FIRST AMENDMENT AND WAIVER
TO THE
AMENDED AND RESTATED CREDIT AGREEMENT
DONEGAL GROUP INC.
Dated as of December 31, 1999
This FIRST AMENDMENT AND WAIVER TO THE AMENDED AND RESTATED CREDIT
AGREEMENT dated as of December 31, 1999 (the "First Amendment") is between
DONEGAL GROUP INC., (the "Borrower"); the Banks and other financial institutions
that have executed the signature pages hereto (together with their successors
and assigns, individually, a "Bank" and collectively, the "Banks"); and FLEET
NATIONAL BANK, as Agent for the Banks (in such capacity, together with its
successors in such capacity, the "Agent").
The Borrower and the Banks entered into an Amended and Restated Credit
Agreement dated as of July 27, 1998 (the "Credit Agreement"). The Borrower and
the Banks wish to amend the Credit Agreement, to amend, among other things,
certain financial covenants and to waive a default with respect to Borrower's
failure to comply with Section 6.11 of the Credit Agreement. Capitalized terms
used herein but not defined shall have the meanings assigned to them in the
Credit Agreement. Accordingly, the Borrower and the Banks agree as follows:
Section 1. Amendments to the Credit Agreement. Effective as of the
effective date hereof and subject to the satisfaction of the conditions
precedent set forth in Section 3 hereof, the Credit Agreement is hereby amended
as follows:
(a) Section 6.10 (Minimum Statutory Surplus of Insurance Subsidiaries) of
the Credit Agreement is deleted in its entirety and replaced with the following:
"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) $85,000,000 plus (b) 50% of any
cumulative positive Combined Statutory Net Income, after dividends to the
Borrower, for each fiscal quarter, commencing with the quarter ended
December 31, 1999, plus (c) any contributions to surplus made by the
Borrower to any Insurance Subsidiary, from Revolving Loans, during each
fiscal quarter, commencing with the quarter ended December 31, 1999, 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, commencing with the quarter ended December 31, 1999."
(b) Section 6.11 (Minimum Statutory Surplus of Donegal Mutual) of the
Credit Agreement is deleted in its entirety and replaced with the following:
"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) $50,000,000 plus (b) 50% of any
cumulative positive Statutory Net Income of Donegal Mutual for each fiscal
quarter, commencing with the fiscal quarter ended December 31, 1999."
Section 2. Waivers. The Banks waive any Event of Default which would result
from the Borrower's failure to comply with that certain financial covenant under
Section 6.11 of the Credit Agreement as of the fiscal quarter ended September
30, 1999. The foregoing waiver is effective only for said Event of Default and
shall not entitle Borrower to any future waiver in similar or other
circumstances.
Section 3. Conditions of Effectiveness. This First Amendment shall become
effective as of December 31, 1999 when, and only when, the Banks shall have
received a counterpart of this First Amendment duly executed by the Borrower and
the payment of an amendment fee (in immediately available funds) as follows: (a)
Fleet National Bank, $25,000; and (b) Credit Lyonnais New York Branch, $15,000.
Section 4. Representations and Warranties of the Borrower. Borrower
represents as follows:
(a) The execution, delivery and performance by the Borrower of this First
Amendment is within Borrower's corporate powers, have been duly authorized by
all necessary corporate action and does not and will not (a) require any consent
or approval of the shareholders of Borrower; (b) contravene Borrower's charter
or by-laws; (c) violate any provision of, or require any filing, registration,
consent or approval under, any law, rule, regulation (including without
limitation, Regulations U and X), order, writ, judgment, injunction, decree,
determination or award presently in effect having applicability to and binding
upon Borrower; (d) result in a breach of or constitute a default or require any
consent under any indenture or loan or credit agreement or any other material
agreement, lease or instrument to which Borrower is a party or by which it or
its properties may be bound or affected; or (e) result in, or require, the
creation or imposition of any mortgage, deed of trust, pledge, lien, security
interest or other charge or encumbrance of any nature upon or with respect to
any of the properties now owned or hereafter acquired by Borrower; and (f)
Borrower is not in default under any such law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award or any such indenture,
agreement, lease or instrument.
(b) No authorization or approval or other action by a governmental
authority or regulatory body or other Person, and no notice to or filing with
such authority or body or Person by any Person is required for the due
execution, delivery and performance by Borrower of this First Amendment.
(c) This First Amendment has been duly executed and when delivered by the
Borrower will constitute the legal, valid and binding obligations of the
Borrower enforceable against Borrower in accordance with its 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.
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(d) The representations and warranties contained in Article 4 of the Credit
Agreement are correct on and as of the date hereof as though made on and as of
the date hereof.
(e) No Event of Default has occurred and is continuing (except those that
have been waived pursuant to Section 2 of this First Amendment) or would result
from the signing of this First Amendment or the transactions contemplated
hereby.
(f) Since the date of the last financial statements furnished to the Banks,
there has occurred no event which would have a Materially Adverse Effect.
(g) 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 Adversely Effect, or affect Borrower's ability to
perform its obligations under this First Amendment.
(h) No information, exhibit or report furnished in writing by or on behalf
of the Borrower or any officer or director of Borrower to the Banks in
connection with the negotiation of, or pursuant to the terms of, this First
Amendment contained when made any material misstatement of fact or omitted to
state a materially fact necessary to make the statements contained therein not
misleading.
Section 4. Reference to and Effect on the Credit Agreement and Revolving
Notes.
(a) Upon the effectiveness of this First Amendment, on and after the date
hereof, each reference in the Credit Agreement to this "Agreement", "hereunder",
"hereof", "herein" or words of like import and each reference in the Revolving
Notes shall mean and be a reference to the Credit Agreement as amended hereby.
(b) Except as specifically amended above, the Credit Agreement shall remain
in full force and effect and is hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this First Amendment shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of any Bank under the Credit Agreement, nor constitute a waiver
of any provision of the Credit Agreement.
Section 5. Costs, Expenses and Taxes. The Borrower agrees to pay on demand
all costs and expenses of the Banks in connection with the preparation,
execution and delivery of this First Amendment and the other instruments and
documents to be delivered hereunder, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for the Agent with respect
thereto and with respect to advising the Banks as to its rights and
responsibilities hereunder and thereunder. In addition, the Borrower shall pay
any and all stamp and other taxes payable or determined to be payable in
connection with the execution and delivery of this First Amendment and the other
instruments and documents to be delivered hereunder, and agrees to
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save the Banks harmless from and against any and all liabilities with respect to
or resulting from any delay in paying or omission to pay such taxes.
Section 6. Execution in Counterparts. This First Amendment may be executed
in any number of counterparts, each of which when so executed and delivered
shall be deemed to be an original and all of which taken together shall
constitute but one and the same instrument.
Section 7. Governing Law. This First Amendment shall be governed by, and
construed in accordance with, the laws of the State of Connecticut.
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IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
BORROWER:
DONEGAL GROUP, INC.
By: /s/ Ralph G. Spontak
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Name: Ralph G. Spontak
Title: Sr. V.P. / Secretary
AGENT:
FLEET NATIONAL BANK, as Agent
By:
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Name:
Title:
BANKS:
FLEET NATIONAL BANK
By:
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Name:
Title:
CREDIT LYONNAIS NEW YORK
BRANCH
By:
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Name:
Title:
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
BORROWER:
DONEGAL GROUP, INC.
By:
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Name:
Title:
AGENT:
FLEET NATIONAL BANK, as Agent
By: /s/ Holly A. O'Neill
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Name: Holly A. O'Neill
Title: Loan Officer
BANKS:
FLEET NATIONAL BANK
By: /s/ Holly A. O'Neill
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Name: Holly A. O'Neill
Title: Loan Officer
CREDIT LYONNAIS NEW YORK
BRANCH
By:
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Name:
Title:
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
BORROWER:
DONEGAL GROUP, INC.
By:
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Name:
Title:
AGENT:
FLEET NATIONAL BANK, as Agent
By:
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Name:
Title:
BANKS:
FLEET NATIONAL BANK
By:
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Name:
Title:
CREDIT LYONNAIS NEW YORK
BRANCH
By: /s/ Sebastian Rocco
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Name: Sebastian Rocco
Title: Senior Vice President