EXHIBIT 10(Y)
AMENDED AND RESTATED
CREDIT AGREEMENT
among
DONEGAL GROUP INC.,
THE BANKS AND OTHER FINANCIAL INSTITUTIONS
FROM TIME TO TIME PARTY HERETO
and
FLEET NATIONAL BANK
(FORMERLY KNOWN AS FLEET NATIONAL BANK
OF CONNECTICUT), AS AGENT
DATED AS OF DECEMBER 29, 1995
AND
AMENDED AND RESTATED AS OF JULY 27, 1998
TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS; ACCOUNTING TERMS...........................................1
Section 1.1. Definitions..............................................1
Section 1.2. Accounting Terms........................................13
Section 1.3. Rounding................................................13
Section 1.4. Exhibits and Schedules..................................13
Section 1.5. References to "Borrower and its Subsidiaries"...........13
Section 1.6. Miscellaneous Terms.....................................14
ARTICLE 2. THE CREDIT..............................................................14
Section 2.1. The Revolving Loans.....................................14
Section 2.2. The Revolving Notes.....................................14
Section 2.3. Procedure for Borrowing.................................15
Section 2.4. Termination or Optional Reduction of Commitment.........16
Section 2.5. Mandatory Annual Reduction of Commitment................16
Section 2.6. Maturity of Revolving Loans.............................17
Section 2.7. Optional Prepayments....................................17
Section 2.8. Interest on the Revolving Loans.........................18
Section 2.9. Fees....................................................19
Section 2.10. Payments Generally......................................19
Section 2.11. Capital Adequacy. .....................................19
Section 2.12. Increased Costs; Funding Losses.........................20
Section 2.13. Illegality..............................................21
Section 2.14. Payments to be Free of Deductions.......................21
Section 2.15. Computations............................................22
Section 2.16. Obligations Absolute....................................22
Section 2.17. Sharing of Payments, Etc................................23
Section 2.18. Non-Receipt of Funds by the Agent.......................23
ARTICLE 3. CONDITIONS PRECEDENT....................................................24
Section 3.1. Documentary Conditions Precedent........................24
Section 3.2. Additional Conditions Precedent to Each Loan............26
Section 3.3. Deemed Representations..................................27
ARTICLE 4. REPRESENTATIONS AND WARRANTIES..........................................27
Section 4.1. Incorporation, Good Standing and Due Qualification......27
Section 4.2. Corporate Power and Authority; No Conflicts.............27
Section 4.3. Legally Enforceable Agreements..........................28
Section 4.4. Litigation..............................................28
Section 4.5. Financial Statements....................................28
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Section 4.6. Ownership and Liens.....................................29
Section 4.7. Taxes...................................................29
Section 4.8. ERISA...................................................29
Section 4.9. Subsidiaries and Ownership of Stock.....................30
Section 4.10. Credit Arrangements.....................................30
Section 4.11. Operation of Business...................................31
Section 4.12. No Default on Outstanding Judgments or Orders...........31
Section 4.13. No Defaults on Other Agreements.........................31
Section 4.14. Governmental Regulation.................................31
Section 4.15. Consents and Approvals..................................31
Section 4.16. Partnerships............................................32
Section 4.17. Environmental Protection................................32
Section 4.18. Copyrights, Patents, Trademarks, Etc....................32
Section 4.19. Compliance with Laws....................................33
Section 4.20. Events of Default.......................................33
Section 4.21. No Adverse Change.......................................33
Section 4.22. Year 2000 Compatibility.................................33
Section 4.23. Use of Proceeds.........................................33
ARTICLE 5. AFFIRMATIVE COVENANTS...................................................33
Section 5.1. Maintenance of Existence and
Domicile of Insurance Subsidiaries....................33
Section 5.2. Conduct of Business.....................................34
Section 5.3. Maintenance of Properties...............................34
Section 5.4. Maintenance of Records..................................34
Section 5.5. Maintenance of Insurance................................34
Section 5.6. Compliance with Laws....................................34
Section 5.7. Right of Inspection.....................................34
Section 5.8. Reporting Requirements..................................35
(a) Annual GAAP Statements of the Borrower..................35
(b) Annual SAP Financial Statements.........................36
(c) Quarterly GAAP Statements of the Borrower...............36
(d) Quarterly SAP Statements................................37
(e) Annual/Quarterly Reports................................37
(f) SEC Filings.............................................37
(g) Notice of Litigation....................................37
(h) Notices of Default......................................38
(i) Actuarial Report Confirming Reserves....................38
(j) Other Filings...........................................38
(k) Additional Information..................................38
Section 5.9. Certificates............................................38
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(a) Officers' Certificate...................................38
Section 5.10. Compliance with Agreements..............................39
Section 5.11. Use of Proceeds.........................................39
ARTICLE 6. NEGATIVE COVENANTS......................................................39
Section 6.1. Debt....................................................39
Section 6.2. Guaranties, Etc.........................................40
Section 6.3. Liens...................................................40
Section 6.4. Investments.............................................41
Section 6.5. Mergers and Consolidations and Acquisitions of Asset....41
Section 6.6. Sale of Assets..........................................41
Section 6.7. Stock of Subsidiaries, Etc..............................41
Section 6.8. Transactions with Affiliates............................42
Section 6.9. Capital Expenditures....................................42
Section 6.10. Minimum Statutory Surplus of Insurance Subsidiaries.....42
Section 6.11. Minimum Statutory Surplus of Donegal Mutual.............42
Section 6.12. Minimum Consolidated GAAP Net Worth.....................42
Section 6.13. Minimum Fixed Charge Coverage...........................43
Section 6.14. Minimum A.M. Best Rating................................43
Section 6.15. Minimum Ownership of Donegal Group......................43
Section 6.16. Limitations on Debt and Negative Pledges................43
ARTICLE 7. EVENTS OF DEFAULT.......................................................43
Section 7.1. Events of Default.......................................43
Section 7.2. Remedies................................................46
ARTICLE 8. THE AGENT...............................................................46
Section 8.1. Authorization and Action................................46
Section 8.2. Exculpatory Provisions; Agent's Reliance, Etc...........47
Section 8.3. Notice of Default.......................................47
Section 8.4. Fleet and Affiliates....................................48
Section 8.5. Credit Decision.........................................48
Section 8.6. Indemnification.........................................48
Section 8.7. Successor Agent.........................................48
Section 8.8. Application of this Article to the Borrower.............49
ARTICLE 9. MISCELLANEOUS...........................................................49
Section 9.1. Amendments and Waivers..................................49
Section 9.2. Usury...................................................50
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Section 9.3. Expenses; Indemnities...................................50
Section 9.4. Term; Survival..........................................52
Section 9.5. Assignment; Participations..............................52
Section 9.6. Notices.................................................54
Section 9.7. Setoff..................................................55
Section 9.8. Jurisdiction; Immunities................................55
Section 9.9. Table of Contents; Headings.............................56
Section 9.10. Severability............................................56
Section 9.11. Counterparts............................................56
Section 9.12. Integration.............................................56
Section 9.13. Governing Law...........................................56
Section 9.14. Confidentiality.........................................56
Section 9.15. Authorization of Third Parties to
Deliver Opinions, Etc.................................57
Section 9.16. Borrower's Waivers......................................57
Schedule 1.1 Commitments and Lending Offices
Schedule 4.4 Litigation
Schedule 4.6 Liens
Schedule 4.9 Subsidiaries
Schedule 4.10 Credit Arrangements
Schedule 4.15 Consents and Approvals
Schedule 4.16 Partnerships
Schedule 6.8 Permitted Transaction with Affiliates
Exhibit A Form of Revolving Note
Exhibit B Notice of Borrowing
Exhibit C Officer's Certificate
Exhibit D Form of Opinion of Counsel to Borrower
Exhibit E Form of Acceptance and Assignment
Exhibit F Form of Subordinated Debt Provisions
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AMENDED AND RESTATED CREDIT AGREEMENT
AMENDED AND RESTATED CREDIT AGREEMENT dated as of December 29, 1995,
amended and restated as of July 27, 1998, by and among Donegal Group Inc., a
Delaware corporation (the "Borrower"), Fleet National Bank, a national banking
association formerly known as Fleet National Bank of Connecticut ("Fleet" and,
together with any banks or financial institutions from time to time party to
this Agreement, the "Banks") and Fleet National Bank, as agent for the Banks
hereunder (in such capacity, the "Agent").
Fleet and the Borrower entered into a Credit Agreement dated as of December
29, 1995, which Agreement was amended as of December 12, 1997 (as in effect
immediately prior to the Amendment Effective Date defined below, the "Existing
Credit Agreement").
The Borrower has requested that Fleet increase the aggregate Revolving
Credit Commitment to $40,000,000 under the Existing Credit Agreement and the
Banks are willing to effect such increase on the terms and conditions hereof.
Accordingly, the parties hereto agree to amend and restate the Existing
Credit Agreement so that, as amended and restated, it provides in its entirety
as follows:
ARTICLE 1. DEFINITIONS; ACCOUNTING TERMS.
Section 1.1. Definitions. As used in this Agreement, the following terms
have the following meanings (terms defined in the singular to have a correlative
meaning when used in the plural and vice versa):
"Acquisition" means the acquisition by the Borrower of all of the capital
stock of Southern Heritage.
"Acquisition Agreement" means the agreement setting forth the terms and
conditions of the Acquisition.
"Acquisition Pro-Formas" means financial projections, prepared by the
Borrower on a GAAP and SAP basis, showing the consolidated and consolidating
balance sheets and statements of operations of Borrower and its Subsidiaries
giving effect to the Acquisition.
"Affiliate" means, as to any Person, any other Person which directly or
indirectly controls, or is under common control with, or is controlled by, such
Person. As used in this definition, "control" (including, with its correlative
meanings, "controlled by" and "under common control with") shall mean
possession, directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities or partnership
or other ownership interests, by contract or otherwise), provided that, in any
event: (i) any
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Person which owns directly or indirectly 20% or more of the securities having
ordinary voting power for the election of directors or other governing body of a
corporation or 20% or more of the partnership or other ownership interests of
any other Person (other than as a limited partner of such other Person) will be
deemed to control such corporation or other Person; and (ii) each director and
officer shall be deemed to be an Affiliate of the Person.
"Agreement" means this Amended and Restated Credit Agreement, as further
amended or supplemented from time to time. References to Articles, Sections,
Exhibits, Schedules and the like refer to the Articles, Sections, Exhibits,
Schedules and the like of this Agreement unless otherwise indicated.
"A.M. Best Rating" means the most recent rating announced by A.M. Best (or
any successor thereto) or, if such rating is no longer announced by A.M. Best
(or its successor), the most recent rating announced by another rating agency
selected by the Agent with the consent of the Banks.
"Amendment Effective Date" means the date on which all of the conditions
set forth in Section 3.1 shall have been satisfied or waived by the Banks and
the Agent.
"Anniversary Date" means July 27 of each calendar year, commencing July 27,
1999.
"Applicable Interest Rate" means for any Revolving Loan, the Base Rate,
plus the Applicable Margin, or Eurodollar Rate, plus the Applicable Margin, for
such Revolving Loan.
"Applicable Margin" means, with respect to Base Rate Loans or Eurodollar
Rate Loans, the percentage per annum set forth below in the column entitled
"Base Rate" or "Eurodollar Rate", as appropriate:
Base Rate Eurodollar Rate
--------- ---------------
0.00% 1.70%
"Assignment and Acceptance" means an assignment and acceptance entered into
by a Bank and an assignee of such Bank, and accepted by the Agent, in
substantially the form of Exhibit E.
"Atlantic States" means Atlantic States Insurance Company, a Pennsylvania
stock casualty insurance company.
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"Available Dividends" at the end of any fiscal quarter means the portion of
Statutory Surplus of the Insurance Subsidiaries that is permitted by applicable
laws and regulations to be distributed to shareholders.
"Base Rate" means, for any Interest Period or any other period, a
fluctuating interest rate per annum as shall be in effect from time to time,
which rate per annum shall at all times be equal to the highest of (a) the rate
of interest announced publicly by the Agent in Hartford, Connecticut, from time
to time, as the Agent's base rate or prime rate, or (b) 1/2 of 1% per annum
above the Federal Funds Effective Rate.
"Base Rate Loan" means a Revolving Loan which bears interest at the Base
Rate, plus the Applicable Margin.
"Borrowing" means a borrowing consisting of a Revolving Loan from the Banks
under this Agreement.
"Business Day" means any day (other than a Saturday, Sunday or legal
holiday) on which commercial banks are not authorized or required to close in
Connecticut or New York, except that, with respect to Borrowings, notices,
determinations and payments with respect to a Eurodollar Rate Loan, such day
shall be a "Business Day" only if it is also a day for trading by and between
banks in the London interbank Eurodollar market.
"Capital Expenditures" means, for any period, the Dollar amount of gross
expenditures (including payments in respect of Capital Lease Obligations) made
for fixed assets, real property, plant and equipment, and all renewals,
improvements and replacements thereto (but not repairs thereof) incurred during
such period, all as determined in accordance with GAAP.
"Capital Lease" means any lease which has been or should be capitalized on
the books of the lessee in accordance with GAAP.
"Capital Lease Obligation" means the obligation of the lessee under a
Capital Lease. The amount of a Capital Lease Obligation at any date is the
amount at which the lessee's liability under the related Capital Lease would be
required to be shown on its balance sheet at such date in accordance with GAAP.
"Closing Date" means December 29, 1995.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
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"Combined Statutory Net Income" means, for any period the combined net
income of each of the Insurance Subsidiaries that appears, or should appear, on
the SAP Financial Statements. On the annual SAP Financial Statements form for
the year ended December 31, 1997, the net income amount appears on line 16,
column (1) on page 4 thereof.
"Combined Statutory Surplus" means, for any period, the positive surplus of
each of the Insurance Subsidiaries that appears, or should appear, on the SAP
Financial Statements of each Insurance Subsidiary, combined. On the annual SAP
Financial Statements form prescribed for the year ended December 31, 1997, such
amount appears on line 32, column (1) on page 4 thereof.
"Commitment" means, with respect to each Bank, the commitment of such Bank
to make Revolving Loans hereunder as set forth in Schedule 1.1, as the same may
be reduced from time to time pursuant to Sections 2.4 and 2.5.
"Commitment Period" means the period from and including the date hereof to
but not including the Revolving Loan Termination Date or such earlier date as
the Commitment shall terminate as provided herein.
"Consolidated GAAP Net Worth" means the sum of (a) the capital stock and
additional paid-in capital of the Borrower and its Subsidiaries on a
consolidated basis, plus (without duplication) (b) the amount of retained
earnings (or, in the case of a deficit, minus the deficit), minus (c) treasury
stock, plus or minus (d) any other account which is customarily added or
deducted in determining shareholders' equity, all of which shall be determined
on a consolidated basis in accordance with GAAP.
"Debt" means, with respect to any Person: (a) indebtedness of such Person
for borrowed money; (b) indebtedness for the deferred purchase price of Property
or services (except trade payables in the ordinary course of business); (c)
Unfunded Vested Liabilities of such Person (if such Person is not the Borrower,
determined in a manner analogous to that of determining Unfunded Vested
Liabilities of the Borrower); (d) the face amount of any outstanding letters of
credit issued for the account of such Person; (e) obligations arising under
acceptance facilities; (f) guaranties, endorsements (other than for collection
in the ordinary course of business) and other contingent obligations to purchase
or to provide funds for payment of the obligations of another Person, to supply
funds to invest in any Person to cause such Person to maintain a minimum working
capital or net worth or otherwise assure the creditors of such Person against
loss; (g) obligations secured by any Lien on Property of such Person; and (h)
Capital Lease Obligations.
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"Default" means any event which with the giving of notice or lapse of time,
or both, would become an Event of Default.
"Default Rate" means a percentage per annum equal at all times to the
lesser of 2% per annum above the Base Rate in effect from time to time or the
highest rate permitted by law.
"Delaware Insurance" means Delaware Atlantic Insurance Company, a Delaware
stock casualty insurance company.
"Distributions" means (a) dividends or other distributions in respect of
capital stock of a Person (except distributions in such stock) and (b) the
redemption or acquisition of such stock or of warrants, rights or other options
to purchase such stock (except when solely in exchange for such stock) unless
made, contemporaneously, from the net proceeds of a sale of such stock; in
either case valued at the greater of book or fair market value of the Property
being dividended, distributed or otherwise transferred as a Distribution.
"Dollars" and the sign "$" mean lawful money of the United States of
America.
"Donegal Mutual" means Donegal Mutual Insurance Company, a mutual casualty
insurance company organized under the laws of the Commonwealth of Pennsylvania.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, including any rules and regulations promulgated
thereunder.
"ERISA Affiliate" means any corporation or trade or business which is a
member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Borrower or is under common control (within
the meaning of Section 414(c) of the Code) with the Borrower.
"Eurodollar Rate" means, for the Interest Period for each Eurodollar Rate
Loan compris ing part of the same Borrowing, an interest rate per annum equal to
(x) the rate quoted by the Agent at which deposits in Dollars are offered by
prime commercial banks to prime commercial banks in the London interbank
Eurodollar market two Business Days before the first day of such Interest Period
for a period equal to such Interest Period and in an amount equal to the Borrow-
ing, divided by (y) one (1) minus the Reserve Requirement for each such
Eurodollar Rate Loan for such Interest Period.
"Eurodollar Rate Loan" means a Revolving Loan which bears interest at the
Eurodollar Rate, plus the Applicable Margin.
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"Event of Default" has the meaning given such term in Section 7.1.
"Federal Funds Effective Rate" at any time means a fluctuating interest
rate per annum equal to the weighted average of the rates on overnight Federal
Funds transactions with members of the Federal Reserve System arranged by
Federal Funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such transactions
received by the Agent from three (3) Federal Funds brokers of recognized
standing selected by the Agent.
"Fixed Charge Coverage Ratio" at the end of any fiscal quarter means the
ratio of (a) the sum of (i) Available Dividends, minus dividends paid by each
Insurance Subsidiary to the Borrower for the immediately preceding four fiscal
quarters (ending on such date), plus (ii) total taxes paid by the Insurance
Subsidiaries to the Borrower pursuant to any intercorporate tax sharing
agreement, plus (iii) an amount equal to the consolidated GAAP EBIT of the
Borrower and all Subsidiaries, except the Insurance Subsidiaries, for the
immediately preceding four fiscal quarters (ending on such date), minus (iv)
total taxes (determined in accordance with GAAP) paid by the Borrower on a
consolidated basis for the immediately preceding four fiscal quarters (ending on
such date) to (b) total Fixed Charges of the Borrower and its Subsidiaries on a
consolidated basis for the immediately preceding four fiscal quarters (ending on
such date).
"Fixed Charges" means, with respect to any Person for any period, the sum
of (a) the Interest Expense, plus (b) rental payments (other than the interest
component of rental payments under Capital Leases included in Interest Expense)
under all leases of such Person, plus (c) scheduled principal payments of Debt
owed by such Person during such period.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect from time to time, applied on a basis consistent with
those used in the preparation of the financial statements referred to in Section
4.5 (except for changes concurred in by the Borrower's independent public
accountants).
"GAAP EBIT" means, with respect to any Person, for any period, an amount
equal to Net Income for such period, plus (without duplication to the extent
deducted in determining Net Income) the sum of (a) Interest Expense for such
period, plus (b) income tax expense deducted in determining Net Income for such
period, all of which shall be determined in accordance with GAAP and eliminating
intercompany balances and transactions, as applicable.
"Insurance Commissioner" means with respect to any Insurance Subsidiary,
the head of any insurance regulatory authority and/or such insurance regulatory
authority in the relevant place of domicile of such Subsidiary at the relevant
time.
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"Insurance Subsidiary" means any of Atlantic States, Southern Insurance,
Pioneer Insurance and Delaware Insurance, and any other insurance company
Subsidiaries of Borrower hereafter owned or acquired.
"Interest Expense" means, with respect to any Person for any period, the
consolidated interest expense, including the interest portion of rental payments
under Capital Leases, as determined on a consolidated basis in accordance with
GAAP.
"Interest Period" means (a) for each Eurodollar Rate Loan comprising part
of the same Borrowing, the period commencing on the date of such Eurodollar Rate
Loan or on the last day of the preceding Interest Period, as the case may be,
and ending on the numerically corresponding day of the last month of the period
selected by the Borrower pursuant to the following provisions: the duration of
each Eurodollar Rate Loan Interest Period shall be one (1), two (2), three (3)
or six (6) months, in each case as the Borrower may select, upon notice received
by the Agent not later than 11:00 a.m. (Connecticut time) on the third Business
Day prior to the first day of such Interest Period; and (b) for each Base Rate
Loan comprising part of the same Borrowing, the period commencing on the date of
such Base Rate Loan or on the last day of the preceding Interest Period, as the
case may be, pursuant to notice received by the Agent not later than 11:00 a.m.
(Connecticut time) on any Business Day selected by the Borrower as the first day
of such Interest Period, and ending on the ninetieth (90th) day after the date
of such Base Rate Loan or the last day of the preceding Interest Period, as the
case may be; provided, however, that:
(i) all Eurodollar Rate Loans comprising part of the same Borrowing shall
be of the same duration;
(ii) whenever the last day of any Interest Period would otherwise occur on
a day other than a Business Day, the last day of such Interest Period
shall be extended to occur on the next succeeding Business Day;
provided that, if such extension would cause the last day of such
Interest Period to occur in the next following calendar month, the
last day of such Interest Period shall occur on the next preceding
Business Day; and
(iii) no Interest Period for any Revolving Loan shall extend beyond the
Revolving Loan Termination Date.
"Investment" means, with respect to any Person, any investment by or of
such Person, whether by means of purchase or other acquisition of capital stock
or other Securities of any other Person or by means of loan, advance (other than
advances to employees for moving and travel expenses, drawing accounts and
similar expenditures made in the ordinary course of
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business), capital contribution or other debt or equity participation or
interest, in any other Person, including any partnership, joint venture and
membership interests of such Person in any other Person.
"Investment Grade Securities" means any Securities having a fixed maturity
which have a rating by the NAIC of 1 or 2 or, if the NAIC rating categories in
effect on the Closing Date change, such other rating or ratings of such
Securities determined by the NAIC to be symbolic of investment grade quality.
"Lending Office" means, for each Bank and for each type of Revolving Loan,
the lending office of such Bank (or of an affiliate of the Bank) designated as
such for such type of Revolving Loan on Schedule 1.1 or such other office of
such Bank (or of an affiliate of such Bank) as such Bank may from time to time
specify to the Borrower as the office through which its Revolving Loans of such
type are to be made and maintained.
"Lien" means any lien (statutory or otherwise), security interest,
mortgage, deed of trust, priority, pledge, charge, conditional sale, title
retention agreement, financing lease or other encumbrance or similar right of
others, or any agreement to give any of the foregoing.
"Loan Documents" mean this Agreement, the Revolving Notes and any other
documents, agreements, reports, and instruments now or hereafter executed in
connection herewith or contemplated hereby.
"Materially Adverse Effect" means any material adverse effect upon the
business, assets, liabilities, financial condition, results of operations or, as
far as the Borrower can reasonably foresee, prospects of the Borrower and its
Subsidiaries taken as a whole, or upon the ability of the Borrower or any of its
Subsidiaries to perform in all material respects its obligations under this
Agreement or any Loan Document resulting from any act, omission, situation,
status, event, or undertaking, either singly or taken together.
"Multiemployer Plan" means a Plan defined as such in Section 3(37) of
ERISA to which contributions have been made by the Borrower or any ERISA
Affiliate and which is covered by Title IV of ERISA.
"NAIC" means the National Association of Insurance Commissioners or
any successor thereto, or in lieu thereof, any other association, agency or
other organization performing substantially similar advisory, coordination or
other like functions among insurance departments, insurance commissions and
similar governmental authorities of the various states of the United States of
America toward the promotion of uniformity in the practices of such governmental
authorities.
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"Net Income" means, as applied to any Person for any period, the aggregate
amount of net income of such Person, after taxes, for such period, as determined
in accordance with GAAP.
"Notice of Borrowing" means the certificate, in the form of Exhibit B
hereto, to be delivered by the Borrower to the Agent pursuant to Sections 2.3
and 3.2(e) and shall include any accompanying certifications or documents.
"Obligations" means all indebtedness, obligations and liabilities of the
Borrower and its Subsidiaries, if any, to the Banks, individually or
collectively, under this Agreement and the Revolving Notes.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture, governmen tal authority or other entity of whatever nature.
"Pioneer Insurance" means Pioneer Insurance Company, an Ohio stock casualty
insurance company.
"Plan" means any employee benefit or other plan established or maintained,
or to which contributions have been made, by the Borrower or any ERISA Affiliate
and which is covered by Title IV of ERISA.
"Prohibited Transaction" means any transaction set forth in Section 406 of
ERISA or Section 4975 of the Code for which there is no applicable statutory or
regulatory exemption (including a class exemption or an individual exemption).
"Property" means any interest of any kind in property or assets, whether
real, personal or mixed, and whether tangible or intangible.
"Regulations D, X and U" means Regulations D, X and U of the Board of
Governors of the Federal Reserve System, as amended or supplemented from time to
time.
"Regulatory Change" means any change after the date of this Agreement in
United States federal, state or foreign laws or regulations (including
Regulation D) or the adoption or making after such date of any orders, rulings,
interpretations, directives, guidelines or requests applying to a class of banks
including the Banks, of or under any United States federal, state, or foreign
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laws or regulations (whether or not having the force of law) by any court or
governmental or monetary authority charged with the interpretation or
administration thereof.
"Reportable Event" means any of the events set forth in Section 4043(c) of
ERISA as to which events the PBGC by regulation has not waived the requirement
of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence
of such event, provided that a failure to meet the minimum funding standard of
Section 412 of the Code or Section 302 of ERISA shall be a Reportable Event
regardless of any waivers given under Section 412(d) of the Code.
"Required Banks" means, at any time, Banks holding sixty-six and two-thirds
percent (66 2/3%) of the aggregate amount of the Commitments, or, if the
Commitments have been terminated, Banks holding sixty-six and two-thirds percent
(66 2/3%) of the aggregate principal amount of the Revolving Loans outstanding.
"Reserve Requirement" means for any Eurodollar Rate Loans for any quarterly
period (or, as the case may be, shorter period) as to which interest is payable
hereunder, the average maximum rate at which reserves (including any marginal,
supplemental or emergency reserves) are required to be maintained during such
period under Regulation D by member banks of the Federal Reserve System in
Boston, Massachusetts and New York, New York with deposits exceeding one billion
Dollars against "Eurocurrency liabilities" (as such term is used in Regulation
D) or nonpersonal Dollar time deposits in an amount of $100,000 or more. Without
limiting the effect of the foregoing, the Reserve Requirement shall reflect any
other reserves required to be maintained by such member banks by reason of any
Regulatory Change against: (i) any category of liabilities which includes
deposits by references to which the Eurodollar Rate is to be determined as
provided in the definition of "Eurodollar Rate", as applicable, in this Article
1, or (ii) any category of extensions of credit or other assets which include
Eurodollar Rate Loans.
"Revolving Loan" or "Revolving Loans" has the meaning specified in Section
2.1. Each Revolving Loan shall be a Base Rate Loan or a Eurodollar Rate Loan.
"Revolving Loan Termination Date" means July 27, 2005; provided, however,
if not fewer than ninety (90) days nor more than one hundred twenty (120) days
prior to either or both of the first and second Anniversary Date, the Borrower
requests the Banks to extend the Revolving Loan Termination Date for an
additional year and if all of the Banks, in their sole discretion in writing
within thirty (30) days of such request, grant such request, the Revolving Loan
Termination Date means the date to which the Revolving Loan Termination Date has
been so extended. If such date is not a Business Day, the Revolving Loan
Termination Date shall be the next preceding Business Day.
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"Revolving Note" means a promissory note of the Borrower, in the form of
Exhibit A hereto, evidencing the Revolving Loans made by a Bank hereunder.
"SAP" means, for each Insurance Subsidiary, the statutory accounting
practices permitted or prescribed by any applicable Insurance Commissioner for
the preparation of annual statements and other financial reports by casualty
insurance companies selling the same lines of insurance as such Insurance
Subsidiary.
"SAP Financial Statements" means, for each Insurance Subsidiary, the
financial statements which have been submitted or are required to be submitted
to the applicable Insurance Commissioner.
"Securities" means any capital stock, share, voting trust certificate,
bonds, debentures, notes or other evidences of indebtedness, limited partnership
interests, or any warrant, option or other right to purchase or acquire any of
the foregoing.
"Senior Officer" means the (a) chief executive officer, (b) chief financial
officer or (c) the president of the Person designated.
"SFAS No. 115" means Statement of Financial Accounting Standards No. 115,
Accounting for Certain Investments in Debt and Equity Securities, issued by the
Financial Accounting Standards Board in May, 1993.
"Southern Heritage" means Southern Heritage Insurance Company, a Georgia
stock property-casualty insurance company.
"Southern Insurance" means Southern Insurance Company of Virginia, a
Virginia stock casualty insurance company.
"Statutory Net Income" with respect to any Insurance Subsidiary, means, for
any period the net income that appears, or should appear, on the SAP Financial
Statements of such Insurance Subsidiary. On the annual SAP Financial Statements
form prescribed for the year ended December 31, 1997, the net income amount
appears on line 16, column (1) on page 4 thereof.
"Statutory Surplus" with respect to any Insurance Subsidiary, means, for
any period, the surplus that appears, or should appear, on the SAP Financial
Statements of such Insurance Subsidiary. On the annual SAP Financial Statements
form prescribed for the year ended December 31, 1997, such amount appears on
line 32, column (1) on page 4 thereof.
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"Subordinated Debt" means unsecured Debt which (i) does not permit any
payment or prepayment of the principal amount thereof prior to ninety-one days
after the indefeasible payment in full of the Obligations and termination of the
Commitment, but permits payment of interest on the principal amount thereof so
long as no Default or Event of Default has occurred and is continuing under this
Agreement (ii) contains in the instrument evidencing such Debt or in the
agreement under which it is issued (which agreement shall be binding on all
holders of such Debt) subordination provisions substantially in the form of
Exhibit F hereto and (iii) the proceeds of which are used to acquire all or
substantially all of the assets or capital stock of any other corporation or to
make an investment for the expansion of the insurance business of the Borrower's
Subsidiaries.
"Subsidiary" means with respect to any Person, any corporation, partnership
or joint venture whether now existing or hereafter organized or acquired: (i) in
the case of a corporation, of which a majority of the securities having ordinary
voting power for the election of directors (other than securities having such
power only by reason of the happening of a contingency) are at the time owned by
such Person and/or one or more Subsidiaries of such Person or (ii) in the case
of a partnership or joint venture, in which such Person is a general partner or
joint venturer or of which a majority of the partnership or other ownership
interests are at the time owned by such Person and/or one or more of its
Subsidiaries. Unless the context otherwise requires, references in this
Agreement to "Subsidiary" or "Subsidiaries" shall be deemed to be references to
a Subsidiary or Subsidiaries of the Borrower or of a Subsidiary of the Borrower.
"Total Invested Assets" means, as at any date of determination, the
aggregate value of all Borrower's and the Insurance Subsidiaries' portfolios of
stocks, bonds, mortgage loans, real estate, policy loans and other assets
classified as invested assets under and valued in accordance with SAP as at such
date.
"Unfunded Vested Liabilities" means, with respect to any Plan, the amount
(if any) by which the present value of all vested benefits under the Plan
exceeds the fair market value of all Plan assets allocable to such benefits, as
determined on the most recent valuation date of the Plan and in accordance with
the provisions of ERISA for calculating the potential liability of the Borrower
or any ERISA Affiliate to the PBGC or the Plan under Title IV of ERISA.
Section 1.2. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP, applied on a
consistent basis, and all financial data required to be delivered hereunder
shall be prepared in accordance with GAAP, applied on a consistent basis; except
as otherwise specifically prescribed herein. In the event that GAAP changes
during the term of this Agreement such that the financial covenants contained in
Article 6 would then be calculated in a different manner or with different
components (a) the Borrower and the Bank agree to enter into good faith
negotiations to amend this Agreement in such
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respects as are necessary to conform those covenants as criteria for evaluating
the Borrower's financial condition to substantially the same criteria as were
effective prior to such change in GAAP and (b) the Borrower shall be deemed to
be in compliance with the financial covenants contained in such Sections during
the sixty (60) days following any such change in GAAP if and to the extent that
the Borrower would have been in compliance therewith under GAAP as in effect
immediately prior to such change; provided, however, if an amendment shall not
be agreed upon within sixty (60) days or such longer period as shall be agreed
to by the Bank, for purposes of determining compliance with such covenants until
such amendment shall be agreed upon, such terms shall be construed in accordance
with GAAP as in effect on the Amendment Effective Date applied on a basis
consistent with the application used in preparing the financial statements for
the year ended December 31, 1997.
Section 1.3. Rounding. Any financial ratios required to be maintained by
Borrower pursuant to this Agreement shall be calculated by dividing the
appropriate component by the other component, carrying the result to one place
more than the number of places by which such ratio is expressed in this
Agreement and rounding the result up or down to the nearest number (with a
round-up if there is no nearest number) to the number of places by which such
ratio is expressed in this Agreement.
Section 1.4. Exhibits and Schedules. All Exhibits and Schedules to this
Agreement, either as originally existing or as the same may from time to time be
supplemented, modified or amended, are incorporated herein by this reference. A
matter disclosed on any Schedule shall be deemed disclosed on all Schedules.
Section 1.5. References to "Borrower and its Subsidiaries". Any reference
herein to "Borrower and its Subsidiaries" or the like shall refer solely to
Borrower during such times, if any, as the Borrower shall have no Subsidiaries.
Section 1.6. Miscellaneous Terms. The term "or" is disjunctive; the term
"and" is conjunctive. The term "shall" is mandatory, the term "may" is
permissive. Masculine terms also apply to females; feminine terms also apply to
males. The term "including" is by way of example and not limitation.
ARTICLE 2. THE CREDIT.
Section 2.1. The Revolving Loans. Subject to the terms and conditions of
this Agreement, each Bank severally agrees to make revolving loans to the
Borrower (hereinafter collectively referred to as the "Revolving Loan" or
"Revolving Loans") from time to time from and including the date hereof until
the earlier of the Revolving Loan Termination Date or the
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termination of the Commitment of such Bank, up to, but not exceeding in the
aggregate principal amount at any one time outstanding, the amount of its
Commitment. Each Borrowing under this Section 2.1 of (i) a Base Rate Loan shall
be in the principal amount of not less than $200,000 or any greater amount which
is an integral multiple of $100,000; or (ii) a Eurodollar Rate Loan shall be in
the principal amount of not less than $1,000,000 or any greater amount which is
an integral multiple thereof. During the Commitment Period and subject to the
foregoing limitations, the Borrower may borrow, repay and reborrow Revolving
Loans, all in accordance with the terms and conditions of this Agreement.
Section 2.2. The Revolving Notes.
(a) The Revolving Loans of each Bank shall be evidenced by a single
promissory note in favor of each Bank in the form of Exhibit A, dated the date
of this Agreement, and duly completed and executed by the Borrower.
(b) Each Bank is authorized to record and, prior to any transfer of any
Revolving Note, endorse on a schedule forming a part thereof appropriate
notations evidencing the date, the type, the amount and the maturity of each
Revolving Loan made by it which is evidenced by such Revolving Note and the date
and amount of each payment of principal made by the Borrower with respect
thereto; provided, that failure to make any such endorsement or notation shall
not affect the Obligations of the Borrower hereunder or under any Revolving
Note. Each Bank is hereby irrevocably authorized by the Borrower to so endorse
its Revolving Note and to attach to and make a part of the Revolving Note a
continuation of any such schedule as and when required. Each Bank may, at its
option, record and maintain such information in its internal records rather than
on such schedule.
Section 2.3. Procedure for Borrowing.
(a) The Borrower shall give the Agent a Notice of Borrowing, in the form of
Exhibit B hereto, prior to 11:00 a.m. (Connecticut time), on the date of a
Borrowing of a Base Rate Loan and at least three (3) Business Days before a
Borrowing of a Eurodollar Rate Loan, specifying:
(i) the date of such Borrowing, which shall be a Business Day,
(ii) the principal amount of such Borrowing,
(iii) whether the Revolving Loan comprising such Borrowing is to be a Base
Rate Loan or a Eurodollar Rate Loan, and
(iv) if a Eurodollar Rate Loan, the Interest Period with respect to such
Borrowing.
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The Agent will promptly notify each Bank of its receipt of any Notice of
Borrowing and the amount of the Borrowing thereunder.
(b) No Notice of Borrowing shall be revocable by the Borrower.
(c) Not later than 2:00 p.m. (Connecticut time) on the date of each
Borrowing, each Bank shall (except as provided in subsection (e) of this
Section) make available its pro rata share of such Borrowing, in Dollars and in
federal or other funds immediately available in Hartford, Connecticut, to the
Agent at its address set forth on the signature pages hereof or at such other
address as the Agent may hereafter designate by notice to the Borrower and the
Banks and, unless the Agent determines that any applicable condition specified
in Article 3 has not been satisfied (in which case the Agent will give prompt
notice to the Borrower and the Banks thereof), the Agent will promptly make the
funds so received from the Banks available to the Borrower at the Agent's
aforesaid address.
(d) There shall be no more than four (4) Interest Periods relating to
Eurodollar Rate Loans outstanding at any time.
(e) If any Bank makes a new Revolving Loan hereunder on a day on which the
Borrower is to repay an outstanding Revolving Loan from such Bank, such Bank
shall apply the proceeds of the new Revolving Loan to make such repayment and
only an amount equal to the excess (if any) of the amount being borrowed over
the amount being repaid shall be made available by such Bank to the Agent as
provided in subsection (c) of this Section, or remitted to the Agent as provided
in Section 2.10, as the case may be.
(f) Notwithstanding anything to the contrary herein contained, if, upon the
expiration of any Interest Period applicable to any Borrowing of a Revolving
Loan, the Borrower shall not have repaid the Revolving Loan and fail to give a
new Notice of Borrowing as set forth in this Section 2.3, the Borrower shall be
deemed to have given a new Notice of Borrowing of a Base Rate Loan in principal
amount equal to the outstanding principal amount of such Revolving Loan, and the
proceeds of the new Borrowing shall be applied directly to repay such
outstanding principal amount on the day of such Borrowing.
Section 2.4. Termination or Optional Reduction of Commitment. The
Commitment shall terminate on the Revolving Loan Termination Date and any
Revolving Loans then outstanding (together with accrued interest thereon) shall
be due and payable on such date. No termination of the Commitment hereunder
shall relieve the Borrower of any of its outstanding Obligations to the Banks
hereunder or otherwise. The Borrower shall have the right, upon prior written
notice of at least five (5) Business Days to the Agent, to terminate or, from
time to time,
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reduce the Commitment, provided that (i) any such reduction of the Commitment
shall be accompanied by the prepayment of the Revolving Notes, together with
accrued interest thereon to the date of such prepayment and any amount due
pursuant to Section 2.7, to the extent, if any, that the aggregate unpaid
principal amount thereof then outstanding exceeds the Commitment as then reduced
and (ii) any such termination of the Commitment shall be accompanied by
prepayment in full of the unpaid principal amount of the Revolving Notes,
together with accrued interest thereon to the date of such prepayment and any
amount due pursuant to Section 2.7 and all other amounts owing hereunder and
under the Revolving Notes. Any such partial reduction of the Commitment shall be
in an aggregate principal amount of $500,000 or any whole multiple thereof and
shall reduce permanently the Commitment then in effect hereunder.
Section 2.5. Mandatory Annual Reduction of Commitment.
(a) On each Anniversary Date, commencing on July 27, 2001 (the
"Amortization Commencement Date"), until and including the Revolving Loan
Termination Date, the Commitment of the Bank shall be reduced automatically by
an amount equal to $8,000,000; provided, however, if all the Banks on or prior
to either or both of the first and second Anniversary Dates have granted any
request of the Borrower to extend the Revolving Loan Termination Date for an
additional year (as described in the definition of Revolving Loan Termination
Date), the Amortization Commencement Date shall be extended to the immediately
succeeding such Anniversary Date.
(b) On the effective date of each reduction of the Commitment of the Banks
pursuant to Section 2.5(a), the Borrower shall repay such principal amount
(together with accrued interest thereon and any amount due pursuant to Section
2.7(b), of outstanding Revolving Loans, if any, as may be necessary so that
after such repayment, the aggregate unpaid principal amount of the Revolving
Loans does not exceed the Commitment as then reduced.
Section 2.6. Maturity of Revolving Loans. Each Revolving Loan shall mature,
and the principal amount thereof shall be due and payable, on the earlier to
occur of (a) the Revolving Loan Termination Date, (b) the last day of the
Interest Period applicable to such Revolving Loan, or (c) any such earlier date
as may be provided for herein (whether by acceleration or otherwise); provided,
however, if the Revolving Loan Termination Date occurs on a date that is not the
last day of the Interest Period applicable to any Eurodollar Rate Loans being
repaid on such date, the Borrower shall pay any amounts required to compensate
each Bank for any reasonable losses, out-of-pocket costs or expenses (excluding
any losses of anticipated profit), as certified by such Bank (such certification
setting forth the basis for such compensation), which such Bank may reasonably
incur as a result of such prepayment, including without limitation, any loss,
cost or expense incurred by reason of funds liquidation or reemployment of
deposits or
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other funds acquired by such Bank to fund or maintain such Eurodollar Rate Loan
and any additional administrative costs, expenses or charges of such Bank as a
result thereof.
Section 2.7. Optional Prepayments.
(a) The Borrower may, upon notice to the Agent not later than 2:00 p.m.
(Connecticut time) on the date of payment, prepay the Base Rate Loans, without
premium or penalty, in whole at any time or from time to time in part by paying
the principal amount being prepaid together with accrued interest thereon to the
date of prepayment. Any partial prepayments of Eurodollar Rate Loans shall be in
an aggregate principal amount of $500,000 or any greater amount which is an
integral multiple of $100,000.
(b) The Borrower may, upon at least three (3) Business Days' notice to the
Agent, prepay the Eurodollar Rate Loans, in whole at any time or from time to
time in part, by paying the principal amount being prepaid together with (i)
accrued interest thereon to the date of prepayment and (ii) if such prepayment
occurs on a date that is not the last day of the Interest Period applicable to
such Revolving Loan, any amounts as shall be sufficient (in the reasonable
opinion of the Bank) to compensate each Bank for any loss, cost or expense which
such Bank may reasonably incur as a result of such prepayment, including without
limitation, any loss, cost or expense incurred by reason of funds liquidation or
reemployment of deposits or other funds acquired by such Bank to fund or
maintain such Eurodollar Rate Loan and any administrative costs, expenses or
charges of such Bank as a result thereof. Without limiting the effect of the
preceding sentence, such compensation shall include an amount equal to the
excess, if any, of (i) the amount of interest that otherwise would have accrued
on the principal amount so prepaid for the period from the date of such
prepayment to the last day of the then current Interest Period for such
Eurodollar Rate Loan at the applicable rate of interest for such Eurodollar Rate
Loan provided for herein over (ii) the amount of interest that otherwise would
have accrued on such principal amount at a rate per annum equal to the interest
component of the amount such Bank would have bid in the London interbank market
for Dollar deposits of leading banks in amounts comparable to such principal
amount and with maturities comparable to such period (as reasonably determined
by such Bank, if such Bank has match-funded such Eurodollar Rate Loan, or such
Bank's cost of funds, if such Bank has not match-funded. Each Bank will furnish
to the Borrower a certificate setting forth the basis and amount of each request
by such Bank for compensation under this Section 2.7. Any partial prepayments of
Eurodollar Rate Loans shall be in an aggregate principal amount of $500,000 or
any greater amount which is an integral multiple of $100,000.
Section 2.8. Interest on the Revolving Loans.
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(a) Each Base Rate Loan shall bear interest on the outstanding principal
amount thereof, for each day from the date such Base Rate Loan is made until it
becomes due, at a rate per annum equal to the Base Rate for such day, plus the
Applicable Margin. Interest shall be payable on the first Business Day of each
calendar quarter. Such interest shall accrue from and including the date of such
Borrowing to but excluding the date of any repayment thereof and shall be com-
puted on the basis of a fraction, the numerator of which is the actual number of
days elapsed from the date of Borrowing and the denominator of which is three
hundred sixty-five (365). Overdue principal of and, to the extent permitted by
law, overdue interest on the Base Rate Loans shall bear interest for each day
until paid at a percentage per annum equal to the Default Rate.
(b) Each Eurodollar Rate Loan shall bear interest on the unpaid principal
amount thereof, for each day from the date such Eurodollar Rate Loan is made
until it becomes due, at a rate per annum equal to the Eurodollar Rate for the
relevant Interest Period, plus the Applicable Margin. Interest shall be payable
on the last day of the Interest Period applicable thereto; provided, that if
such Interest Period is longer than ninety (90) days, interest shall be payable
every ninety (90) days and on the last day of such Interest Period. Such
interest shall accrue from and including the date of such Borrowing to but
excluding the date of any repayment thereof and shall be computed on the basis
of a fraction, the numerator of which is the actual number of days elapsed from
the date of Borrowing and the denominator of which is three hundred sixty (360).
Overdue principal of and, to the extent permitted by law, overdue interest on
the Eurodollar Rate Loans shall bear interest for each day until paid at a
percentage per annum equal to the Default Rate.
Section 2.9. Fees. The Borrower shall pay to the Agent for the benefit of
the Banks a non-use fee for the Commitment Period, payable in arrears at the
rate of 3/10 of 1% per annum (calculated on a 365 day basis) on the average
daily unused portion of the Commitment, which non-use fee shall be payable
quarterly on the first Business Day of January, April, July and October of each
year beginning January, 1996.
Section 2.10. Payments Generally. All payments under this Agreement shall
be made in Dollars in immediately available funds not later than 2:00
p.m.(Connecticut time) on the due date (each such payment made after such time
on such due date to be deemed to have been made on the next succeeding Business
Day) to the Agent at its address set forth on the signature pages hereof or at
such other address as it may hereafter designate by notice to the Borrower and
the Banks for the account of the Lending Office of each Bank specified by such
Bank on Schedule 1.1 hereto. The Borrower shall, at the time of making each
payment under this Agreement, specify to the Agent the principal or other amount
payable by the Borrower under this Agreement to which such payment is to be
applied (and in the event that it fails to so specify, or if a Default or Event
of Default has occurred and is continuing, the Agent may apply such payment as
it may elect in its sole discretion). If the due date of any payment under this
Agreement
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would otherwise fall on a day which is not a Business Day, such date shall be
extended to the next succeeding Business Day and such extension of time shall in
such case be included in the computation of such payment; provided that, if such
extension would cause the last day of an Interest Period to occur in the next
following calendar month, the last day of such Interest Period shall occur on
the immediately preceding Business Day.
Section 2.11. Capital Adequacy. If after the date hereof, either (i) the
introduction of, or any change in, or in the interpretation or enforcement of,
any law, regulation, order, ruling, interpretation, directive, guideline or
request or (ii) the compliance with any order, ruling, interpretation,
directive, guideline or request from any central bank or other governmental
authority (whether or not having the force of law) issued, announced, published,
promulgated or made after the date hereof (including, in any event, any law,
regulation, order, ruling, interpretation, directive, guideline or request
contemplated by the report dated July, 1988 entitled "International Convergence
of Capital Measurement and Capital Standards" issued by the Basle Committee on
Banking Regulation and Supervisory Practices) affects or would affect the amount
of capital required or expected to be maintained by any Bank or any corporation
controlling any Bank and such Bank reasonably determines that the amount of such
required or expected capital is increased by or based upon the existence of such
Bank's Revolving Loans hereunder or such Bank's commitment to lend hereunder,
then, upon demand by such Bank, the Borrower shall be liable for, and shall pay
to such Bank, within thirty (30) days following demand from time to time by such
Bank, additional amounts sufficient to compensate such Bank in the light of such
circumstances for the effects of such law, regulation, order, ruling,
interpretation, directive, guideline or request, to the extent that such Bank
reasonably determines such increase in capital to be allocable to the existence
of such Bank's Revolving Loans hereunder or of such Bank's commitment to lend
hereunder. A certificate substantiating such amounts and identifying the event
giving rise thereto, submitted to the Borrower (with a copy to the Agent) by
such Bank, shall be conclusive, absent manifest error. Each Bank shall promptly
notify the Borrower of any event of which it has knowledge occurring after the
date of this Agreement which will entitle such Bank to compensation pursuant to
this Section, and such Bank shall take any reasonable action available to it
consistent with its internal policy and legal and regulatory restrictions
(including the designation of a different Lending Office, if any) that will
avoid the need for, or reduce the amount of, such compensation and will not in
the reasonable judgment of such Bank be otherwise disadvantageous to such Bank.
Section 2.12. Increased Costs; Funding Losses. (a) If after the date
hereof, due to either (i) the introduction of or any change in or in the
interpretation or enforcement of, any law, regulation, order, ruling, directive,
guideline or request, or (ii) the compliance with any order, ruling, directive,
guideline or request from any central bank or other governmental authority
(whether or not having the force of law) issued, announced, published,
promulgated or made after the date hereof, there shall be any increase in the
cost to any Bank of agreeing to make or
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making, funding or maintaining Eurodollar Rate Loans, then the Borrower shall be
liable for, and shall from time to time, within thirty (30) days following a
demand by such Bank (with a copy to the Agent), pay to such Bank for the account
of such Bank additional amounts sufficient to compensate such Bank for such
increased cost; provided, however, that before making any such demand, such Bank
agrees to use reasonable efforts (consistent with its internal policy and legal
and regulatory restrictions) to designate a different Lending Office if the
making of such a designation would allow such Bank or its Lending Office to
continue to perform its obligations to make Eurodollar Rate Loans or to continue
to fund or maintain Eurodollar Rate Loans and would not, in the reasonable
judgment of such Bank, be otherwise disadvantageous to such Bank. A certificate
in reasonable detail substantiating the amount of such increased cost, submitted
to the Borrower (with a copy to the Agent) by such Bank, shall be conclusive,
absent manifest error.
(b) Upon notice by the relevant Bank accompanied by a certificate showing
in reasonable detail the calculation of such amount, the Borrower shall
reimburse each Bank and shall hold each Bank harmless from any loss or expense
which the Bank may sustain or incur as a consequence of the failure of the
Borrower to (i) make a borrowing hereunder after the Borrower has given a Notice
of Borrowing or (ii) make any optional prepayment after the Borrower has
provided notice thereof under Section 2.7 hereof.
Section 2.13. Illegality; Unavailability.
(a) Notwithstanding any other provision of this Agreement, if after the
date hereof the introduction of, or any change in or in the interpretation or
enforcement of, any law, regulation, order, ruling, directive, guideline or
request shall make it unlawful, or any central bank or other governmental
authority shall assert that it is unlawful, for any Bank or its Lending Office
to perform its obligations hereunder to make Eurodollar Rate Loans or to
continue to fund or maintain Eurodollar Rate Loans hereunder, then, on notice
thereof by such Bank to the Borrower, (i) the obligation of such Bank to make
Eurodollar Rate Loans shall terminate (and such Bank shall make all of its
Revolving Loans as Base Rate Loans notwithstanding any election by the Borrower
to have such Bank make Eurodollar Rate Loans) and (ii) if legally permissible,
at the end of the current Interest Period for such Eurodollar Rate Loans,
otherwise five (5) Business Days after such notice and demand, all Eurodollar
Rate Loans of such Bank then outstanding will automatically convert into Base
Rate Loans; provided, however, that before making any such demand, such Bank
agrees to use reasonable efforts (consistent with its internal policy and legal
and regulatory restrictions) to designate a different Lending Office if the
making of such a designation would allow such Bank or its Lending Office to
continue to perform its obligations to make Eurodollar Rate Loans and would not,
in the judgment of such Bank, be otherwise disadvantageous to such Bank. A
certificate describing such introduction or change in or in the interpretation
or enforcement of such law, regulation, order, ruling, directive, guideline or
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request, submitted to the Borrower and the Agent by such Bank, shall be
conclusive evidence of such introduction, change, interpretation or enforcement,
absent manifest error. The Banks and the Borrower agree to negotiate in good
faith in order to agree upon a mutually acceptable mechanism to provide that
Eurodollar Rate Loans made by the Banks as to which the foregoing conditions
occur shall convert into Base Rate Loans.
(b) Notwithstanding any other provision of this Agreement, if after the
date hereof the Agent determines that quotations of interest rates for the
relevant deposits referred to in the definition of "Eurodollar Rate" in Section
1.1 hereof are not being provided in the relevant amounts or for the relevant
maturities for purposes of determining rates of interest for Eurodollar Rate
Loans, then, on notice thereof by the Agent to the Borrower, (i) the obligation
of the Banks to make Eurodollar Rate Loans shall terminate (and the Banks shall
make all Revolving Loans as Base Rate Loans notwithstanding any election by the
Borrower to have the Banks make Eurodollar Rate Loans). A certificate describing
such event submitted to the Borrower by the Agent shall be conclusive evidence
of such event, absent manifest error.
Section 2.14. Payments to be Free of Deductions. All payments by the
Borrower under this Agreement shall be made without setoff or counterclaim and
free and clear of, and without deduction for, any taxes (other than any taxes
imposed on or measured by the gross income or profits of any Bank), levies,
imposts, duties, charges, fees, deductions, withholdings, compulsory loans,
restrictions or conditions of any nature now or hereafter imposed or levied by
any country or any political subdivision thereof or taxing or other authority
therein unless the Borrower is compelled by law to make such deduction or
withholding. If any such obligation is imposed upon the Borrower with respect to
any amount payable by it hereunder, it will pay to the Agent, on the date on
which such amount becomes due and payable hereunder and in Dollars, such
additional amount as shall be necessary to enable each Bank to receive the same
net amount which it would have received on such due date had no such obligation
been imposed upon the Borrower. If any Bank, or any permitted assignee of such
Bank hereunder (an "Assignee"), at any time, is organized under the laws of any
jurisdiction other than the United States or any state or other political
subdivision thereof, such Bank or the Assignee shall deliver to the Borrower and
the Agent on the date it becomes a party to this Agreement, and at such other
times as may be necessary in the determination of the Borrower in its reasonable
discretion, such certificates, documents or other evidence, properly completed
and duly executed by such Bank or the Assignee (including, without limitation,
Internal Revenue Service Form 1001 or Form 4224 or any other certificate or
statement of exemption required by Treasury Regulations Section 1.1441-4(a) or
Section 1.1441-6(c) or any successor thereto) to establish that such Bank or the
Assignee is not subject to deduction or withholding of United States Federal
Income Tax under Section 1441 or 1442 of the Internal Revenue Code or otherwise
(or under any comparable provisions of any successor statute) with respect to
any payments to such Bank or the Assignee of principal, interest, fees or other
amounts payable hereunder. The Borrower shall not be
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required to pay any additional amount to such Bank or any Assignee under this
Section 2.14 if such Bank or such Assignee shall have failed to satisfy the
requirements of the immediately preceding sentence; provided that any Bank or
any Assignee shall have satisfied such requirements on the date it became a
party to this Agreement, nothing in this Section 2.14 shall relieve the Borrower
of its obligation to pay any additional amounts pursuant to this Section 2.14 in
the event that, as a result of any change in applicable law, such Bank or such
Assignee is no longer properly entitled to deliver certificates, documents or
other evidence at a subsequent date establishing the fact that such Bank or such
Assignee is not subject to withholding as described in the immediately preceding
sentence.
Section 2.15. Computations. All computations of interest and like payments
hereunder on the Revolving Loans shall, in the absence of clearly demonstrable
error, be considered correct and binding on the Borrower and the Banks, unless
within thirty (30) Business Days after receipt of any notice by the Agent of
such outstanding amount, the Borrower or any Bank notifies the Agent in writing
to the contrary.
Section 2.16. Obligations Absolute. The Obligations of the Borrower to make
payments under this Agreement shall be unconditional and irrevocable, and shall
be paid strictly in accordance with the terms of this Agreement under all
circumstances, and irrespective of, the following circumstances:
(a) Any lack of validity or enforceability of all or any portion of this
Agreement or any other agreement or any instrument relating hereto;
(b) any change in the time, manner or place of payment of, or in any other
term of, all or any of the Obligations of the Borrower;
(c) the existence of any claim, setoff, defense or other right that the
Borrower may have; or
(d) any other circumstance or happening whatsoever, whether or not similar
to any of the foregoing, including without limitation, any other circumstance
that might otherwise constitute a defense available to, or a discharge of, the
Borrower.
Section 2.17. Sharing of Payments, Etc. If any Bank shall obtain any
payment (whether voluntary, involuntary, through the exercise of any right of
setoff, or otherwise) on account of the Revolving Loans made by it (other than
pursuant to Sections 2.11, 2.12, 2.13 or 2.14) in excess of its ratable share of
payments on account of outstanding Revolving Loans obtained by all the Banks,
such Bank shall forthwith purchase from the other Banks such participations in
the Revolving Loans made by them as shall be necessary to cause such Bank to
share the excess payment ratably with each of them; provided, however, that if
all or any portion of such excess
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payment is thereafter recovered from such purchasing Bank, such purchase from
each Bank shall be rescinded and each such Bank shall repay to the purchasing
Bank the purchase price to the extent of such recovery, together with an amount
equal to such Bank's ratable share (according to the proportion of (i) the
amount of such Bank's required repayment to (ii) the total amount so recovered
from the purchasing Bank) of any interest or other amount paid or payable by the
purchasing Bank in respect of the total amount so recovered. The Borrower agrees
that any Bank so purchasing a participation from another Bank pursuant to this
Section 2.17 may, to the fullest extent permitted by law, exercise all its
rights of payment (including the right of setoff) with respect to such
participation as fully as if such Bank were the direct creditor of the Borrower
in the amount of such participation.
Section 2.18. Non-Receipt of Funds by the Agent. Unless the Agent shall
have been notified in writing by a Bank prior to any date on which a Revolving
Loan is to be made, which notice shall be effective upon receipt, that such Bank
does not intend to make available to the Agent such Bank's pro rata share of the
Revolving Loan requested, the Agent may assume that such Bank has made such
amount available to the Agent on such date and Agent may, in its sole discretion
(but shall not be obligated to), make available to the Borrower a corresponding
amount on such date. If such corresponding amount is not in fact made available
to the Agent by such Bank, the Agent shall be entitled to recover such
corresponding amount on demand from such Bank together with interest thereon,
for each day from the date the Agent made such amount available to the Borrower
until the date such amount is repaid to the Agent, at a rate per annum equal to
the Federal Funds Rate for two days and thereafter at the Default Rate. If such
Bank does not pay such corresponding amount forthwith upon the Agent's demand
therefor, the Agent shall promptly notify the Borrower and the Borrower shall
immediately pay such corresponding amount to the Agent provided, however, that
in such event the Borrower shall not have any obligation under Section 2.7(b) or
Section 2.12(b) to reimburse such Bank for any loss, cost or expense which such
Bank may incur as a result of such prepayment and such payment by the Borrower
shall not be deemed a failure to make a borrowing hereunder after the Borrower
shall have given a Notice of Borrowing. Nothing in this Section 2.18 shall be
deemed to relieve any Bank from its obligation to fulfill its Commitment
hereunder or to prejudice any rights that the Borrower may have against any Bank
as a result of any default by such Bank hereunder.
ARTICLE 3. CONDITIONS PRECEDENT.
Section 3.1. Documentary Conditions Precedent. The effectiveness of the
amendment and restatement of the Existing Credit Agreement provided for hereby
is subject to the receipt by the Agent of the following documents, each of which
shall be satisfactory to the Agent and each Bank in form and substance:
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(a) the Agent shall have received, with a counterpart for each Bank, this
Agreement executed and delivered by a duly authorized officer of the Borrower;
(b) the Revolving Notes duly completed and executed and, in the case of the
Existing Bank, in exchange for the promissory note issued under the Existing
Credit Agreement;
(c) a certificate of the Secretary or Assistant Secretary of the Borrower,
dated the Amendment Effective Date, attesting on behalf of the Borrower to all
corporate action taken by the Borrower, including resolutions of its Board of
Directors authorizing the execution, delivery and performance of this Agreement,
the Revolving Notes and each other document to be delivered pursuant to this
Agreement, and attesting to the names and true signatures of the officers of the
Borrower authorized to sign this Agreement, the Revolving Notes, and the other
documents to be delivered by the Borrower under this Agreement;
(d) a certificate of a Senior Officer of the Borrower, dated the Amendment
Effective Date, certifying on behalf of the Borrower that (i) the
representations and warranties in Article 4 are true, complete and correct in
all material respects on such date as though made on and as of such date, (ii)
no event has occurred and is continuing which constitutes a Default or Event of
Default, (iii) the Borrower has performed and complied with all agreements and
conditions contained in this Agreement which are required to be performed or
complied with by the Borrower at or before the Amendment Effective Date, (iv)
each consent, license, approval and notice required in connection with the
execution, delivery, performance, validity and enforceability of this Agreement
and each other document and instrument required to be delivered in connection
herewith and the consummation of the Acquisition is in full force and effect,
and (v) there has been no material adverse change in the financial condition,
operations, Properties, business, or as far as the Borrower can reasonably
foresee, prospects of the Borrower and its Subsidiaries, if any, taken as a
whole, since December 31, 1997;
(e) a certificate of a Senior Officer of the Borrower, substantially in the
form of Exhibit C, which certificate shall include information required to
establish that the Borrower will be in compliance with the covenants set forth
in this Agreement, after giving effect to the Acquisition and the transactions
contemplated herein and in the Acquisition Agreement;
(f) a certificate of good standing for the Borrower as of a recent date by
the Secretary of State of its jurisdiction of incorporation and each state where
the Borrower, by the nature of its business, is required to qualify to do
business, except where the failure to be so qualified would not have a
Materially Adverse Effect;
-24-
(g) a certificate or similar instrument from the appropriate tax authority
in the State of Delaware and, if different, its principal place of business, as
to the payment by the Borrower of all taxes owed;
(h) if obtainable by insurance companies generally in such jurisdiction, a
certificate of good standing for each of the Insurance Subsidiaries as of a
recent date by the Secretary of State or Insurance Commissioner of its
jurisdiction of incorporation;
(i) a certificate of authority from each Insurance Commissioner certifying
that each Insurance Subsidiary is duly licensed and in good standing with the
applicable Insurance Commissioner in the state where it is domesticated;
(j) a favorable opinion of Duane, Morris & Heckscher LLP, counsel to the
Borrower, dated the Amendment Effective Date, in substantially the form set
forth in Exhibit D hereto;
(k) all corporate and legal proceedings and all instruments and agreements
in connection with the transactions contemplated by this Agreement shall be
satisfactory in form and substance to the Agent and the Agent shall have
received any and all other information and documents with respect to the
Borrower which it may reasonably request;
(l) payment to the Agent and the Banks of such fees as shall have been
agreed upon by the Borrower and the Agent;
(m) payment to Day, ▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, special counsel to the Agent, of
its legal fees and disbursements (up to $14,000); and
(n) such other documents as the Agent or any Bank or special counsel to the
Agent may reasonably request.
Section 3.2. Additional Conditions Precedent to Each Loan. The obligation
of each Bank to make the Revolving Loans pursuant to a Borrowing (including any
Borrowing on the Amendment Effective Date), unless waived by the Required Banks,
shall be subject to the further conditions precedent that on the date of such
Revolving Loan:
(a) the representations and warranties contained in Article 4 of this
Agreement are true and correct in all material respects on and as of the date of
such Revolving Loan as though made on and as of such date (or, if such
representation or warranty is expressly stated to have been made as of a
specific date, as of such specific date);
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(b) the Borrower has performed and complied with and is in compliance with
all agreements and conditions contained in this Agreement which are required to
be performed or complied with by the Borrower;
(c) there does not exist any Default or Event of Default under this
Agreement;
(d) the Agent shall have received a Notice of Borrowing in the form of
Exhibit B, except to the extent otherwise provided in Section 2.3(f); and
(e) with respect only to the initial Loan in excess of the Commitment under
the Existing Credit Agreement, (i) the Borrower shall have consummated the
Acquisition, (ii) the Agent shall have received a favorable opinion of Duane,
Morris & Heckscher LLP, counsel to the Borrower, that (A) the Borrower is the
record owner, with the exception of directors qualifying shares, and beneficial
owner of all of the issued and outstanding shares of Southern Heritage, (B) the
Acquisition Agreement does not require any authorizations, consents and
shareholder approvals except the authorizations, consents, or approvals which
have been obtained and are in full force and effect and (C) the Acquisition does
not require the authorization, consent, approval, order, license or permit from,
or filing registration or qualification with, or exemption by, any governmental
or public body or authority, or any subdivision thereof, or any other Person
under any law, act, rule, regulation or otherwise, or in connection with the
execution, delivery and performance by the Borrower of, or the legality,
validity, binding effect or enforceability of the Acquisition Agreement except
those which have been obtained and are in full force and effect, (iii) the Agent
shall have received a certificate of a Senior Officer of the Borrower, dated the
date of such initial Loan, certifying on behalf of the Borrower that attached
thereto are true, correct and complete copies of the Acquisition Pro-Formas and
the Acquisition Agreement (and all amendments thereto) as in effect on the date
of such initial Loan and (iv) the Agent shall have received such other documents
as the Agent or any Bank or special counsel to the Agent may reasonably request.
Section 3.3. Deemed Representations. Each Notice of Borrowing hereunder and
acceptance by the Borrower of the proceeds of such Borrowing shall constitute a
representation and warranty that the statements contained in Section 3.2(a) are
true and correct both on the date of such Notice of Borrowing and, unless the
Borrower otherwise notifies the Agent prior to such Borrowing, as of the date of
such Borrowing.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES.
The Borrower hereby represents and warrants the following:
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Section 4.1. Incorporation, Good Standing and Due Qualification. The
Borrower is duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of incorporation, has the power and authority to own
its assets and to transact the business in which it is now engaged, and is duly
qualified as a foreign corporation and in good standing under the laws of each
other jurisdiction in which such qualification is required, except where the
failure to be so qualified would not have a Materially Adverse Effect. The
Borrower has all requisite power and authority to execute and deliver and to
perform all of its obligations under this Agreement, the Revolving Notes and the
other writings contemplated hereby.
Section 4.2. Corporate Power and Authority; No Conflicts. The execution,
delivery and performance by the Borrower of this Agreement and the Revolving
Notes have been duly authorized by all necessary corporate action and do not and
will not (a) require any consent or approval of its shareholders; (b) violate
any provisions of its certificate of incorporation or by-laws; (c) violate any
provision of, or require any filing, registration, consent or approval under,
any law, rule, regulation (including without limitation, Regulation U and X),
order, writ, judgment, injunction, decree, determination or award presently in
effect having applicability to and binding upon the Borrower or any Subsidiary,
except with respect to filings described on Schedule 4.15, which filings have
been made; (d) result in a breach of or constitute a default or require any
consent under any indenture, mortgage or loan or credit agreement or any other
material agreement, lease or instrument to which the Borrower or any Subsidiary
is a party or by which it or its Properties may be bound; or (e) result in, or
require, the creation or imposition of any Lien upon or with respect to any of
the Properties now owned or hereafter acquired by the Borrower.
Section 4.3. Legally Enforceable Agreements. This Agreement and the
Revolving Notes constitute the legal, valid and binding obligations of the
Borrower enforceable against the Borrower in accordance with their respective
terms, except to the extent that such enforcement may be limited by applicable
bankruptcy, insolvency and other similar laws affecting creditors' rights
generally and by general principles of equity.
Section 4.4. Litigation. Except as disclosed on Schedule 4.4, there are no
actions, suits or proceedings or investigations (other than routine examinations
performed by insurance regulatory authorities) pending or, as far as the
Borrower can reasonably foresee, threatened against or affecting, the Borrower
or any of its Subsidiaries, or any Property of any of them before any court,
governmental agency or arbitrator, which if determined adversely to the Borrower
or any Subsidiary would in any one case or in the aggregate, have a Materially
Adverse Effect.
Section 4.5. Financial Statements.
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(a) The consolidated balance sheets of the Borrower and its Subsidiaries as
of December 31, 1997 and December 31, 1996 and the related consolidated
statements of operations, stockholders' equity, and cash flows of the Borrower
and its Subsidiaries for the fiscal years then ended, and the accompanying
footnotes, together with the opinion thereon of KPMG Peat Marwick LLP
independent certified public accountants, copies of which have been furnished to
the Agent, fairly present the financial condition of the Borrower and its
Subsidiaries, taken as a whole, as at such dates and the results of the
operations of the Borrower and its Subsidiaries, taken as a whole, for the
periods covered by such statements, all in accordance with GAAP consistently
applied. There are no liabilities of the Borrower or any Subsidiary, fixed or
contingent, which are material but are not reflected in the financial statements
or in the notes thereto, other than liabilities arising in the ordinary course
of the Borrower's business since December 31, 1997 and liabilities arising from
the Acquisition Agreement, this Agreement and the Revolving Notes. No written
information, exhibit or report furnished by the Borrower to the Agent or any
Bank in connection with the negotiation of this Agreement contained any material
misstatement of fact or omitted to state any fact necessary to make the
statements contained therein not materially misleading. Since December 31, 1997,
no event or circumstance has occurred that would have a Materially Adverse
Effect.
(b) The Acquisition Pro-Formas have been prepared in good faith and on
reasonable assumptions.
Section 4.6. Ownership and Liens. Each of the Borrower and its Subsidiaries
has good and valid title to, or valid leasehold interests in, its material
Properties and assets, real and personal, including the material Properties and
assets, and leasehold interests reflected in the financial statements referred
to in Section 4.5 (other than any Properties or assets disposed of in the
ordinary course of business of the Borrower and its Subsidiaries), and none of
the material Properties and assets owned by the Borrower or its Subsidiaries,
and none of its leasehold interests is subject to any Lien, except as disclosed
in such financial statements or in Schedule 4.6, or as may be permitted
hereunder.
Section 4.7. Taxes. Each of the Borrower and its Subsidiaries has filed all
federal and state tax returns and all other material local tax returns required
to be filed, has paid all due and payable taxes, assessments and governmental
charges and levies, including interest and penalties, imposed upon it or upon
its Properties, and has made adequate provision for the payment of such taxes,
assessments and other charges accruing but not yet due and payable, except with
respect to taxes which are being contested in good faith by the Borrower or its
Subsidiaries and for which such Person has established and maintains adequate
reserves for payment. To the best knowledge of the Borrower, there is no tax
assessment contemplated or proposed by any governmental agency against the
Borrower or any of its Subsidiaries that would have a Materially Adverse Effect,
other than, as of each date subsequent to the Closing Date,
-28-
such contemplated or proposed tax assessments with respect to which (i) the
Borrower has promptly notified the Agent in writing of its knowledge and (ii)
the Borrower or the appropriate Subsidiary of the Borrower has in good faith
commenced, and thereafter diligently pursued, appropriate proceedings in
opposition to such assessment.
Section 4.8. ERISA. Each of the Borrower and its Subsidiaries is in
compliance in all material respects with all applicable provisions of ERISA.
Within the three-year period prior to the date hereof, neither a Reportable
Event nor a Prohibited Transaction has occurred with respect to any Plan; no
notice of intent to terminate a Plan has been filed nor has any Plan been
terminated; no circumstance exists which constitutes grounds under Section 4042
of ERISA entitling the PBGC to institute proceedings to terminate, or appoint a
trustee to administer, a Plan, nor has the PBGC instituted any such proceedings;
neither the Borrower nor any ERISA Affiliate has completely or partially
withdrawn under Sections 4201 or 4204 of ERISA from a Multiemployer Plan; each
of the Borrower and its ERISA Affiliates has met its minimum funding
requirements under ERISA with respect to all of its Plans and there are no
Unfunded Vested Liabilities and neither the Borrower nor any ERISA Affiliate has
incurred any material liability to the PBGC under ERISA other than for premium
payments incurred in the normal course of operating the Plans.
Section 4.9. Subsidiaries and Ownership of Stock.
(a) Schedule 4.9 correctly sets forth the names of all Subsidiaries of the
Borrower. Except as otherwise indicated on Schedule 4.9, all of the outstanding
shares of capital stock, or all of the units of equity interest, as the case may
be, of each Subsidiary are owned of record, except for qualifying shares held by
the directors of the Subsidiaries, and beneficially by the Borrower or a
Subsidiary of the Borrower, as disclosed on said Schedule; there are no
outstanding options, warrants or other rights to purchase capital stock of any
such Subsidiary; and all such shares or equity interests so owned are duly
authorized, validly issued, fully paid, non-assessable, and were issued in
compliance with all applicable state and federal securities and other laws, and
are free and clear of all Liens, except as may be permitted hereunder and except
for restrictions imposed upon the sale of stock of the Insurance Subsidiaries of
the Borrower by the Insurance Commissioner or other insurance regulatory
authorities.
(b) Each Subsidiary of the Borrower is a corporation duly incorporated,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, has the power and authority to own its assets and to transact the
business in which it is now engaged, and is duly qualified as a foreign
corporation and in good standing under the laws of each other jurisdiction in
which such qualification is required, except where the failure to be so
qualified would not have a Materially Adverse Effect.
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(c) Each Subsidiary of the Borrower is in compliance with all laws and
other requirements applicable to its business and has obtained all
authorizations, consents, approvals, orders, licenses, and permits from, and
each Subsidiary has accomplished all filings, registrations, and qualifications
with, or obtained exemptions from any of the foregoing from, any governmental or
public agency that are necessary for the transaction of its business, except
where the failure to be in such compliance, obtain such authorizations,
consents, approvals, orders, licenses, and permits, accomplish such filings,
registrations, and qualifications, or obtain such exemptions, would not have a
Materially Adverse Effect.
Section 4.10. Credit Arrangements. Schedule 4.10 is a complete and correct
list of all credit agreements, indentures, guaranties, Capital Leases,
mortgages, and other instruments, agreements and arrangements presently in
effect providing for or relating to extensions of credit (including agreements
and arrangements for the issuance of letters of credit or for acceptance
financing) in respect of which the Borrower or any of its Subsidiaries is in any
manner directly or contingently obligated, other than trade payables in the
ordinary course of business of the Borrower and its Subsidiaries; and the
maximum principal or face amounts of the credit in question, which are
outstanding and which can be outstanding, are therein set forth and are
correctly stated as of the date hereof, and all Liens given or agreed to be
given as security therefor are therein set forth and are correctly described or
indicated in such Schedule.
Section 4.11. Operation of Business. Each of the Borrower and its
Subsidiaries possesses all licenses, permits and franchises, or rights thereto,
necessary to conduct its business as now conducted and as presently proposed to
be conducted, the absence of which would have a Materially Adverse Effect, and
neither the Borrower nor any of its Subsidiaries is in violation in any material
respect of any valid rights of others with respect to any of the foregoing.
Section 4.12. No Default on Outstanding Judgments or Orders. Each of the
Borrower and its Subsidiaries has satisfied all material judgments and neither
the Borrower nor any Subsidiary is in default with respect to any judgment,
writ, injunction, decree, rule or regulation of any court, arbitrator or
federal, state, municipal or other governmental authority, commission, board,
bureau, agency or instrumentality, domestic or foreign, which would, in any one
case or in the aggregate, have a Materially Adverse Effect.
Section 4.13. No Defaults on Other Agreements. Neither the Borrower nor any
of its Subsidiaries is a party to any indenture, mortgage or loan or credit
agreement or any lease or other agreement or instrument or subject to any
charter or corporate restriction which would have a Materially Adverse Effect.
Neither the Borrower nor any of its Subsidiaries is in default in any material
respect in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any agreement or instrument material to its
business to which it is a party.
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Section 4.14. Governmental Regulation. Neither the Borrower nor any of its
Subsidiaries is subject to regulation under the Investment Company Act of 1940,
as amended, or any statute or regulation limiting its ability to incur
indebtedness for money borrowed as contemplated hereby.
Section 4.15. Consents and Approvals. No authorization, consent, approval,
order, license or permit from, or filing, registration or qualification with, or
exemption by, any governmental or public body or authority, or any subdivision
thereof, or any other Person, including without limitation, any Insurance
Commissioner or other regulatory authority, is required to authorize, or is
required in connection with the execution, delivery and performance by the
Borrower of, or the legality, validity, binding effect or enforceability of,
this Agreement, the Revolving Notes or the Acquisition Agreement, except the
consents, approvals or other similar actions listed on Schedule 4.15 attached
hereto. Such consents, approvals or other similar actions have been obtained and
have not been modified, amended, rescinded or revoked, and are in full force and
effect.
Section 4.16. Partnerships. Except as set forth in Schedule 4.16, neither
the Borrower nor any of its Subsidiaries is a partner in any partnership.
Section 4.17. Environmental Protection. Each of the Borrower and its
Subsidiaries has obtained all material permits, licenses and other
authorizations which are required under all environmental laws, including laws
relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals or industrial, toxic or hazardous substances
or wastes into the environment (including without limitation, ambient air,
surface water, ground water, or land), or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants, chemicals, or industrial, toxic or
hazardous substances or wastes, except to the extent failure to have any such
permit, license or authorization would not reasonably be expected to have a
Materially Adverse Effect. Each of the Borrower and its Subsidiaries is in
compliance with all terms and conditions of the required permits, licenses and
authorizations, and is also in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in the environmental laws or contained in any
regulation, code, plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder, except to the extent
failure to comply would not reasonably be expected to have a Materially Adverse
Effect. None of the Properties of the Borrower or its Subsidiaries, either owned
or leased, have been included or, as far as the Borrower can reasonably foresee,
proposed for inclusion on the National Priorities List adopted pursuant to the
Comprehensive Environmental Response Compensation and Liability Act, as
amended, or on any similar list or inventory of sites requiring response or
cleanup actions adopted by any other federal, state or local agency.
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Section 4.18. Copyrights, Patents, Trademarks, Etc. Each of the Borrower
and its Subsidiaries owns or is duly licensed or otherwise entitled to use all
patents, trademarks, service marks, trade names, and copyrighted materials which
are used in the operation of its business as presently conducted, except where
the failure to be so licensed or entitled would not have a Materially Adverse
Effect. No claim is pending or, as far as the Borrower can reasonably foresee,
threatened against the Borrower or any of its Subsidiaries contesting the use of
any such patents, trademarks, service marks, trade names or copyrighted
materials, nor does the Borrower know of any valid basis for any such claims,
other than claims which, if adversely determined, would not have a Materially
Adverse Effect.
Section 4.19. Compliance with Laws. Neither the Borrower nor any of its
Subsidiaries is in violation of any laws, ordinances, rules or regulations,
applicable to it, of any federal, state or municipal governmental authorities,
instrumentalities or agencies, including without limitation, the United States
Occupational Safety and Health Act of 1970, as amended, except where such
violation would not have a Materially Adverse Effect.
Section 4.20. Events of Default. No Default or Event of Default has
occurred and is continuing.
Section 4.21. No Adverse Change. Since December 31, 1997, there has
occurred no event which would have a Materially Adverse Effect.
Section 4.22. Year 2000 Compatibility. The Borrower and each Subsidiary has
taken all action necessary to ensure that the Borrower's and each Subsidiary's
computer-based systems are able to operate and effectively process data,
including dates, on or after January 1, 2000. At the request of the Agent, the
Borrower and its Subsidiaries shall provide the Agent reasonable assurance of
such "Year 2000 Compatibility."
Section 4.23. Use of Proceeds. The Borrower shall use the proceeds of each
Revolving Loan (i) to acquire 100% of the shares of capital stock of Southern
Heritage, (ii) to make surplus contributions to the Insurance Subsidiaries,
(iii) to acquire all or substantially all of the assets or capital stock of any
other insurance corporation, and (iv) for other general corporate purposes;
provided, however, that the Borrower shall use at least $18,000,000 of the
proceeds of the Revolving Loans for the purposes described in clause (i) above.
No part of such proceeds shall be used to purchase or carry, or to extend credit
to others for the purpose of purchasing or carrying, any "margin stock" (as such
term is defined in Regulation U of the Board of Governors of the Federal Reserve
System) in violation of Regulations U and X. Neither the Borrower nor any of its
Subsidiaries is engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of purchasing or carrying any
such "margin stock."
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ARTICLE 5. AFFIRMATIVE COVENANTS
During the term of this Agreement, and until performance, payment and/or
satisfaction in full of the Obligations, the Borrower covenants and agrees that
it shall, and shall cause each of its Subsidiaries to, unless the Required Banks
otherwise consent in writing:
Section 5.1. Maintenance of Existence and Domicile of Insurance
Subsidiaries. Preserve and maintain its corporate existence and good standing in
the jurisdiction of its incorporation, and qualify and remain qualified as a
foreign corporation in each jurisdiction in which such qualification is required
from time to time, except where failure to be so qualified would not have a
Materially Adverse Effect; and preserve and maintain the domicile of each of its
Insurance Subsidiaries as in effect on the date hereof.
Section 5.2. Conduct of Business. Continue to engage in a business of the
same general type as conducted by it on the date of this Agreement.
Section 5.3. Maintenance of Properties. Maintain, keep and preserve all of
its material Properties (tangible and intangible), necessary or useful in the
conduct of its business, in good working order and condition, ordinary wear and
tear excepted, except that the failure to maintain, preserve and protect a
particular item of depreciable Property that is not of significant value, either
intrinsically or to the operations of the Borrower and its Subsidiaries, taken
as a whole, shall not constitute a violation of this covenant.
Section 5.4. Maintenance of Records. Keep accurate and complete records and
books of account, in which complete entries will be made in accordance with GAAP
and SAP, reflecting all financial transactions of the Borrower and its
Subsidiaries.
Section 5.5. Maintenance of Insurance. Maintain insurance (subject to
customary deductibles and retentions) with financially sound and reputable
insurance companies, in such amounts and with such coverages (including without
limitation public liability insurance, fire, hazard and extended coverage
insurance on all of its assets, necessary workers' compensation insurance and
all other coverages as are consistent with industry practice) as are maintained
by companies of established reputation engaged in similar businesses and
similarly situated.
Section 5.6. Compliance with Laws. Comply in all respects with all
applicable laws, rules, regulations and orders, except where the failure to so
comply would not have a Materially Adverse Effect. Such compliance shall
include, without limitation, paying all taxes, assessments and governmental
charges imposed upon it or upon its Property (and all penalties and other
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costs, if any, related thereto), unless contested in good faith by appropriate
proceedings and for which adequate reserves have been set aside.
Section 5.7. Right of Inspection. From time to time upon prior notice and
in accordance with customary standards and practices within the banking
industry (including, without limitation, upon any Event of Default or whenever
the Agent or any Bank may have reasonable cause to believe that an Event of
Default has occurred), the Borrower shall permit the Agent or any Bank or any
agent or representative thereof, to examine and make copies and abstracts from
the records and books of account of, and visit the Properties of, the Borrower
and its Subsidiaries to discuss the affairs, finances and accounts of the
Borrower and any such Subsidiaries with any of their respective officers and
directors and the Borrower's independent accountants, and to make such
verification concerning the Borrower and its Subsidiaries as may be reasonable
under the circumstances, and furnish promptly to the Agent or any Bank true
copies of all financial information that may reasonably be requested by the
Agent or any Bank; provided, that the Agent or such Bank shall use reasonable
efforts to not materially interfere with the business of the Borrower and its
Subsidiaries and to treat as confidential any and all information obtained
pursuant to this Section 5.7, except to the extent disclosure is permitted under
Section 9.14 of this Agreement.
Section 5.8. Reporting Requirements. The Borrower shall, and shall cause
each of its Subsidiaries, as applicable, to, furnish to the Agent and each of
the Banks:
(a) Annual GAAP Statements of the Borrower. Within one hundred twenty
(120) days following the end of the Borrower's fiscal year (or such earlier
date as the Borrower's Form 10-K is filed with the Securities and Exchange
Commission) copies of:
(i) the consolidated and consolidating (including the Borrower on a
parent-only basis) balance sheets of the Borrower and its
Subsidiaries as at the close of such fiscal year, and
(ii) the consolidated and consolidating (including the Borrower on a
parent-only basis) statements of operations and statements of
stockholders' equity and cash flows, in each case of the Borrower
and its Subsidiaries for such fiscal year,
in each case setting forth in comparative form the figures for the
preceding fiscal year and prepared in accordance with GAAP, all in
reasonable detail and accompanied by an opinion thereon of KPMG Peat
Marwick LLP or other firm of independent public accountants of recognized
national standing selected by the Borrower and reasonably acceptable to the
Agent, to the effect that the financial statements have been prepared in
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accordance with GAAP (except for changes in application in which such
accountants concur) and present fairly in all material respects in
accordance with GAAP the financial condition of the Borrower and its
Subsidiaries as of the end of such fiscal year and the results of their
operations for the fiscal year then ended and that the examination of such
accountants in connection with such financial statements has been made in
accordance with generally accepted auditing standards and, accordingly,
included such tests of the accounting records and such other auditing
procedures as were considered necessary under the circumstances.
(b) Annual SAP Financial Statements. As soon as available, and in any
event within one hundred twenty (120) days following the end of the fiscal
year of each Insurance Subsidiary (or such earlier date as such are filed
with the applicable insurance regulatory authority), copies of audited SAP
Financial Statements for each such Insurance Subsidiary, in each case
setting forth in comparative form the figures for the preceding fiscal year
and prepared in accordance with SAP, all in reasonable detail and
accompanied by an opinion thereon of KPMG Peat Marwick LLP or other firm of
independent public accountants of recognized national standing selected by
the Borrower and reasonably acceptable to the Agent, to the effect that the
financial statements have been prepared in accordance with SAP (except for
changes in application in which such accountants concur) and present fairly
in all material respects in accordance with SAP the financial condition of
such Insurance Subsidiary as of the end of such fiscal year and the results
of its operations for the fiscal year then ended and that the examination
of such accountants in connection with such financial statements has been
made in accordance with generally accepted auditing standards and,
accordingly, included such tests of the accounting records and such other
auditing procedures as were considered necessary under the circumstances.
(c) Quarterly GAAP Statements of the Borrower. As soon as available,
and in any event within sixty (60) days after the end of each quarterly
fiscal period of the Borrower (other than the fourth fiscal quarter of any
fiscal year), copies of:
(i) the consolidated and consolidating (including the Borrower on a
parent-only basis) balance sheets of the Borrower and its
Subsidiaries as at the end of such fiscal quarter, and
(ii) the consolidated and consolidating (including the Borrower on a
parent-only basis) statements of operations and consolidated
statements of stockholders' equity and cash flows, in each case
of the Borrower and its Subsidiaries for such fiscal quarter and
the portion of such fiscal year ended with such fiscal quarter,
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in each case setting forth in comparative form the figures for the
preceding fiscal year and prepared in accordance with GAAP all in
reasonable detail and certified as presenting fairly in accordance with
GAAP the financial condition of the Borrower and its Subsidiaries as of the
end of such period and the results of their operations for such period by a
Senior Officer of the Borrower, subject only to normal year-end accruals
and audit adjustments and the absence of footnotes.
(d) Quarterly SAP Statements. As soon as available, and in any event
within sixty (60) days following the end of each fiscal quarter of each
Insurance Subsidiary (or such earlier date as such are filed with the
applicable insurance regulatory authority), copies of the unaudited SAP
Financial Statements for each quarterly fiscal period of each such
Insurance Subsidiary, in each case setting forth in comparative form the
figures for the preceding fiscal year and prepared in accordance with SAP,
all in reasonable detail and certified as presenting fairly in accordance
with SAP the financial condition of such Insurance Subsidiary, as of the
end of such period and results of operations for such period by a Senior
Officer of such Insurance Subsidiary, subject to normal year-end accruals
and audit adjustments and the absence of footnotes.
(e) Annual/Quarterly Reports. Concurrently with the delivery of the
financial statements required pursuant to subsections (a) and (c) of this
Section, copies of all reports required to be filed with the Insurance
Commissioner in connection with the filing of such financial statements.
(f) SEC Filings. Promptly after the same are available, copies of each
annual report, proxy or financial statement or other report or
communication sent to the stockholders of the Borrower and copies of all
annual, regular, periodic and special reports and registration statements
which the Borrower may file or be required to file with the Securities and
Exchange Commission under Sections 13 and 15(d) of the Securities Exchange
Act of 1934.
(g) Notice of Litigation. Promptly after the commencement thereof,
notice of any action, suit and proceeding before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic
or foreign, against the Borrower or any of its Subsidiaries (A) not arising
out of an insurance policy issued by the Borrower or any of its
Subsidiaries, which, if determined adversely to the Borrower or such
Subsidiary, would have a Materially Adverse Effect, (B) arising out of an
insurance policy issued by any of the Subsidiaries of the Borrower or by
any of its Subsidiaries, which demands relief, net of reinsurance obtained
by the Borrower or its Subsidiaries with respect to such insurance policy,
which, if determined adversely to the Borrower or such Subsidiary would
have a Materially Adverse Effect, or (C) commenced by any
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creditor or lessor under any written credit agreement with respect to
borrowed money in excess of $500,000 or material lease which asserts a
default thereunder on the part of the Borrower or any of its Subsidiaries.
(h) Notices of Default. As soon as practicable and in any event within
fifteen (15) days after the occurrence of each Default or Event of Default,
a written notice setting forth the details of such Default or Event of
Default and the action which is proposed to be taken by the Borrower with
respect thereto.
(i) Actuarial Report Confirming Reserves. As soon as available, and in
any event within one hundred twenty (120) days after the close of each
fiscal year of the Borrower, a report confirming the adequacy of the SAP
reserves of each Insurance Subsidiary from KPMG Peat Marwick LLP or an
actuarial firm of recognized national standing or the actuarial division of
any other accounting firm of recognized national standing acceptable to the
Agent.
(j) Other Filings. Promptly upon the filing thereof and at any time
upon the reasonable request of the Agent, permit the Agent or any Bank the
opportunity to review copies of all reports, including annual reports, and
notices which the Borrower or any Subsidiary files with or receives from
the PBGC or the U.S. Department of Labor under ERISA; and as soon as
practicable and in any event within fifteen (15) days after the Borrower or
any of its Subsidiaries knows or has reason to know that any Reportable
Event or Prohibited Transaction has occurred with respect to any Plan or
that the PBGC or Donegal Mutual, the Borrower or any such Subsidiary has
instituted or will institute proceedings under Title IV of ERISA to
terminate any Plan, the Borrower will deliver to the Agent or any Bank a
certificate of a Senior Officer of the Borrower setting forth details as to
such Reportable Event or Prohibited Transaction or Plan termination and the
action the Borrower proposes to take with respect thereto.
(k) Additional Information. Such additional information as the Agent
or any Bank may reasonably request concerning the Borrower and its
Subsidiaries and for that purpose all pertinent books, documents and
vouchers relating to its business, affairs and Properties, including
investments as shall from time to time be designated by the Agent or any
Bank.
Section 5.9. Certificates.
(a) Officers' Certificate. Simultaneously with each delivery of
financial statements pursuant to Section 5.8(a) and 5.8(d), the Borrower
shall deliver to the Agent and each of the Banks a certificate of its Chief
Financial Officer which will
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(i) certify on behalf of the Borrower that such officer has
reviewed this Agreement and the condition and transactions of the
Borrower and its Subsidiaries for the period covered by such financial
statements, and state that to the best of his knowledge the Borrower
has observed or performed all of its covenants and other agreements,
and satisfied every condition, contained in this Agreement and the
Revolving Notes, and no Default or Event of Default has occurred and
is continuing or, if a Default or Event of Default has occurred and is
continuing, a statement as to the nature thereof and the action which
is proposed to be taken with respect thereto, and
(ii) include information (with detailed calculations in the form
set out in Exhibit C) required to establish whether the Borrower was
in compliance with the covenants set forth in this Agreement during
the period covered by the financial statements then being delivered.
Section 5.10. Compliance with Agreements. Promptly and fully comply with
all contractual obligations under all agreements, mortgages, indentures, leases
and/or instruments to which any one or more of the Borrower and its Subsidiaries
is a party, whether such agreements, mortgages, indentures, leases or
instruments are with the Agent or any Bank or another Person, except where such
failure to so comply would not have a Materially Adverse Effect.
Section 5.11. Use of Proceeds. Use the proceeds of the Revolving Loans only
for the purposes described in Section 4.23.
ARTICLE 6. NEGATIVE COVENANTS.
During the term of this Agreement, and until performance, payment and/or
satisfaction in full of the Obligations, the Borrower covenants and agrees that
the Borrower shall not, and shall not permit its Subsidiaries to, unless the
Required Banks otherwise consent in writing:
Section 6.1. Debt. Create, incur, assume or suffer to exist any Debt,
except:
(a) Debt of the Borrower under this Agreement and the Revolving Notes;
(b) Debt permitted under Section 6.2;
(c) Capital Lease Obligations, subject to the limitations of Section 6.9;
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(d) Debt of the Borrower or its Subsidiaries existing as of the date of
this Agreement and described on Schedule 4.10, as the same may be refinanced or
extended from time to time, so long as there is no increase in the principal
amount outstanding thereunder or the rate of interest or fees payable in respect
thereof; and
(e) Subordinated Debt of the Borrower, provided the aggregate principal
amount of such Subordinated Debt does not exceed $35,000,000.
Section 6.2. Guaranties, Etc. Assume, guarantee, endorse or otherwise be or
become directly or contingently responsible or liable (including, but not
limited to, an agreement to purchase any obligation, or to supply or advance any
funds (other than Investments permitted pursuant to Section 6.4), or an
agreement to cause such Person to maintain a minimum working capital or net
worth or otherwise to assure the creditors of any Person against loss) for the
obligations of any Person, except guaranties by endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business.
Section 6.3. Liens. Create, incur, assume or suffer to exist any Lien, upon
or with respect to any of its Properties, now owned or hereafter acquired,
except:
(a) Liens for taxes or assessments or other government charges or levies if
not yet due and payable or if due and payable, if they are being contested in
good faith by appropriate proceedings and for which appropriate reserves are
maintained;
(b) Liens imposed by law, such as mechanic's, materialmen's, landlord's,
warehousemen's and carrier's Liens, and other similar Liens, securing
obligations incurred in the ordinary course of business which are not past due
for more than forty-five (45) days, or which are being contested in good faith
by appropriate proceedings and for which appropriate reserves have been
established;
(c) Liens under workers' compensation, unemployment insurance, social
security or similar legislation (other than ERISA);
(d) judgment and other similar Liens arising in connection with court
proceedings; provided that the execution or other enforcement of such Liens is
effectively stayed and the claims secured thereby are being actively contested
in good faith and by appropriate proceedings;
(e) easements, rights-of-way, restrictions and other similar encumbrances
which, in the aggregate, do not materially interfere with the occupation, use
and enjoyment by the Borrower or any of its Subsidiaries of the Property or
assets encumbered thereby in the normal course of its business or materially
impair the value of the Property subject thereto;
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(f) Liens referred to in Schedule 4.6; and
(g) Liens consisting of pledges or deposits of Property to secure
performance in connection with operating leases made in the ordinary course of
business to which the Borrower or a Subsidiary is a party as lessee, provided
the aggregate value of all such pledges and deposits in connection with any such
lease does not at any time exceed fifteen percent (15%) of the annual fixed
rentals payable under such lease.
Section 6.4. Investments. Permit total consolidated Investment of the
Borrower and its Insurance Subsidiaries in Investment Grade Securities, as of
the end of any fiscal quarter, to be less than ninety seven percent (97%) of the
aggregate amount of Total Invested Assets; provided, however, for the purpose of
this Section 6.4, "Total Invested Assets" shall not include Debt of any
Insurance Subsidiary evidenced by surplus notes held by the Borrower.
Section 6.5. Mergers and Consolidations and Acquisitions of Assets. Merge
or consolidate with any Person (whether or not the Borrower or any Subsidiary is
the surviving entity), or acquire all or substantially all of the assets or any
of the capital stock of any Person; provided that (a) any Subsidiary (other than
any Insurance Subsidiary) may merge into the Borrower or any other Subsidiary,
and (b) the Borrower may merge or consolidate with or acquire all or
substantially all of the assets or capital stock of another Person, including
Southern Heritage, if, after giving effect to such transaction (i) the Borrower
is the corporation which survives such merger or acquisition, and (ii) no
Default or Event of Default would exist.
Section 6.6. Sale of Assets. Sell, lease or otherwise dispose of all or
substantially all of its assets, including through any reinsurance arrangements,
except in the ordinary course of business.
Section 6.7. Stock of Subsidiaries, Etc. Pledge, assign, hypothecate,
transfer, convey, sell or otherwise dispose of, encumber or grant any security
interest in, or deliver to any other Person, any shares of capital stock of its
Subsidiaries, or permit any such Subsidiaries to issue any additional shares of
its capital stock to any Person other than the Borrower or any of its
Subsidiaries, except directors' qualifying shares; provided, however, the
Borrower may sell some or all of the shares of capital stock of any of its
Subsidiaries (other than Atlantic States, Southern Insurance or Southern
Heritage), and permit or permit any such Subsidiaries (other than Atlantic
States, Southern Insurance or Southern Heritage) to issue and sell additional
shares of its capital stock to any Person other than the Borrower or any
Subsidiaries, so long as such sale of stock is made in exchange for cash or,
with respect to any Subsidiary with a book value of less than $10,000,000, other
consideration, in an amount equal to the fair market value of such shares.
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Section 6.8. Transactions with Affiliates. Enter into any transaction of
any kind with any Affiliate of the Borrower, or any Person that owns or holds
five percent (5%) or more of the outstanding common stock of the Borrower, other
than (a) transactions between or among Borrower and its wholly owned
Subsidiaries or between or among its wholly owned Subsidiaries, (b)
transactions between the Borrower and Donegal Mutual as described on Schedule
6.8, or (c) transactions on terms at least as favorable to the Borrower or its
Subsidiaries as would be the case in an arm's-length transaction between
unrelated parties of equal bargaining power.
Section 6.9. Capital Expenditures. Make or permit to be made any Capital
Expenditure in any fiscal year, or commit to make any Capital Expenditure in
any fiscal year, which when added to the aggregate Capital Expenditures of the
Borrower and its Subsidiaries theretofore made or committed to be made in that
fiscal year, would exceed $5,000,000.
Section 6.10. Minimum Statutory Surplus of Insurance Subsidiaries. As of
the end of any fiscal quarter, permit the Combined Statutory Surplus to be less
than an amount equal to the sum of (a) $66,000,000 plus (b) 50% of any
cumulative positive Combined Statutory Net Income, after dividends to the
Borrower, for each fiscal quarter following the fiscal year ended December 31,
1997, plus (c) any contributions to surplus made by the Borrower to any
Insurance Subsidiary, from Revolving Loans, during each fiscal year quarter
following the fiscal year ended December 31, 1997, plus (d) 50% of any
contributions to surplus made by the Borrower to any Insurance Subsidiary, other
than from Revolving Loans, during each fiscal quarter following the fiscal year
ended December 31, 1997.
Section 6.11. Minimum Statutory Surplus of Donegal Mutual. As of the end of
any fiscal quarter, permit the Statutory Surplus of Donegal Mutual to be less
than an amount equal to the sum of (a) $60,000,000 plus (b) 50% of any positive
Statutory Net Income of Donegal Mutual for each fiscal quarter following the
fiscal quarter ended December 31, 1994.
Section 6.12. Minimum Consolidated GAAP Net Worth. As of the end of any
fiscal quarter, permit Consolidated GAAP Net Worth of the Borrower and its
Subsidiaries to be less than an amount equal to the sum of (a) $81,000,000 plus
(b) 50% of any cumulative positive Net Income of the Borrower and its
Subsidiaries for each fiscal quarter following the fiscal year ended December
31, 1997, plus (c) the amount of paid-in capital resulting from any issuance by
the Borrower of its capital stock after the date of this Agreement.
Section 6.13. Minimum Fixed Charge Coverage. As of the end of each fiscal
quarter during the periods set forth below, permit the Fixed Charge Coverage
Ratio to be less than 1.2 to 1.
Section 6.14. Minimum A.M. Best Rating. At any time, permit the A.M. Best
Rating of (a) Atlantic States to be less than "A-", (b) Southern Insurance to be
less than "B+" or
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(c) Southern Heritage to be less than "B+" at any time after 30 days following
consummation of the Acquisition.
Section 6.15. Minimum Ownership of Donegal Group. At any time, cease to
have at least 51% of the Borrower's securities having voting power for the
election of directors of the Borrower owned of record and beneficially by
Donegal Mutual.
Section 6.16. Limitations on Debt and Negative Pledges. Enter into any
agreement with any other Person (other than any agreement existing on the date
hereof and other than this Agreement) restricting its ability to create or incur
Debt hereunder or to secure Debt hereunder.
ARTICLE 7. EVENTS OF DEFAULT.
Section 7.1. Events of Default. Any of the following events shall be an
"Event of Default":
(a) the Borrower shall fail to pay any principal amount of any Revolving
Loan when due, whether at stated maturity, by acceleration, by notice of
prepayment or otherwise, or the Borrower shall fail to pay any premium or
interest, or any fees or other amounts payable hereunder, within five days after
the date due;
(b) any written statement, representation or warranty made by the Borrower
in this Agreement, or the Revolving Notes, or which is contained in any
certificate, document, financial or other written statement furnished at any
time under or in connection with this Agreement or the Revolving Notes shall
prove to have been incorrect in any material respect on or as of the date made
or as of the date deemed made;
(c) the Borrower shall (i) fail to perform or observe any term, covenant,
or agreement contained in Section 4.23, Section 5.8(h) or Article 6; or (ii)
fail to perform or observe any term, covenant, or agreement on its part to be
performed or observed (other than the obligations specifically referred to
elsewhere in this Section 7.1) in this Agreement (including without limitation
any such term, covenant or agreement contained in Article 5 hereof) or the
Revolving Notes and such failure shall continue unremedied for thirty (30)
consecutive days from the occurrence of such failure. (The Agent shall use
reasonable efforts to give the Borrower notice of any Default or Event of
Default under this Section 7.1(c); provided, however, that failure to give any
such notice shall not impair or otherwise adversely affect the Agent's or the
Banks' rights and remedies hereunder);
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(d) the Borrower or any Subsidiary shall (i) fail to pay any indebtedness,
including but not limited to indebtedness for borrowed money (other than the
payment Obligations described in (a) above) of the Borrower or such Subsidiary,
as the case may be, or any interest or premium thereon, when due (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise); or
(ii) fail to perform or observe any term, covenant or condition on its part to
be performed or observed under any agreement or instrument relating to any such
indebtedness, when required to be performed or observed and such failure
continues after any applicable notice and grace period, if the effect of such
failure to perform or observe is to accelerate, or to permit the acceleration of
the maturity of such indebtedness, or (iii) any such indebtedness shall be
declared to be due and payable, or required to be prepaid (other than by a
regularly scheduled required prepayment), prior to the stated maturity thereof;
provided, however, with the exception of any Subordinated Debt, that it shall
not be a Default or Event of Default under this Section 7.1(d) unless the
aggregate principal amount of all such indebtedness as described in clauses (i)
through (iii) above shall exceed $100,000;
(e) the Borrower or any Subsidiary (i) shall generally not, or be unable
to, or shall admit in writing its inability to, pay its debts as such debts
become due; or (ii) shall make an assignment for the benefit of creditors or
petition or apply to any tribunal for the appointment of a custodian, receiver
or trustee for it or a substantial part of its assets; or (iii) shall commence
any proceeding under any bankruptcy, reorganization, arrangement, readjustment
of debt, dissolution or liquidation law or statute of any jurisdiction, whether
now or hereafter in effect; or (iv) shall have had any such petition or
application filed or any such proceeding shall have been commenced against it in
which an adjudication or appointment is made or order for relief is entered, or
which petition, application or proceeding remains undismissed for a period of
sixty (60) days or more; or (v) shall be the subject of any proceeding under
which its assets may be subject to seizure, forfeiture or divestiture (other
than a proceeding in respect of a Lien permitted under this Agreement); or (vi)
by any act or omission shall indicate its consent to, approval of or
acquiescence in any such petition, application or proceeding or order for relief
or the appointment of a custodian, receiver or trustee for all or any
substantial part of its Property; or (vii) shall suffer any such custodianship,
receivership or trusteeship to continue undischarged for a period of sixty (60)
days or more;
(f) (A) Any Insurance Commissioner or any other head of any insurance
regulatory authority and/or such insurance regulatory authority shall apply for
an order pursuant any section of the applicable insurance code, directing the
rehabilitation, conservation or liquidation of any Insurance Subsidiary, and any
such application shall not be dismissed or otherwise terminated during a period
of sixty (60) consecutive days, or a court of competent jurisdiction shall enter
an order granting the relief sought; or (B) any Insurance Commissioner shall
file a complaint or petition pursuant any applicable insurance code seeking the
dissolution of any Insurance Subsidiary, and such complaint or petition is not
dismissed or otherwise terminated for a period
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of sixty (60) consecutive days, or a court of competent jurisdiction shall order
the dissolution of any Insurance Subsidiary;
(g) one or more judgments, decrees or orders for the payment of money in
excess of $100,000 in the aggregate shall have been rendered against the
Borrower or any of its Subsidiaries (excluding judgments which are covered by
insurance other than self-insurance and excluding judgments rendered against any
Insurance Subsidiary which judgments have been both (i) rendered in the ordinary
course of business in connection with its insurance and reinsurance obligations,
and (ii) adequately reserved against) and such judgments, decrees or orders
shall continue unsatisfied and in effect for a period of sixty (60) consecutive
days without being vacated, discharged, satisfied or stayed or bonded pending
appeal;
(h) any of the following events shall occur or exist with respect to the
Borrower or any ERISA Affiliate: (i) any Prohibited Transaction involving any
Plan; (ii) any Reportable Event shall occur with respect to any Plan; (iii) the
filing under Section 4041 of ERISA of a notice of intent to terminate any Plan
or the termination of any Plan (other than in a "standard termination" referred
to in Section 4041 of ERISA); (iv) any event or circumstance exists which would
constitute grounds entitling the PBGC to institute proceedings under Section
4042 of ERISA for the termination of, or for the appointment of a trustee to
administer any Plan, or the institution by the PBGC of any such proceedings; (v)
complete or partial withdrawal under Section 4201 or 4204 of ERISA from a
Multiemployer Plan or the reorganization, insolvency or termination of any
Multiemployer Plan; and in each case above, such event or condition, together
with all other such events or conditions, if any, would in the reasonable
opinion of the Bank subject the Borrower or any ERISA Affiliate to any tax,
penalty or other liability to a Plan, Multiemployer Plan, the PBGC or otherwise
(or any combination thereof) which in the aggregate exceed or may exceed
$500,000; or
(i) this Agreement or any Revolving Note shall at any time after its
execution and delivery and for any reason cease to be in full force and effect
or shall be declared null and void, or the validity or enforceability thereof
shall be contested by the Borrower or the Borrower shall deny it has any further
liability or obligation hereunder.
Section 7.2. Remedies. Without limiting any other rights or remedies of the
Agent or the Banks provided for elsewhere in this Agreement or the Revolving
Notes, or by applicable law, or in equity, or otherwise, if any Event of Default
shall occur and be continuing, the Agent may, and if requested by the Required
Banks shall, by notice to the Borrower, (i) declare the Commitment to be
terminated, whereupon the same shall forthwith terminate, and/or (ii) declare
all amounts owing under this Agreement and the Revolving Notes (whether or not
such Obligations be contingent or unmatured) to be forthwith due and payable,
whereupon all such amounts shall become and be forthwith due and payable,
without presentment, demand, protest
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or further notice of any kind, all of which are hereby expressly waived by the
Borrower; provided that, in the case of an Event of Default referred to in
Section 7.1(e) and Section 7.1(f) above with respect to the Borrower, the
Commitment shall be immediately automatically terminated, and all such amounts
shall be immediately due and payable without notice, presentment, demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by the Borrower.
ARTICLE 8. THE AGENT.
Section 8.1. Authorization and Action.
(a) Each Bank hereby irrevocably appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers and discretion
under this Agreement and the Revolving Notes as are delegated to the Agent by
the terms hereof, together with such powers as are reasonably incidental
thereto. As to any matters not expressly provided for by this Agreement and the
Revolving Notes, the Agent shall not be required to exercise any discretion or
take any action, but shall be required to act or to refrain from acting (and
shall be fully protected in so acting or refraining from acting) upon the
instructions of the Required Banks, and such instructions shall be binding upon
all Banks; provided, however, that the Agent shall not be required to take any
action which exposes the Agent to liability or which is contrary to this
Agreement, the Revolving Notes or applicable law.
(b) The Banks agree to cooperate in good faith and in a commercially
reasonable manner in connection with the exercise by the Agent of the rights
granted to the Banks by law, this Agreement and the Revolving Notes, including,
but not limited to, providing necessary information to the Agent with respect to
the Obligations and preparing and executing necessary affidavits, certificates,
notices, instruments and documents. Subject to the authority of the Required
Banks or other applicable number of Banks as provided in this Agreement to
direct the Agent in writing when such direction by the Banks is required by this
Agreement for such action, the Agent is hereby authorized to act for and on
behalf of the Banks in all day-to-day matters with respect to the exercise of
rights described herein, such as the supervision of attorneys, accountants,
appraisers or others in connection with litigation or other similar actions.
Section 8.2. Exculpatory Provisions; Agent's Reliance, Etc. Neither the
Agent, nor its directors, officers, agents, employees or Affiliates shall be
liable for any action taken or omitted to be taken by it or them under or in
connection with this Agreement and the Revolving Notes, except for its or their
own gross negligence or willful misconduct. Without limitation of the generality
of the foregoing, the Agent (i) may consult with legal counsel (including
counsel for the Borrower), independent public accountants and other experts
selected by it and shall not be
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liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts; (ii) makes
no warranty or representation to any Bank and shall not be responsible to any
Bank for any statements, warranties or representations made in or in connection
with this Agreement or the Revolving Notes; (iii) shall have no duty to
ascertain or to inquire as to the performance or observance of any of the terms,
covenants or conditions of this Agreement and the Revolving Notes on the part of
the Borrower, (iv) shall not be responsible to any Bank for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of this
Agreement and the Revolving Notes or any other instrument or document furnished
pursuant hereto or thereto; and (v) shall incur no liability under or in respect
of this Agreement and the Revolving Notes by acting upon any notice, consent,
certificate or other instrument or writing (which may be by telegram, cable,
telex or telecopy) purported to be genuine and signed or sent by the proper
party or parties. The Agent shall in all cases be fully protected in acting, or
in refraining from acting, under this Agreement in accordance with a request of
the Required Banks, and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Banks.
Section 8.3. Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Agent has received notice from a Bank or the Borrower,
describing such Default or Event of Default and stating that such notice is a
"notice of default". In the event that the Agent receives such a notice, the
Agent may, and upon the written direction of the Required Banks shall, give
prompt notice thereof to the Banks. The Agent shall take such action with
respect to such Default or Event of Default as shall be reasonably directed by
the Required Banks, provided that unless and until the Agent shall have received
such directions, the Agent may (but shall not be obligated to) take such action,
or refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of the Banks; provided
further, that Agent shall not be required to take any action which exposes the
Agent to liability or which is contrary to this Agreement, the Revolving Notes
or applicable law.
Section 8.4. Fleet and Affiliates. With respect to its Commitment and the
Revolving Loans made by it, the Agent shall have the same rights and powers with
respect to this Agreement or the Revolving Notes as any other Bank and may
exercise the same as though it were not the Agent; and the term "Bank" or
"Banks" shall, unless otherwise expressly indicated, include Fleet in its
individual capacity. Fleet and its Affiliates may accept deposits from, lend
money to, act as trustee under indentures of, and generally engage in any kind
of business with, the Borrower and its Affiliates and any of their respective
Affiliates and any Person who may do business with or own securities of the
Borrower or its Affiliates all as if Fleet were not the Agent, and without any
duty to account therefor to the Banks.
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Section 8.5. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other bank and based on
such information as it deems necessary (the receipt of which such Bank
acknowledges), made its own credit analysis and decision to enter into this
Agreement. Each Bank also acknowledges that it will, independently and without
reliance upon the Agent or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement and the
Revolving Notes.
Section 8.6. Indemnification. The Banks severally and ratably agree to
indemnify the Agent (to the extent not reimbursed by the Borrower), from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by, or asserted against the
Agent in any way relating to or arising out of this Agreement and the Notes, or
any action taken or omitted by the Agent under this Agreement and the Revolving
Notes, provided that no Bank shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the Agent's gross negligence or
willful misconduct. Without limitation of the foregoing, each Bank agrees to
reimburse the Agent promptly upon demand for its ratable share of any
out-of-pocket expenses (including reasonable counsel fees) incurred by the Agent
in connection with the preparation, execution, administration, or enforcement
of, or legal advice in respect of rights or responsibilities under, this
Agreement and the Revolving Notes, to the extent that the Agent is not
reimbursed for such expenses by the Borrower.
Section 8.7. Successor Agent. The Agent may resign at any time as Agent
under this Agreement by giving written notice thereof to the Banks and the
Borrower. Upon any such resignation, the Required Banks shall have the right to
appoint a successor Agent hereunder with the approval of the Borrower, which
shall not be unreasonably withheld (provided no approval by the Borrower shall
be required if the Borrower is in Default hereunder). If no successor Agent
shall have been so appointed by the Required Banks and shall have accepted such
appointment, within 30 days after the retiring Agent's giving of notice of
resignation of the retiring Agent, then the retiring Agent may, on behalf of the
Banks, appoint a successor Agent with the approval of the Borrower, which shall
not be unreasonably withheld (provided no approval by the Borrower shall be
required if the Borrower is in Default hereunder), which shall be a commercial
bank organized under the laws of the United States of America or of any state
thereof and having a combined capital and surplus of at least $500,000,000. Upon
the acceptance of any appointment as Agent under this Agreement by a successor
Agent, such successor Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations under this
Agreement arising from and after the date of resignation. After any retiring
Agent's resignation as Agent under this Agreement, the provisions of this
Article 8 shall
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inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent under this Agreement.
Section 8.8. Application of this Article to the Borrower. Notwithstanding
anything to the contrary in this Article 8, the provisions of Sections 8.1, 8.2,
8.3, 8.5 and 8.6 shall be deemed to govern the rights and obligations as among
the Banks and the Agent only, and shall not be construed to affect any rights or
obligations of the Borrower with respect to the Banks and the Agent.
ARTICLE 9. MISCELLANEOUS.
Section 9.1. Amendments and Waivers. No amendment or waiver of any
provision of this Agreement or the Revolving Notes nor consent to any departure
by the Borrower therefrom, shall in any event be effective unless the same shall
be in writing and signed by the Agent, the Borrower and the Required Banks, and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given. Notwithstanding the foregoing, the
written consent of all Banks shall be required for any amendment or waiver
having the effect of (i) extending the Revolving Loan Termination Date (except
as expressly provided for herein), extending the time of payment of principal,
interest or fees on any Revolving Loans or reducing or forgiving the principal
amount thereof (other than by repayment), decreasing the interest rate borne by
any Revolving Loans, increasing the amount of any Bank's Commitment over the
amount then in effect (it being understood that a waiver of any Default or Event
of Default or a mandatory reduction in the Commitment shall not constitute an
increase in any Commitment of any Bank), or postponing or reducing any scheduled
reduction of the Commitment (except as set forth herein), (ii) reducing the
percentage specified in the definition of Required Banks, (iii) amending or
waiving any provision of this Section 9.1 or (iv) consenting to the assignment
or transfer by the Borrower of any of its rights and obligations under this
Agreement or the Revolving Notes. No failure on the part of Agent or any Bank to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof or preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
Section 9.2. Usury. Anything herein to the contrary notwithstanding, the
Obligations of the Borrower with respect to this Agreement and the Revolving
Notes shall be subject to the limitation that payments of interest shall not be
required to the extent that receipt thereof would be contrary to provisions of
law applicable to the Banks limiting rates of interest which may be charged or
collected by the Banks.
Section 9.3. Expenses; Indemnities.
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(a) The Borrower shall reimburse the Agent for all reasonable out-of-pocket
costs, expenses and charges (including without limitation, reasonable fees and
charges of Day, ▇▇▇▇▇ & ▇▇▇▇▇▇ LLP) incurred by the Agent in connection with the
preparation of this Agreement and the Revolving Notes.
(b) Unless otherwise agreed in writing by all Banks, the Borrower shall
reimburse the Agent and the Banks on demand for all reasonable out-of-pocket
costs, expenses and charges (including without limitation, reasonable fees and
charges of counsel for the Agent and the Banks) incurred by the Agent and the
Banks in connection with any amendment or modification of this Agreement and
the Revolving Notes. The Borrower further agrees to pay on demand all reasonable
costs and expenses (including reasonable counsel fees and expenses), if any, in
connection with the enforcement, including without limitation, the enforcement
of judgments (whether through negotiations, legal proceedings or otherwise) of
this Agreement or the Revolving Notes or any other document to be delivered
under this Agreement and all audits, all insurance costs, and all other
reasonable costs and expenses which the Agent or any Bank has or shall have paid
by reason of the Borrower's failure or refusal to do so as and when required
hereunder. The Borrower agrees to indemnify and hold harmless the Agent and the
Banks from and against any and all liabilities with respect to or resulting from
any delay in paying or omission to pay such costs, expenses, charges and fees,
except to the extent caused by the Agent's or such Bank's negligence or willful
misconduct or breach of this Agreement; provided, however, that this agreement
to indemnify shall apply to such Bank's or the Agent's direct loss or damage
only and not to indirect, consequential or other damages. Until paid, the amount
of any cost, expense or charge shall constitute, together with all accrued
interest thereon, part of the Obligations, and shall accrue interest from the
date five days after demand at the Base Rate.
(c) The Borrower agrees to indemnify the Agent and the Banks, and their
directors, officers, employees, agents and Affiliates from, and hold each of
them harmless against, any and all claims, damages, liabilities, losses, costs
and expenses (including without limitation, reasonable fees and disbursements of
counsel) arising as a consequence of (i) any failure by the Borrower to pay the
Agent or any Bank, as required under this Agreement, punctually on the due date
thereof, any amount payable by the Borrower to the Agent or any Bank or (ii) the
acceleration, in accordance with the terms of this Agreement, of the time of
payment of any of the Obligations of the Borrower, except to the extent caused
by the Agent's or such Bank's negligence or willful misconduct or breach of this
Agreement; provided, however, that this agreement to indemnify shall apply to
such Bank's or the Agent's direct loss or damage only and not to indirect,
consequential or other damages. Such losses, costs or expenses may include,
without limitation, (i) any costs incurred by the Bank in carrying funds to
cover any overdue principal, overdue interest, or any other overdue sums payable
by the Borrower to such Bank or (ii) any losses
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incurred or sustained by any Bank in liquidating or reemploying funds acquired
by such Bank from third parties.
(d) The Borrower agrees to indemnify the Agent and the Banks, and their
directors, officers, employees, agents and Affiliates from, and hold each of
them harmless against, any and all claims, damages, liabilities, losses, costs
and expenses (including without limitation, reasonable fees and disbursements of
counsel) arising out of or by reason of any investigation or litigation or other
proceedings (including any threatened investigation or litigation or other
proceedings), relating to any actions or omissions of the Borrower or any of its
agents or any of their respective directors, officers, employees or agents in
connection with this Agreement, or any actual or proposed use by the Borrower of
the proceeds of the Revolving Loans, including without limitation, the
reasonable fees and disbursements of counsel incurred in connection with any
such investigation or litigation or other proceedings (but excluding any such
losses, liabilities, claims, damages or expenses incurred by reason of the gross
negligence or willful misconduct of the Person to be indemnified), provided,
however, that this agreement to indemnify shall apply to such Bank's or the
Agent's direct loss or damage only and not to indirect, consequential or other
damages.
(e) The Borrower agrees to indemnify the Agent and the Banks, and their
directors, officers, employees, agents and Affiliates from, and hold each of
them harmless against, any and all claims, damages, liabilities, losses, costs
and expenses (including without limitation, reasonable fees and disbursements of
counsel) which may be incurred by or asserted against the Agent and the Banks or
any such party in connection with their acting as Agent or as lenders under this
Agreement, arising out of or relating to (i) any natural resource damages,
governmental fines or penalties or other amounts mandated by any governmental
authority, court order, demand or decree in connection with the disposal by the
Borrower, its Subsidiaries or their agents (including leakage or seepage from
any such site including third party treatment facilities) of pollutants,
contaminants or hazardous wastes and (ii) any personal injury or property damage
to third parties resulting from the pollutants, contaminants or hazardous wastes
so disposed by the Borrower, its Subsidiaries or their agents.
Section 9.4. Term; Survival. This Agreement shall continue in full force
and effect as long as any Obligations are owing by the Borrower to the Agent or
any Bank. No termination of this Agreement shall in any way affect or impair the
rights and obligations of the parties hereto relating to any transactions or
events prior to such termination date, and all warranties and representations of
the Borrower shall survive such termination. All representations and warranties
made hereunder and in any document, certificate, or statement delivered pursuant
hereto or in connection herewith shall survive the execution and delivery of
this Agreement and the Revolving Notes. The obligations of the Borrower under
Section 9.3 shall survive the repayment of the Revolving Loans and the
termination of the Commitment.
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Section 9.5. Assignment; Participations.
(a) With the written consent of the Agent and the Borrower (which consent
shall not be unreasonably withheld), each Bank may assign to one or more
commercial banks or financial institutions all or a portion of its rights and
obligations under this Agreement (including without limitation, all or a portion
of its Commitment and the amounts under the Revolving Loans owing to it);
provided, however, that (i) each such assignment shall be of a constant, and not
a varying, percentage of all of the assigning Bank's rights and obligations
under this Agreement, (ii) the amount of the Commitment of the assigning Bank
being assigned pursuant to each such assignment (determined as of the date of
the Assignment and Acceptance) with respect to such assignment shall in no event
be less than $5,000,000 and shall be an integral multiple of $500,000 (or in the
case of an Assignment and Acceptance covering all or the remaining portion of an
assigning Bank's rights and obligations under this Agreement, any lesser
increment), and (iii) the parties to each such assignment shall execute and
deliver to the Agent, for its acceptance and recording in the Register (as
defined in (c) below), an Assignment and Acceptance and a $3,500 non-refundable
processing fee from the assigning Bank. Notwithstanding the foregoing, no
written consent of the Borrower shall be required in connection with any
assignment by a Bank to an Affiliate of such Bank of all or a portion of its
rights and obligations under this Agreement. Upon such execution, delivery,
acceptance and recording, from and after the effective date specified in each
Assignment and Acceptance, (x) the assignee thereunder shall be a Bank party
hereto and, to the extent that rights and obligations (including any portion of
any Commitment) hereunder have been assigned to it pursuant to such Assignment
and Acceptance, shall have the rights and obligations of a Bank hereunder and
(y) the Bank assignor thereunder shall, to the extent that rights and
obligations (including any portion of any Commitment) hereunder have been
assigned by it pursuant to such Assignment and Acceptance, relinquish its rights
(other than its rights to indemnification under Section 9.3) and be released
from its obligations under this Agreement arising after the date of assignment
(and, in the case of an assignment covering all or the remaining portion of an
assigning Bank's rights and obligations under this Agreement, such Bank shall
cease to be a party hereto.)
(b) By executing and delivering an Assignment and Acceptance, the Bank
assignor thereun der and the assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (i) other than as provided in
such Assignment and Acceptance, such assigning Bank makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document furnished pursuant
hereto; (ii) such assigning Bank makes no representation or warranty and assumes
no responsibility with respect to the financial condition of the Borrower or the
performance or observance by the Borrower of any of its
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obligations under this Agreement or any other instrument or document furnished
pursuant hereto; (iii) such assignee confirms that it has received a copy of
this Agreement, together with copies of the most recent financial statements
referred to in Section 5.8 and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance; (iv) such assignee will, independently and
without reliance upon the Agent, such assigning Bank or any other Bank and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (v) such assignee appoints and authorizes the Agent to take such
action as Agent on its behalf and to exercise such powers under this Agreement
as are delegated to the Agent by the terms hereof, together with such powers as
are reasonably incidental thereto; (vi) such assignee agrees that it will
perform in accordance with the terms all of the obligations which by the terms
of this Agreement are required to be performed by it as a Bank; and (vii) such
assignee represents that such assignment will not result in any Prohibited
Transaction.
(c) The Agent shall maintain at its address set forth on the signature
pages hereto a copy of each Assignment and Acceptance delivered to and accepted
by it and a register for the recordation of the names and addresses of the Banks
and the Commitment of, and principal amount of the Revolving Loans owing to,
each Bank from time to time (the "Register"). The entries in the Register shall
be conclusive and binding for all purposes, absent manifest error, and the
Borrower, the Agent and the Banks may treat each Person whose name is recorded
in the Register as a Bank hereunder for all purposes of this Agreement. The
Register shall be available for inspection by the Borrower or any Bank at any
reasonable time and from time to time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed by an
assigning Bank and its assignee, the Agent shall, if such Assignment and
Acceptance has been completed and is in substantially the form of Exhibit E, (i)
accept such Assignment and Acceptance, (ii) record the information contained
therein in the Register and (iii) give prompt notice thereof to the Borrower.
(e) Each Bank may sell participations to one or more banks or other
entities in or to all or a portion of its rights and obligations under this
Agreement (including without limitation, all or a portion of its Commitment and
the amounts under the Revolving Loans owing to it); provided, however, that (i)
such Bank's obligations under this Agreement (including without limitation, its
Commitment to the Borrower hereunder) shall remain unchanged, (ii) such Bank
shall remain solely responsible to the other parties hereto for the performance
of such obligations and (iii) the Borrower, the Agent and the other Banks shall
continue to deal solely and directly with such Bank in connection with such
Bank's rights and obligations under this Agreement; provided, that no Bank shall
transfer or grant any participation under which the participant shall have the
right
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to approve any amendment to or waiver of this Agreement or any Revolving Note,
except with respect to an extension of the final maturity of the Revolving Loans
or a reduction of the principal amount of or the rate of interest payable on the
Revolving Loans or any fees related thereto.
(f) Any Bank may, in connection with any assignment or participation or
proposed assign ment or participation pursuant to this Section 9.5, disclose to
the assignee or participant or proposed assignee or participant any information
relating to the Borrower furnished to such Bank by or on behalf of the Borrower;
provided that, prior to any such disclosure, the assignee or participant or
proposed assignee or participant shall agree in writing to preserve the
confidentiality of any confidential information relating to the Borrower
received by it from such Bank.
(g) Nothing herein shall prohibit any Bank from pledging or assigning any
Revolving Note to any Federal Reserve Bank in accordance with applicable law.
Section 9.6. Notices. All notices, requests, demands and other
communications provided for herein shall be in writing and shall be (i) hand
delivered; (ii) sent by certified, registered or express United States mail,
return receipt requested, or reputable next-day courier service; (iii) with
respect to notices given under Article 2 only, given by telex, telecopy,
telegraph or similar means of electronic communication followed by mail or hand
delivery thereof, or (iv) with respect to the service of any and all process on
the Borrower by any Bank or the Agent, sent to the attention of the President of
the Borrower by certified, registered or express United States mail, return
receipt requested, or reputable next-day courier service. All such
communications shall be effective upon the receipt thereof. Notices shall be
addressed to the Borrower, the Agent and the Banks at their respective addresses
set forth on the signature pages of or (in the case of the Banks) Schedule 1.1.
to this Agreement, or to such other address as the Borrower, the Agent or the
Banks shall theretofore have transmitted to the other party in writing by any of
the means specified in this Section.
Section 9.7. Setoff. The Borrower agrees that, in addition to (and without
limitation of) any right of setoff, banker's lien or counterclaim each Bank may
otherwise have, each Bank shall be entitled, at its option, to offset balances
(general or special, time or demand, provisional or final, and regardless of
whether such balances are then due to the Borrower) held by it for the account
of the Borrower at any of such Bank's offices, in Dollars or in any other
currency, against any amount payable by the Borrower under this Agreement or any
Revolving Note that is not paid when due, taking into account any applicable
grace period, in which case it shall promptly notify the Borrower and the Agent
thereof; provided that such Bank's failure to give such notice shall not affect
the validity thereof.
Section 9.8. Jurisdiction; Immunities.
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(a) The Borrower hereby irrevocably submits to the jurisdiction of any
Connecticut State or United States Federal court sitting in Connecticut over any
action or proceeding arising out of or relating to this Agreement or the
Revolving Notes, and the Borrower hereby irrevocably agrees that all claims in
respect of such action or proceeding may be heard and determined in such
Connecticut State or Federal court. The Borrower irrevocably consents to the
service of any and all process in any such action or proceeding by the mailing
of copies of such process to the Borrower at its address specified in Section
9.6. The Borrower agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. The Borrower further waives any
objection to venue in such State and any objection to an action or proceeding in
such State on the basis of forum non conveniens. The Borrower further agrees
that any action or proceeding brought against the Bank shall be brought only in
Connecticut State or United States Federal courts sitting in Connecticut.
(b) Nothing in this Section shall affect the right of each Bank to serve
legal process in any other manner permitted by law or affect the right of each
Bank to bring any action or proceeding against the Borrower or its Property in
the courts of any other jurisdictions.
Section 9.9. Table of Contents; Headings. Any table of contents and the
headings and captions hereunder are for convenience only and shall not affect
the interpretation or construction of this Agreement.
Section 9.10. Severability. The provisions of this Agreement are intended
to be severable. If for any reason any provision of this Agreement shall be held
invalid or unenforceable in whole or in part in any jurisdiction, such
provision shall, as to such jurisdiction, be ineffective to the extent of such
invalidity or unenforceability without in any manner affecting the validity or
enforceability thereof in any other jurisdiction or the remaining provisions
hereof in any jurisdiction, unless the ineffectiveness of such provision would
(a) result in such a material change to the performance of this Agreement as to
be unreasonable or (b) materially and adversely frustrate the objectives of the
parties as expressed in this Agreement as originally written, in which event,
the parties agree to negotiate in good faith an amendment to this Agreement to
achieve its intended purpose.
Section 9.11. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any party hereto may execute this Agreement by signing any such
counterpart.
Section 9.12. Integration. This Agreement and the Revolving Notes set forth
the entire agreement between the parties hereto relating to the transactions
contemplated hereby and
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thereby and supersede any prior oral or written statements or agreements with
respect to such transactions.
Section 9.13. Governing Law. This Agreement shall be governed by, and
interpreted and construed in accordance with, the laws of the State of
Connecticut.
Section 9.14. Confidentiality. Subject to the following sentence, the
Agent, each Bank and any assignee of such Bank becoming a party to this
Agreement agrees to use its best efforts, consistent with its normal operating
procedures, to retain in confidence in accordance with each Bank's customary
procedures and not disclose without the prior written consent of the Borrower
any written information about the Borrower and its Subsidiaries obtained
pursuant to the requirements of this Agreement and identified in writing by the
Borrower as "non-public," except as permitted under Section 9.5 of this
Agreement. Notwithstanding the foregoing, the Agent or any Bank (a) may disclose
or otherwise use such information to the extent that such information is
required in any application, report, statement or testimony submitted to any
governmental agency having or claiming to have jurisdiction over the Agent or
such Bank, (b) may disclose or otherwise use such information to the extent that
such information is required in response to any summons or subpoena or in
connection with any litigation affecting the Agent or such Bank or to preserve
the Agent's or such Bank's rights, remedies or enforcement hereunder, (c) may
disclose or otherwise use such information to the extent that such information
is reasonably believed by the Agent or such Bank (after notification to the
Borrower, unless such notification is prohibited by law or any disclosure is
requested or demanded by any bank regulatory body) to be required in order to
comply with any law, order, regulation, or ruling applicable to the Agent or
such Bank, (d) may disclose or otherwise use such information to the extent that
such information becomes publicly available and (e) may disclose or otherwise
use such information to the extent such information is or becomes available on a
non-confidential basis from a source other than the Borrower, provided such
source is not bound by a confidentiality agreement known to the Banks, after
due inquiry, with the Borrower.
Section 9.15. Authorization of Third Parties to Deliver Opinions, Etc. The
Borrower hereby authorizes and directs each Person whose preparation or delivery
to the Agent or any Bank of any opinion, report or other information is a
condition or covenant under this Agreement to so prepare or deliver such
opinion, report or other information for the benefit of the Agent and the Banks.
The Borrower agrees to confirm such authorizations and directions provided for
in this Section 9.15 from time to time as may be requested by the Agent or the
Banks.
Section 9.16. Borrower's Waivers. THE BORROWER ACKNOWLEDGES THAT IT HAS
BEEN ADVISED BY COUNSEL OF ITS CHOICE WITH RESPECT TO THIS TRANSACTION AND THIS
AGREEMENT AND THAT IT MAKES THE FOLLOWING WAIVER KNOWINGLY, VOLUNTARILY AND
INTELLIGENTLY:
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THE BORROWER IRREVOCABLY WAIVES TRIAL BY JURY IN ANY COURT AND IN ANY SUIT,
ACTION OR PROCEEDING OR ANY MATTER ARISING IN CONNECTION WITH OR IN ANY WAY
RELATED TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, THE REVOLVING
NOTES OR ANY OF THE BORROWER'S DOCUMENTS RELATED THERETO AND THE
ENFORCEMENT OF ANY OF THE AGENT'S OR ANY BANK'S RIGHTS AND REMEDIES.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-56-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
DONEGAL GROUP INC.
By
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior Vice President and CFO
Address for Notices:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: Senior Vice President and CFO
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Duane, Morris & Heckscher LLP
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
FLEET NATIONAL BANK, as Agent
By
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Name:
Title:
Address for Notices:
Financial Institutions Group
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
S-1
With a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Day, ▇▇▇▇▇ & ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
BANKS:
FLEET NATIONAL BANK
By
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Name:
Title:
CREDIT LYONNAIS NEW YORK BRANCH
By
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Name:
Title:
S-2
