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Exhibit 4.1
AMENDMENT NO. 1 TO CREDIT AGREEMENT AND
WAIVER
This Amendment and Waiver (this "Amendment") is entered into as
of May 25, 2007 by and among Argonaut Group, Inc., a Delaware
corporation (the "Borrower"), JPMorgan Chase Bank, N. A.,
individually and as administrative agent (the "Administrative
Agent"), and the other financial institutions signatory hereto.
RECITALS
A. The Borrower, the Administrative Agent and the Lenders are
party to that certain credit agreement dated as of March 6,
2006 (the "Credit Agreement"). Unless otherwise specified herein,
capitalized terms used in this Amendment shall have the meanings
ascribed to them by the Credit Agreement.
B. It is contemplated that (i) the Borrower will merge (the
"Merger") with PXMS Inc., a newly formed wholly-owned Delaware
subsidiary of PXRE Group Ltd. ("PXRE"), (ii) the Borrower will
be the surviving entity of the Merger, (iii) as a result of
the Merger the Borrower will become a wholly-owned subsidiary of
PXRE and the shareholders of the Borrower immediately prior to the
Merger will become entitled to receive common shares in PXRE and
will own approximately 70% of the aggregate common shares of PXRE,
and (iv) prior to the Merger the Borrower will pay a cash
dividend to its shareholders in the aggregate amount of $60,000,000
(the "Dividend"), which Dividend will be funded out of a drawing
under the revolving credit facility established by the Credit
Agreement.
C. The Borrower, the Administrative Agent and the undersigned
Lenders wish to amend the Credit Agreement and waive certain
provisions thereof on the terms and conditions set forth below in
connection with the Merger and the Dividend.
Now, therefore, in consideration of the mutual execution hereof
and other good and valuable consideration, the parties hereto agree
as follows:
1. Amendment to Credit Agreement . Upon the "Effective
Date" (as defined below), the Credit Agreement shall be amended as
follows:
(a) The
definitions of "Borrower", "Change of Control" and "Material
Indebtedness" in Article I are amended in their entirety to read as
follows:
"
Borrower " means Argonaut Group, Inc., a Delaware
corporation and its successors and assigns.
" Change in
Control " means (a) the acquisition of ownership, directly
or indirectly, beneficially or of record, by any Person or group
(within the meaning of the Securities Exchange Act of 1934 and the
rules of the Securities and Exchange Commission thereunder as in
effect on the date hereof) of Equity Interests representing more
than 30%
of the aggregate ordinary voting power
represented by the issued and outstanding Equity Interests of the
Parent; (b) occupation of a majority of the seats (other than
vacant seats) on the board of directors of the Parent by Persons
who were neither (i) nominated by the board of directors of
the Parent nor (ii) appointed by directors so nominated;
(c) the acquisition of direct or indirect Control of the
Parent by any Person or group; (d) except as otherwise
expressly permitted under the terms of this Agreement (including a
disposition permitted under Section 6.03(b)), the Borrower
shall cease to own and control, directly or indirectly, free and
clear of all Liens and other encumbrances all of the economic and
voting rights associated with all of the outstanding capital stock
of each of the Borrower’s Insurance Subsidiaries or shall
cease to have the power, directly or indirectly, to elect all of
the members of the board of directors of each of the
Borrower’s Insurance Subsidiaries; or (e) after the
Merger the Parent shall cease to own and control, directly or
indirectly, free and clear of all Liens and other encumbrances all
of the economic and voting rights associated with all of the
outstanding capital stock of the Borrower or shall cease to have
the power, directly or indirectly, to elect all of the members of
the board of directors of the Borrower.
" Material
Indebtedness " means Indebtedness (other than the Loans and
Letters of Credit), or obligations in respect of one or more Swap
Agreements, of any one or more of the Borrower, any Subsidiary or
the Parent or any of its subsidiaries, in an aggregate principal
amount exceeding $5,000,000. For purposes of determining Material
Indebtedness, the "principal amount" of the obligations of any of
the parties listed above in respect of any Swap Agreement at any
time shall be the maximum aggregate amount (giving effect to any
netting agreements) that such party would be required to pay if
such Swap Agreement were terminated at such time.
(b) The
definitions of "Amendment No. 1", "Merger" and "Parent" are
added to Article I in appropriate alphabetical order reading as
follows:
" Amendment
No. 1 " means that certain Amendment and Waiver to this
Agreement, entered into as of May 25, 2007 by and among the
Borrower, the Administrative Agent, and the other financial
institutions signatory thereto.
" Merger
" has the meaning ascribed to such term in Amendment
No. 1.
" Parent
" means PXRE Group Ltd., a Bermuda corporation the name of which is
expected to be changed to Argo Group International Holdings, Ltd.
immediately after the consummation of the Merger, if it occurs;
provided that solely for purposes of the definition of Change
in
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Control, "Parent" shall mean (a) prior to
the Merger, the Borrower and (b) after the Merger, if it
occurs, PXRE Group Ltd.
(c)
Section 2.09 is amended by (i) replacing the
phrase "Reduction/Increase" in the title thereof with the word
"Reductions" and (ii) deleting Section 2.09(d) in its
entirety.
(d)
Section 5.09 is amended by replacing the phrase "BBB-"
in the body thereof with the phrase "BBB+".
(e)
Section 6.01(h) is renumbered as
Section 6.01(i) and a replacement
Section 6.01(h) is added to read as follows:
(h) Indebtedness
in an aggregate principal amount not to exceed $60,000,000,
(i) the proceeds of which are used solely to repay Revolving
Loans and (ii) which has no scheduled repayments until at
least 180 days after the Maturity Date.
(f)
Section 6.04(f ) is renumbered as
Section 6.04(g ) and a replacement
Section 6.04(f) is added to read as follows:
(f) an equity
investment of up to $40 million in Peleus Re (which investment
shall not result in Peleus Re becoming a Subsidiary). Such
investment shall be made and permitted notwithstanding any contrary
provisions of Section 6.07.
(g)
Section 6.06 is amended in its entirety to read as
follows:
SECTION 6.06.
Restricted Payments . The Borrower will not, and will not
permit any of its Subsidiaries to, declare, pay or make, or agree
to declare, pay or make, directly or indirectly, any Restricted
Payment, except:
(a) the Borrower
may pay publicly announced and regularly scheduled dividends on its
issued and outstanding common stock that is traded publicly on a
national securities exchange; provided, however, that no dividend
shall be permitted under this clause (a) upon the occurrence
and during the continuance of a Default;
(b) the Borrower
and any Subsidiary may make any scheduled payment required in
connection with the Trust Preferred Securities permitted under
Sections 6.01(c) and (d); provided, however, that no payment
or dividend shall be permitted under this clause (b) upon the
occurrence and during the continuance of a Default; and
(c) any
Subsidiary may declare and pay dividends or make distributions to
the Borrower or to a Wholly-Owned Subsidiary.
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(h)
Sections 7(d), (h), (i) and (j) are amended in
their entirety and a new Section 7(q) is added to read
as follows:
(d) the Borrower
shall fail to observe or perform any covenant, condition or
agreement contained in Section 5.02, 5.03 (with respect to the
Borrower’s existence), 5.08, 5.09 or 5.11 or in
Article VI;
(h) an
involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation,
reorganization or other relief in respect of any of (A) the
Borrower, (B) any Su
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