SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT, dated as of the 26th day of
August, 1999 (this "Amendment"), is made among PENN-AMERICA GROUP, INC, a
Pennsylvania corporation (the "Borrower"), the banks and financial institutions
from time to time party to the Credit Agreement (as defined herein)
(collectively, the "Lenders"), and FIRST UNION NATIONAL BANK ("First Union"), as
agent for the Lenders (in such capacity, the "Agent").
RECITALS
A. The Borrower, the Lenders and the Agent are parties to a Credit
Agreement, dated as of September 28, 1998, as amended by a First Amendment to
Credit Agreement, dated as of May 12, 1999 (as further amended, the "Credit
Agreement"), providing for the availability of certain credit facilities to the
Borrower upon the terms and conditions set forth therein. Capitalized terms used
herein without definition shall have the meanings given to them in the Credit
Agreement.
B. The Borrower has requested certain amendments to the Credit Agreement,
and the Lenders have agreed to effect such amendments, effective as of June 30,
1999, upon the terms and conditions set forth herein.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
AMENDMENTS
1.1 Definitions. Section 1.1 of the Credit Agreement is amended by deleting
the proviso at the end of the definition of Fixed Charge Coverage Ratio and
substituting the following therefor "provided that, the stock repurchases
referred to in subclause (z) of clause (ii) above shall not include (a) any such
repurchases occurring prior to July 1, 1999 and (b) the first $5,000,000 of such
repurchases occurring on or between July 1, 1999 and September 30, 2000."
1.2 Statutory Surplus. Section 7.6 of the Credit Agreement is hereby
amended and restated in its entirety as follows.
7.6 Statutory Surplus. The Borrower will not permit Combined
Statutory Capital and Surplus of the Insurance Subsidiaries, as
of the last day of any fiscal quarter, beginning with the fiscal
quarter ending December 31, 1999, to be less than 90%
of Combined Statutory and Capital Surplus as of September 30,
1999, as determined in accordance with SAP.
1.3 Compliance Certificate. Part C of Attachment A to Exhibit C-1 to the
Credit Agreement (Form of GAAP Compliance Certificate) is hereby amended and
restated as set forth on Exhibit A hereto. Part C of Attachment A to Exhibit C-2
to the Credit Agreement (Form of SAP Compliance Certificate) is hereby amended
and restated as set forth on Exhibit B hereto.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
The Borrower hereby represents and warrants to the Agent and each Lender as
follows:
2.1 Representations and Warranties. After giving effect to this Amendment,
each of the representations and warranties of the Borrower contained in the
Credit Agreement and in the other Credit Documents is true and correct on and as
of the date hereof with the same effect as if made on and as of the date hereof
(except to the extent any such representation or warranty is expressly stated to
have been made as of a specific date, in which case such representation or
warranty is true and correct as of such date).
2.2 No Default. After giving effect to this Amendment, no Default or Event
of Default has occurred and is continuing.
ARTICLE III
EFFECTIVE DATE
This Amendment shall be effective as of June 30, 1999.
ARTICLE IV
MISCELLANEOUS
4.1 Effect of Amendment. From and after the effective date of the
amendments to the Credit Agreement set forth herein, all references to the
Credit Agreement set forth in any other Credit Document or other agreement or
instrument shall, unless otherwise specifically provided, be references to the
Credit Agreement as amended by this Amendment and as may be further amended,
modified, restated or supplemented from time to time. This Amendment is limited
as specified and shall not constitute or be deemed to constitute an amendment,
modification or waiver of any provision of the Credit Agreement except as
expressly set forth herein. Except as expressly amended hereby, the Credit
Agreement shall remain in full force and effect in accordance with its terms.
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4.2 Governing Law. This Amendment shall be governed by and construed and
enforced in accordance with the laws of the State of North Carolina (without
regard to the conflicts of law provisions thereof).
4.3 Expenses. The Borrower agrees to pay upon demand all reasonable
out-of-pocket costs and expenses of the Agent and each Lender (including,
without limitation, the reasonable fees and expenses of counsel to the Agent and
each Lender) in connection with the preparation, negotiation, execution and
delivery of this Amendment and the other Credit Documents delivered in
connection herewith.
4.4 Severability. To the extent any provision of this Amendment is
prohibited by or invalid under the applicable law of any jurisdiction, such
provision shall be ineffective only to the extent of such prohibition or
invalidity and only in any such jurisdiction, without prohibiting or
invalidating such provision in any other jurisdiction or the remaining
provisions of this Amendment in any jurisdiction.
4.5 Successors and Assigns. This Amendment shall be binding upon, inure to
the benefit of and be enforceable by the respective successors and assigns of
the parties hereto.
4.6 Construction. The headings of the various sections and subsections of
this Amendment have been inserted for convenience only and shall not in any way
affect the meaning or construction of any of the provisions hereof.
4.7 Counterparts; Effectiveness. This Amendment may be executed in any
number of a counterparts and by different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument. This
Amendment shall become effective upon the execution and delivery of a
counterpart hereof by each of the parties hereto.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized officers as of the date first above written.
PENN-AMERICA GROUP, INC.
By: /s/ Xxxxxxxx Xxxxxxx
Title: Vice President, Finance
FIRST UNION NATIONAL BANK,
as Agent and as Lender
By: /s/ Xxxxxx X. Xxxxxxxxxxx
Title: Senior Vice President
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EXHIBIT A
TO
SECOND AMENDMENT TO CREDIT AGREEMENT
C. Fixed Charge Coverage Ratio (Section 7.3 of the Credit Agreement)
(shall not be less than 1.25 : 1.0)
(1) Available coverage as of the last day of any
period of four consecutive fiscal quarters
(the "Measurement Period"):
(a) Available Dividend Amount for the
Measurement Period (list by
Insurance Subsidiary other than
Subsidiaries of Insurance
Subsidiaries)
(i) PAIC $__________
(ii) Other (list separately) $__________
(iii) Total $__________
(b) Net Tax Sharing Payments with
respect to the Measurement Period
(i) Tax Payments received by $__________
Borrower
(ii) Tax Payments to be received by $__________
Borrower
(iii) Tax Payments made by $__________
Borrower
(iv) Tax Payments to be made by $__________
Borrower
(v) Net Payments (the sum of $__________
Lines l(b)(i) and l(b)(ii)
minus Lines l(b)(iii) and
I (b)(iv))
(c) Combined Net Cash Flow of non- $__________
Insurance Subsidiaries for the
Measurement Period (attach detail)
(d) Holding Company Expenses accrued $__________
during the Measurement Period
(e) Available coverage: add Lines $==========
1(a)(iii), l(b)(v) and 1(c), and subtract
Line 1 (d)
(2) Fixed Charges:
(a) Debt Service for the period of four
consecutive fiscal quarters
immediately following the
Measurement Period (the "Pro Forma
Period")
(i) Debt Service on the Loans $__________
(ii) Debt Service on other $__________
consolidated Indebtedness
(iii) Total Debt Service (add Lines $__________
2(a)(i) and 2(a)(ii))
(b) Dividends to shareholders of the $__________
Borrower for the Pro Forma Period
(based upon the most recent quarterly
rate)
(c) Stock purchases for the Measurement $__________
Period (net of stock repurchases
occurring (i) prior to 7/01/99 in the
amount of $___________ and
(ii) on or between 7/01/99 and
9/30/00 in the amount of _________ (1))
(d) Fixed Charges: $==========
Add Lines 2(a)(iii), 2(b) and 2(c)
(3) Fixed Charge Coverage Ratio: $==========
Divide Line 1(e) by Line 2(d)
__________
1 Not to exceed $5,000,000.
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EXHIBIT B
TO
SECOND AMENDMENT TO CREDIT AGREEMENT
C. Statutory Capital and Surplus
(Section 7.6 of the Credit Agreement)
(1) Combined Statutory Capital and
Surplus as of the date of
determination $
===========
(2) Minimum Combined Statutory
Capital and Surplus--90% of the
Combined Statutory Capital and
Surplus as of 9/30/99 $
===========
