or (iii)
under any other material agreement, document or instrument (not for borrowed
money), and such default, breach, or event of default continues beyond any
applicable grace period thereunder and the effect of which shall be to allow the
holder of such agreement, document or instrument to terminate the foregoing or
to accelerate obligations exceeding $100,000 owed to it thereunder.
Section 9.G. State Action. If any proceeding is instituted or commenced by
the State or country of incorporation of the Borrower, seeking a forfeiture of
the Certificate of Incorporation of the Borrower and any order entered in such
proceeding shall fail to be vacated within thirty (30) days.
Section 9.H. ERISA Matters. If any of the following events shall have
occurred with respect to any Employee Plan and the resultant or potential
liability of the Borrower therefor exceeds $100,000: (i) a Reportable Event or
Prohibited Transaction, as such terms are defined in ERISA, shall have occurred;
(ii) a trustee is appointed by any governmental body or agency or any court to
administer any Employee Plan; (iii) any Employee Plan is involuntarily
terminated, or circumstances exist which constitute grounds entitling the
Pension Benefit Guaranty Corporation to institute proceedings to terminate any
Employee Plan; or (iv) any withdrawal liability is incurred in connection with
any termination of an Employee Plan.
Section 9.I. Tax Liens. If a notice of lien, levy or assessment is filed or
recorded with respect to all or a material part of the assets owned by the
Borrower by the United States, or any department, agency or instrumentality
thereof, or by any state, county, municipality or other
33
governmental agency, or any taxes or debts owing at any time or times hereafter
to any one or more of the foregoing become a lien upon a material part of the
assets owned by the Borrower, unless such notice or lien is a Permitted Lien or
is removed within ninety (90) days after filing or recording of such notice or
becoming such lien.
Section 9.J. Failure of Lien. If any Loan Document shall at any time after
its execution and delivery and for any reason (other than as a result of any
action or inaction by the Lender) cease to be in full force and effect or shall
be declared null and void, or the validity or enforceability thereof shall be
contested or the Borrower or any Guarantor shall deny it has any further
liability or obligation under any Loan Document, or the Borrower or any
Guarantor shall fail to perform any of its obligations under any Loan Document
beyond any applicable grace period.
Section 9.K. Environmental or Other Remediation Costs. If the Borrower or
Affiliate becomes aware of, any environmental contamination or similar site
deficiency which may reasonably be expected to cause the Borrower or Affiliate
to incur or be liable for costs of any kind aggregating in excess of a cost of
$100,000.
Section 9.L. Operating Permits and Licenses. If the Borrower fails to
maintain any permits or licenses which are necessary and required for the
ownership, use, occupancy or operation of its business, if such deficiency would
have a Materially Adverse Effect and is not cured within 30 days.
Section 9.M. Material Adverse Change. If since March 31, 2001, there shall
have occurred any condition or event which the Lender determines has or might be
reasonably expected to have a Materially Adverse Effect.
Section 9.N. Change in Control. If a Change in Control shall occur. "Change
in Control" means (i) the direct or indirect sale, lease, exchange or other
transfer of all or substantially all of the assets of Borrower to any Person or
Group, as defined in Rule 13d-5 under the Exchange Act ("Group"), other than an
Affiliate of Borrower, (ii) the merger or consolidation of Borrower with or into
another entity with the effect that the then existing shareholders of Borrower,
collectively, hold less than 50.1% of the combined voting power of the then
outstanding securities of the surviving entity of such merger or the corporation
resulting from such consolidation ordinarily (and apart from rights arising
under special circumstances) having the right to vote in the election of
directors, (iii) during any two-year period, the replacement of a majority of
the Board of Directors of Borrower from the directors who constituted the Board
of Directors at the beginning of such period, and such replacement shall not
have been approved by a vote of at least a majority of the Board of Directors of
Borrower then still in office who were either members of the Board of Directors
at the beginning of such period or whose election as a member of the Board of
Directors was previously so approved, (iv) a Person or Group (other than
existing shareholders of Borrower, and/or any executive officer of Borrower or
its Subsidiaries, or its successors) shall, as a result of a tender or exchange
offer, open market purchases, privately negotiated purchases or otherwise, have
become the beneficial owner (within the meaning of Rule 13d-3 under the Exchange
Act) of securities of Borrower representing 50% or more of the combined voting
power of the then outstanding securities of Borrower ordinarily (and apart from
rights arising under special circumstances) having the right to vote in the
election of directors or shall have acquired the right to designate a majority
of the Board of Directors of Borrower, (v) any Person or Group (other than
existing shareholders of Borrower, or its executive officers) shall acquire the
right, by contract or otherwise, to elect, appoint or otherwise designate a
34
majority of the Board of Directors of Borrower, whether or not such right is
exercised, or (vi) the occurrence of any event specified in Section 9.E. with
respect to Borrower or any of its Subsidiaries.
SECTION 10. RIGHTS AND REMEDIES.
Section 10.A. Termination of Commitment and Acceleration. Upon the
happening or occurrence of an Event of Default described in Section 9.E. above,
the Commitment shall immediately terminate, and upon the happening or occurrence
of any other Event of Default set forth in Section 9, such Event of Default not
having been previously cured or waived in writing by the Lender, the Lender may
declare the Commitment terminated, if they have not yet been terminated.
Following the termination of the Commitment, the Lender may accelerate the
Obligations by declaring that the Obligations are then due and payable and,
thereupon, the Note shall be and become forthwith, due and payable without any
presentment, demand, protest, notice of any of the foregoing or other notice of
any kind, all of which are hereby expressly waived notwithstanding anything
contained herein or in the Note to the contrary, and the Lender shall have all
rights and remedies now or hereafter provided by applicable Laws and without
limiting the generality of the foregoing may, at its option, also appropriate
and apply toward the payment of the Note, any indebtedness of the Lender to the
Borrower, howsoever created or arising, and may also exercise any and all rights
and remedies hereunder, under the Loan Documents.
Section 10.B. Rescission. In the event of an uncured Event of Default, if
at any time after acceleration of the maturity of the Loans, Borrower shall pay
all arrears of interest and all payments on account of principal of the Loans
which shall have become due otherwise than by acceleration (with interest on
principal and, to the extent permitted by laws, on overdue interest, at the
rates specified in this Agreement) and all Events of Default and Defaults (other
than nonpayment of principal of and accrued interest of the Loans due and
payable solely by virtue or acceleration) shall be remedied or waived pursuant
to this Agreement, then by written notice to Borrower, the Lender may elect, in
its sole discretion, to rescind and annul the acceleration and its consequences;
but such action shall not affect any subsequent Event of Default or Default or
impair any right or remedy consequent thereon. The provisions of the preceding
sentence do not give Borrower the right to require Lenders to rescind or annul
any acceleration hereunder, even if the conditions set forth herein are met.
Section 10.C. Application of Payments. All monies received by the Lender
from the exercise of any rights or remedies shall, unless otherwise required by
applicable Law, be applied as follows:
A. First, to the payment of all reasonable expenses (to the extent not paid
by Borrower) actually incurred by the Lender in connection with the exercise of
such rights or remedies, including all out-of-pocket costs and expenses of
collection, reasonable attorneys' fees and court costs, all costs incurred by
the Lender directly or indirectly in carrying out the terms, covenants and
agreements contained in any Loan Document, together with interest thereon as
provided therein, and all other costs and expenses described in Section 8.A.6;
B. Next, to the payment of any outstanding fees due hereunder;
C. Next, to the payment of interest then accrued and unpaid on the Note;
35
D. Next, to the payment of principal then owing on the Note;
E. Next, to all of the other Obligations;
F. Surplus, if any, unless a court of competent jurisdiction decrees
otherwise, to the Borrower.
Section 10.D Attorney-in-Fact. In the event of an uncured Event of Default,
the Borrower hereby irrevocably makes, constitutes and appoints the Lender (and
any officer of the Lender or any Person designated by the Lender for that
purpose) as the Borrower's true and lawful proxy and attorney-in-fact (and
agent-in-fact) in the Borrower's name, place and stead, with full power of
substitution, to take such actions as are permitted in this Agreement. The
Borrower hereby acknowledges that the constitution and appointment of such proxy
and attorney-in-fact are coupled with an interest and are irrevocable. The
Borrower hereby ratifies and confirms all that said attorney-in-fact may do or
cause to be done by virtue of any provision of this Agreement.
SECTION 11. MISCELLANEOUS.
Section 11.A. Assignments and Participations. Lender, without the consent
of the Borrower, may assign or sell participation, to one or more banks or other
financial institutions all or a portion of its rights and obligations under this
Agreement (including without limitation all or a portion of its Commitments and
the Loans owing to it.
Section 11.B. Withholding Taxes. Except as otherwise required by Law, each
payment by the Borrower under this Agreement or the Note shall be made without
setoff or counterclaim and without withholding for or on account of any present
or future taxes imposed by or within the jurisdiction in which the Borrower is
domiciled, any jurisdiction from which the Borrower makes any payment hereunder,
or (in each case) any political subdivision or taxing authority thereof or
therein (excluding any such tax imposed on the overall net income of Lender). If
any such withholding is so required, the Borrower shall make the withholding,
pay the amount withheld to the appropriate governmental authority before
penalties attach thereto or interest accrues thereon and forthwith pay such
additional amount as may be necessary to ensure that the net amount actually
received by Lender free and clear of such taxes (including such taxes on such
additional amount) is equal to the amount which Lender would have received had
such withholding not been made. If the Lender pays any amount in respect of any
such taxes, penalties or interest, the Borrower shall reimburse the Lender for
that payment on demand in the currency in which such payment was made. If a
Borrower pays any such taxes, penalties or interest, it shall deliver official
tax receipts evidencing that payment or certified copies thereof to the Lender
on or before the thirtieth day after payment.
Section 11.C. Amendment and Waivers. No amendment or modification of any
provision of this Agreement shall be effective without the written agreement of
Lender and Borrower. Any waiver or consent shall be effective only in the
specific instance and for the specific purpose for which it was given. No notice
to or demand on Borrower in any case shall entitle Borrower to any further
notice or demand in similar or other circumstances.
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Section 11.D. Merger and Integration Clause. This Agreement and the Loan
Documents contain the entire agreement between the parties hereto with respect
to the subject matter hereof and specifically supersedes in its entirety the
proposal letter of the Lender to Borrower dated October 12, 1999, and any prior
drafts thereof or proposals or letters from the Lender with respect to the terms
of credit facility hereunder or any other matter which is the subject matter of
this Agreement or any of the Loan Documents.
Section 11.E. Applicable Law. This Agreement, the Note and the other Loan
Documents have been executed, issued, delivered and accepted in and shall be
deemed to have been made under and shall be governed by and construed in
accordance with the Laws of the State of Illinois.
Section 11.F. Severability. This Agreement, the Note and the other Loan
Documents shall be construed and interpreted in such manner as to be effective,
enforceable and valid under all applicable Laws. If any provision of this
Agreement, the Note or the other Loan Documents shall be held invalid,
prohibited or unenforceable under any applicable Laws of any applicable
jurisdiction, such invalidity, prohibition or unenforceability shall be limited
to such provision and shall not affect or invalidate the other provisions hereof
or thereof or affect the validity or enforceability of such provision in any
other jurisdiction, and to that extent, the provisions hereof and thereof are
severable.
Section 11.G. Section Headings. Section headings used in this Agreement are
for convenience only and shall not effect the construction or interpretation of
this Agreement.
Section 11.H. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Lender and the Borrower, and their respective
successors and assigns; provided, however, that the Borrower has no right to
assign any of its rights or its obligations hereunder without the prior written
consent of Lender.
Section 11.I. Notices. Any notices, requests or consents required or
permitted by this Agreement shall be (i) in writing, and (ii) delivered in
person, telexed, telecopied or sent by certified or registered mail, postage
prepaid, return receipt requested, or by overnight mail or express delivery
service to the addresses of the parties hereto set forth below, unless such
address, telex number or telecopier number is changed by written notice
hereunder. Each such notice, request, consent or other communication shall be
effective (i) if given by telecopier, when such telecopy is transmitted to the
telecopier number specified on the signature page hereof and a confirmation of
such telecopy has been received by the sender, (ii) if given by telex, when such
telex is transmitted to the telex number specified on the signature page hereof
and the answerback is received by sender, (iii) if given by mail, five (5) days
after such communication is deposited in the mail, certified or registered with
return receipt requested, addressed as aforesaid or (iv) if given by any other
means, when delivered at the addresses specified on the signature page hereof;
provided that any notice given pursuant to Sections 2 and 3 hereof shall be
effective only upon receipt.
(a) To the Borrower, to it at:
Hub International Limited
55 East Jackson Boulevard
Chicago, Illinois 60604
37
Telecopy: (312) 279-4981
for the attention of: W. Kirk James, Vice President,
Secretary and General Counsel
(b) To the Lender, to it at:
LaSalle Bank National Association
135 South LaSalle Street
Chicago, Illinois 60603
Telecopy: (312) 904-6189
for the attention of: Commercial Banking Insurance Division, Suite 216
with copy to:
Lord, Bissell & Brook
115 S. LaSalle Street
Chicago, IL 60603
Telecopy: (312) 443-0336
for the attention of: Kay W. McCurdy
or to such other address or facsimile or telecopy number as any party hereto may
from time to time designate to the other parties hereto in such manner.
Section 11.J. Counterparts. This Agreement may be executed in any number of
counterparts, and by the different parties on different counterparts, each of
which when executed shall be deemed an original but all such counterparts taken
together shall constitute one and the same instrument.
Section 11.K. Indemnification. The Borrower hereby indemnifies, exonerates
and holds free and harmless the Lender, each of its Affiliates and each of their
officers, directors, employees, agents-and attorneys (collectively, the
"Indemnified Parties" or, individually, an "Indemnified Party"), from and
against any and all actions, causes of action, suits, proceedings,
investigations, losses, costs, liabilities, damages, punitive damages, penalties
and expenses, including reasonable attorneys' and paralegals' fees and
disbursements (the "Indemnified Liabilities"), incurred by the Indemnified
Parties or any of them as a result of, or arising out of, or relating to
(irrespective of whether such Indemnified Party is a party to the action for
which indemnification hereunder is sought):
(a) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of any Loan;
(b) the entering into and performance under this Agreement or any
other Loan Document or by any party thereto; or
(c) any investigation, litigation, or proceeding related to any
acquisition or proposed acquisition by the Borrower of all or any portion
of the stock or all or substantially
38
all the assets of any Person or merger or proposed merger of the Borrower
with any other Person, whether or not the Lender is party thereto and
whether or not the proceeds of any Loans are used or to be used in
connection therewith; except for any such Indemnified Liabilities arising
by reason of an Indemnified Party's gross negligence or wilful misconduct.
In addition, if the Borrower institutes any action, suit or proceeding
against any of the Indemnified Parties and such action, suit or proceeding
is unsuccessful, the Borrower shall indemnify and hold harmless the
Indemnified Parties from and against all Indemnified Liabilities arising in
connection with or relating to such action, suit or proceeding. The
Borrower shall pay or reimburse the Indemnified Parties for any Indemnified
Liabilities from time to time within thirty (30) days after demand. This
Section and the agreements of the Borrower set forth herein shall survive
the termination of this Agreement and any or all of the Loan Documents and
repayment of all of the Obligations hereunder and thereunder. If and to the
extent that the undertaking described in this Section 11.K. is held or
determined by any court of competent jurisdiction to be unenforceable for
any reason, the Borrower hereby agree to make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities which
is permissible under applicable Laws.
Section 11.L. Independence of Covenants. All covenants hereunder shall be
given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitations of, another covenant shall
not avoid the occurrence of an Event of Default or Default if such action is
taken or condition exists, and if a particular action or condition is expressly
permitted under any covenant, unless expressly limited to such covenant, the
fact that it would not be permitted under the general provisions of another
covenant shall not constitute an Event of Default or Default if such action is
taken or condition exists.
Section 11.M. Limitation of Liability. To the extent permitted by
applicable Law, no claim may be made by Borrower or any other Person against
Lender, or its Affiliates, directors, officers, employees, attorneys or agents,
for special, indirect, consequential or punitive damages in respect of any claim
for breach of contract or any other theory of liability arising out of or
related to the transactions contemplated by this Agreement, or any act, omission
or event occurring in connection therewith; and Borrower hereby waives, releases
and agrees not to sue upon any claim for any such damages, whether or not
accrued and whether or not known or suspected to exist in its favor.
Section 11.N. Consent to Jurisdiction and Waiver of Jury Trial and Personal
Service. THE BORROWER EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION OF ANY
STATE OR FEDERAL COURT LOCATED WITHIN COOK COUNTY, ILLINOIS IN ANY ACTION, SUIT
OR PROCEEDING (WHETHER IN CONTRACT OR TORT, AT LAW OR IN EQUITY) COMMENCED
THEREIN IN CONNECTION WITH OR WITH RESPECT TO THE OBLIGATIONS, THIS AGREEMENT,
THE NOTE OR ANY OTHER LOAN DOCUMENTS (INCLUDING, WITHOUT LIMITATION, ANY
DEFENSES OR COUNTER CLAIMS THEREIN), AND THE BORROWER AND THE LENDER EACH WAIVE
ANY RIGHT TO JURY TRIAL THAT THEY MAY NOW OR HEREAFTER HAVE UNDER ANY LAWS AND
ANY OBJECTION TO VENUE IN CONNECTION THEREWITH. THE BORROWER HEREBY WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS OR PAPERS ISSUED OR SERVED IN CONNECTION
WITH THE FOREGOING AND AGREES THAT SERVICE OF SUCH PROCESS OR PAPERS MAY BE MADE
BY REGISTERED OR CERTIFIED MAIL,
39
POSTAGE PREPAID, RETURN RECEIPT REQUESTED, DIRECTED TO THE BORROWER AS SET FORTH
IN SECTION 11.I. ABOVE AND THE BORROWER'S REGISTERED AGENT, IN WHICH CASE SUCH
PROCESS OR PAPERS SHALL BE DEEMED RECEIVED FIVE (5) DAYS THEREAFTER, OR BY
OVERNIGHT MAIL OR EXPRESS DELIVERY SERVICE, IN WHICH CASE SUCH PROCESS OR PAPERS
SHALL BE DEEMED RECEIVED ONE (1) DAY THEREAFTER.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
BORROWER:
--------
HUB INTERNATIONAL LIMITED
By: /s/ W. Kirk James
--------------------------------------
Name: W. Kirk James
------------------------------------
Title: Vice President and General Counsel
-----------------------------------
Address: 55 East Jackson Boulevard
Chicago, Illinois 60604
Telephone: (312) 279-4881
------------------------------
Telecopy: (312) 279-4981
------------------------------
LENDER:
------
LASALLE BANK NATIONAL ASSOCIATION
By: /s/ Janet R. Gates
--------------------------------------
Name: Janet R. Gates
Title: Senior Vice President
Address: 135 South LaSalle Street
Chicago, IL 60603
Telephone: (312) 904-4617
Telecopy: (312) 904-6189
40