PROMISSORY NOTE AND SECURITY AGREEMENT
March 10, 2000
This Promissory Note and Security Agreement ("Note") is made and given
effect as of March 10, 2000, BY Xxx X. Xxxxxxxx, an individual having an address
at 000 Xxxxxxxxxxx Xxxx, Xxxxx Xxxxxxxxxx, Xxxxxxxxxxxx, hereinafter referred to
as "Borrower", IN FAVOR OF, Penn-America Insurance Company, a Pennsylvania
corporation, with offices located at 000 X. Xxxx Xxxx, Xxxxxxx, Xxxxxxxxxxxx,
hereinafter referred to as "Lender". The word "Lender" means the original Lender
and anyone else who takes this Note by transfer.
1. Sole Purpose of the Loan. This credit evidenced hereby is given by the Lender
pursuant to Section 1502 of the Pennsylvania Corporation Law and the Unanimous
Consent of the Directors of the Lender, dated January 1, 2000. Any funds
provided under this Note may solely be used by Borrower to purchase $.001 par
value common stock of the Lender (the "Common Stock"), including brokerage
commissions and transaction costs. Such funds will be provided by Lender to
Borrower by way of Borrower's authorized broker, Gruntal & Company, who will
relay Borrower's request for funds from Lender and who will then receive said
funds from Lender and apply them towards the purchase of $.001 par value PNG
common stock as directed by Borrower.
2. Borrower's Promise to Pay Principal and Interest. In return for the funds
loaned by Lender to Borrower for the acquisition of PNG common stock, Borrower
promises to pay $157,554.25 (the "Principal"), plus interest to the order of the
Lender. Interest, at an annual rate of (6.21%) percent will be charged on that
part of the Principal which has not been paid from the date of this Note until
all Principal has been paid in full, with interest to be accrued semi-annually.
See attached Addendum, incorporated herein by reference, for specifics of the
transaction(s), which generated the principal due and owing herein.
3. Payments. Unless otherwise specifically set forth herein, Borrower will pay
all principal, interest, costs and charges due and owing under this Note no
later than March 10, 2005. All payments will be made to Lender at the address
shown above or to such other address as Lender may notify Borrower of, in
writing. Notwithstanding the foregoing, Borrower may instruct Lender to sell
some or all of the Common Stock, which is the subject of this Promissory Note
and Security Agreement. The proceeds from such sale will be used by Lender
towards repayment of Borrower's loan and shall be applied by Lender to repay an
amount equal to the cost basis for the shares of Common Stock sold, including
commissions, costs and interest incurred. Such repayment shall be entered onto
Lender's books within five (5) business days of the receipt of settlement
proceeds by Lender. Further, notwithstanding the foregoing, all principal,
interest, costs and charges due and owing under this Note shall be immediately
due and payable upon the termination of the Borrower's employment relationship
with the Lender for any reason whatsoever.
1
4. Principal Non-Recourse to Borrower. Notwithstanding anything contained in
this Promissory Note and Security Agreement to the contrary, the Lender's sole
recourse with respect to the principal amounts due under this note in the event
of default or other failure of the Borrower hereunder shall be to the Common
Stock subject to the security agreement embodied herein, and the loans evidenced
hereby shall in all events be non-recourse to the Borrower or any assets of the
Borrower other than the Common Stock purchased hereby. Interest due under this
Note, however, shall be fully recourse to the Borrower.
5. Early Payments. Borrower has the right to make payments at any time before
they are due. These early payments will mean that this Note will be paid in less
time.
6. Late Charge for Overdue Payments. If the Lender has not received any payment
within fifteen (15) days after its due date, Borrower will pay the Lender a late
charge of (4%) percent of the payment. This charge will be paid with the late
payment.
7. Default. If Borrower fails to make any payment required by this Note within
fifteen (15) days after its due date, or if Borrower fails to keep any other
promises that Borrower makes in this Note, or if those promises made in the
Security Agreement bearing even date herewith are not kept, Lender may declare
that Borrower is in default on this Note and the Security Agreement. Upon
default, Borrower must immediately pay the full amount of all unpaid principal,
interest, other amounts due on this Note and the Security Agreement and the
Lender's costs of collection and reasonable attorney fees.
8. Waivers. Borrower gives up its right to require that the Lender do the
following: (a) to demand payment (called "presentment"); (b) to notify Borrower
of nonpayment (called "notice of dishonor"); and (c) to obtain an official
certified statement showing nonpayment (called a "protest"). The Lender may
exercise any right under this Note or the Security Agreement or under any law,
even if Lender has delayed in exercising that right or has agreed in an earlier
instance not to exercise that right. Lender does not waive its right to declare
that Borrower is in default by making payments or incurring expenses on
Borrower's behalf.
9. Pledge of Collateral. In order to protect the Lender if the promises made in
this Note are not kept, and as security for the Borrower's repayment of its
obligations as set forth in this Note (the "Obligations"), the Borrower hereby
grants to the Lender a security interest in and a lien on the Common Stock (the
"Collateral") purchased in accordance with this Note and held by Lender in its
safe at Penn-America Insurance Company, under the control of the Controller. The
parties intend that this Note shall constitute a "security agreement" within the
meaning and for purposes of, and as defined in the Pennsylvania Uniform
Commercial Code, 13 PACSA Section 4101 et seq. (the "Code").
2
10. Escrow of Collateral.
A. Simultaneously with the Borrower's execution of this Note, the
Borrower shall execute and deliver to Lender any and all forms, instruments,
certificates and other documents required by Lender that are sufficient for
Lender to establish possession or control of the Common Stock to be purchased in
order to perfect the Lender's lien on such Common Stock, together with such
other reasonable terms and conditions to preserve the Collateral and to protect
the rights of Lender in the Collateral.
B. Lender shall hold the Collateral and the Assignment thereof in
escrow in accordance with the following provisions:
(1) If Borrower is in Default, Lender shall liquidate the Collateral.
(2) When the Obligations have been paid in full or satisfied, the
Lender shall release the Collateral to the order of the Borrower.
11. Rights Retained by the Borrower.
A. Until the Lender exercises its rights under this Agreement to the
Collateral, the Borrower shall retain any voting rights, rights to receive cash
dividends, liquidating stock dividends and dividends paid in stock, new
securities or other property which the Borrower is entitled to receive by virtue
of such dividend, and all other rights associated with the Collateral, except
those expressly limited in this Agreement.
B. In addition, the Borrower shall, at all times until the Collateral
is sold and title thereto is actually transferred, have the absolute right to
redeem the Collateral upon payment to the Lender of the then outstanding balance
of the Obligations.
12. Borrower's Default. If the Borrower defaults in the payment of its
Obligations pursuant to this Note, upon the Lender's demand, the Borrower will
execute any other assignment or document necessary or advisable to liquidate or
assign the Collateral to the Lender, make payment pursuant to this Note, and to
carry out the purposes of this Agreement.
13. Lender's Rights. The rights, powers and remedies given to the Lender by this
Agreement are in addition to all rights, powers and remedies given to the Lender
by statute or rule of law, unless otherwise limited in this Agreement. A
forbearance or failure or a delay by the Lender in exercising any one or more of
its rights, powers or remedies is not a waiver of any such right, power or
remedy, and any exercise of a right, power or remedy does not preclude its
further exercise. Until the Obligations of the Borrower are fully satisfied, the
rights, powers and remedies of the Lender continue to exist and may be exercised
by the Lender at any time not limited in this Agreement.
14. Further Assurances. The Borrower and the Lender hereby agree to execute and
deliver in the future any and all assignments, agreements, instruments and/or
documents as
3
may reasonably be required and as may be necessary or expedient to effect or
facilitate the transfer of the Collateral in order to effect the intents and
purposes of this Agreement.
15. Miscellaneous.
A. This Agreement applies to and shall inure to the benefit of the
Lender's successors and assigns and binds the Borrower's heirs and assigns.
B. This Agreement may not be modified except by a written agreement
executed by both the Borrower and the Lender.
C. This Agreement contains the entire agreement between the parties as
to the subject matter set forth therein and supersedes any and all prior written
or oral understandings or agreements with respect to the subject matter hereof.
D. This Agreement may not be assigned by the Borrower. Lender may
assign this Promissory Note and Security Agreement and shall provide written
notification thereof to Borrower.
E. Any and all notices and other correspondence required or permitted
to be given hereunder shall be in writing and shall either be (i) personally
delivered; (ii) transmitted by telefax and followed by sending same via United
States first class mail; or (iii) sent by United States certified or registered
mail, return receipt requested, with full postage prepaid, and addressed to the
parties at their respective addresses herein set forth (or to such other address
as the parties may from time to time designate by notice to the others given in
the foregoing manner. All notices shall be deemed effective when given.
F. This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Pennsylvania unless preempted by Federal
law, without regard to its principles of conflict of laws.
G. In the event that any provision or part thereof set forth herein is
held to be invalid by a court of competent jurisdiction, or otherwise conflicts
with applicable law, such provision or part hereof shall be deemed to be deleted
from this Agreement, and this Agreement shall be construed to give effect to the
remaining provisions hereof.
H. Captions in this Agreement are included herein for convenience of
reference only and shall not constitute a part hereof for any other purpose.
4
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and
seals the day and year first above written.
PENN-AMERICA INS. CO. Borrower:
By: /s/ Xxxxxxxx Xxxxxxx /s/ Xxx X. Xxxxxxxx
------------------------------------ ------------------------------------
WITNESS:
/s/ Xxxxxxx X Xxxxxxxx
-----------------------------
STATE OF PENNSYLVANIA )
)ss.
COUNTY OF Xxxxxxxxxx )
BE IT REMEMBERED, that I hereby certify that on this 4th day of March,
2000, before me, the undersigned authority, personally appeared Xxx X. Xxxxxxxx,
who I am satisfied is the person mentioned in the within instrument, and he
acknowledged that he signed, sealed and delivered the same as his voluntary act
and deed.
/s/ Xxxxxxxx Xxxxxxx
--------------------------------
5
STATE OF PENNSYLVANIA )
)ss.
COUNTY OF Xxxxxxxxxx )
BE IT REMEMBERED, that on this 10th day of March, 2000, before me, the
subscriber, a Notary Public of the State of Pennsylvania, personally appeared
Xxxxxxxx X. Xxxxxxx, to me known, who, being by me duly sworn upon her oath
according to law, did depose and say that she is the Chief Financial Officer of
Penn-America Insurance Company, the Lender in the within Pledge Agreement, and
that in her capacity aforesaid she executed the within Pledge Agreement on
behalf of the said corporation; she did duly acknowledge to me that she signed,
sealed and delivered the same as her voluntary act and deed and as such officer
of the said corporation; that the within instrument is the voluntary act and
deed of the said corporation, by virtue of authority granted by its Board of
Directors; that this person knows the proper seal of the corporation which was
affixed to his Pledge Agreement.
Notary Public of Pennsylvania
NOTARIAL SEAL
/s/ Xxxxxx X. Xxxxx
My Commission Expires 12/9/02
Addendum
This Addendum forms a part of the Promissory Note and Security Agreement
("Note") by and between Xxx X. Xxxxxxxx ("Borrower") and Penn-America Insurance
Company ("Lender"), dated March 10, 2000.
The common stock acquired by Borrower, which gives rise to the Note in the
amount of $157,554.25 (which is the principal amount of the loan plus
brokerage commissions and transaction costs) is the result of the
acquisition by Borrower on March 7, 2000: (a) of 5,000 shares of PNG common
stock at a price of $7.75 per share; and, (b) 15,000 shares of PNG common
stock at a price of $7.8667 per share. See Confirmation Notice, attached
hereto and forming a part hereof.
By signing this Addendum, the parties to the Note acknowledge that this
Addendum, and all attachments hereto, forms a part of and is incorporated by
reference in the Note by and between Xxx X. Xxxxxxxx and Penn-America Insurance
Company dated March 10, 2000.
PENN-AMERICA INSURANCE COMPANY XXX X. XXXXXXXX
By: /s/ Xxxxxxxx Xxxxxxx /s/ Xxx X. Xxxxxxxx
---------------------------- -----------------------------------
