<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended Commission File
March 31, 1996 No. 1-1569
AMERICAN PREMIER UNDERWRITERS, INC.
Incorporated under IRS Employer I.D.
the Laws of Pennsylvania No. 23-6000765
One East Fourth Street, Cincinnati, Ohio 45202
(513) 579-6600
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___
As of May 1, 1996, there were 47,000,000 shares of the Registrant's Common
Stock outstanding, all of which were owned by American Financial Group, Inc.
Page 1 of 13
<PAGE>
AMERICAN PREMIER UNDERWRITERS, INC. 10-Q
PART I
FINANCIAL INFORMATION
AMERICAN PREMIER UNDERWRITERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars In Millions)
March 31, December 31,
1996 1995
Assets
Cash and short-term investments $ 67.7 $ 116.4
Investments:
Bonds and redeemable preferred stocks:
Held to maturity - at amortized cost
(market - $326.0 and $342.7) 324.6 332.8
Available for sale - at market
(amortized cost - $1,492.9 and $1,468.5) 1,507.8 1,536.9
Other stocks - principally at market
(cost - $3.7 and $4.2) 3.3 3.7
Investment in investee 42.0 41.0
Loans receivable 32.7 39.8
Real estate and other investments 12.4 20.4
1,922.8 1,974.6
Accrued investment income 32.5 33.8
Agents' balances and premiums receivable 319.5 326.9
Amounts due from affiliates, net 627.4 554.4
Recoverables from reinsurers and prepaid
reinsurance premiums 68.6 65.3
Other receivables 34.1 38.0
Deferred acquisition costs 88.7 89.6
Cost in excess of net assets acquired 387.0 389.9
Deferred tax asset 187.2 200.4
Other assets 181.8 165.9
$3,917.3 $3,955.2
Liabilities and Shareholder's Equity
Unpaid losses and loss adjustment expenses $1,165.4 $1,194.9
Unearned premiums 428.0 437.0
Policyholder dividends 42.6 52.5
Long-term debt:
Parent Company 285.3 320.6
Subsidiaries 19.9 9.1
Accounts payable and other liabilities 403.3 389.2
2,344.5 2,403.3
Common Stock, $1 par value - outstanding
47,000,000 shares 47.0 47.0
Capital surplus 578.9 579.1
Retained earnings 937.5 881.8
Net unrealized gain on marketable securities,
net of deferred income taxes 9.4 44.0
Total common shareholder's equity 1,572.8 1,551.9
$3,917.3 $3,955.2
2
<PAGE>
AMERICAN PREMIER UNDERWRITERS, INC. 10-Q
AMERICAN PREMIER UNDERWRITERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(In Millions)
Three months ended
March 31,
1996 1995
Income:
Property and casualty insurance premiums $339.8 $381.9
Net investment income 53.8 48.1
Realized gains (losses) on sales of securities 4.8 (.2)
Equity in net earnings of investee 1.2 -
Gain on sale of subsidiary 53.0 -
Other income 3.9 3.0
456.5 432.8
Costs and Expenses:
Property and casualty insurance:
Losses 225.0 249.5
Loss adjustment expenses 37.0 37.5
Commissions and other underwriting expenses 78.6 86.0
Policyholder dividends .9 7.0
Interest charges on borrowed money 9.8 13.2
Other operating and general expenses 9.7 13.4
361.0 406.6
Earnings before income taxes and
extraordinary items 95.5 26.2
Provision for income taxes 37.9 9.9
Earnings before extraordinary item 57.6 16.3
Extraordinary item - loss on prepayment of debt (1.9) -
Net Earnings $ 55.7 $ 16.3
3
<PAGE>
AMERICAN PREMIER UNDERWRITERS, INC. 10-Q
AMERICAN PREMIER UNDERWRITERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Millions)
Three months ended
March 31,
1996 1995
Operating Activities:
Net earnings $ 55.7 $ 16.3
Adjustments:
Deferred Federal income tax 33.0 8.6
Extraordinary losses from retirement of debt 1.9 -
Depreciation and amortization 7.4 6.7
Equity in net earnings of investee (1.2) -
Realized (gains) losses on investing activities (58.1) .4
Decrease in receivables 8.5 3.7
Increase in other assets (22.6) (6.0)
Increase (decrease) in unpaid losses and loss
adjustment expenses (29.5) 11.4
Decrease in policyholder dividends (9.9) (15.2)
Increase (decrease) in unearned premiums (9.0) 19.3
Increase (decrease) in other liabilities 22.5 (.8)
Dividends from investee .2 -
Other, net (.2) 1.3
(1.3) 45.7
Investing Activities:
Purchases of and additional investments in:
Fixed maturity investments (122.8) (79.3)
Equity securities (.2) (.1)
Property and equipment (1.8) (2.4)
Maturities and redemptions of fixed maturity
investments 32.4 27.4
Sales of:
Fixed maturity investments 82.3 205.9
Equity securities .8 -
Affiliates and subsidiaries 66.2 7.3
Real estate, property and equipment .8 .1
Cash of subsidiaries sold (4.6) -
Increase in other investments - (.5)
53.1 158.4
Financing Activities:
Reductions of long-term debt (38.5) (.2)
Additional long-term borrowings 11.0 -
Purchases of Common Stock - (87.6)
Cash dividends paid - (11.3)
Exercise of stock options and conversion of Career
Shares - .5
Net advances to affiliates (73.0) -
Other, net - (.9)
(100.5) (99.5)
Net Increase (Decrease) in Cash and
Short-term Investments (48.7) 104.6
Cash and short-term investments at
beginning of period 116.4 287.5
Cash and short-term investments at end of period $ 67.7 $ 392.1
4
<PAGE>
AMERICAN PREMIER UNDERWRITERS, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Mergers
In April 1995, American Premier Underwriters, Inc. ("APU") became a wholly-
owned subsidiary of American Financial Group, Inc. ("AFG"), a new
corporation formed by APU for the purpose of acquiring all of the common
stock of APU and American Financial Corporation (the "Mergers"). Under the
terms of the Mergers, each share of APU Common Stock then outstanding was
converted into one share of AFG common stock, and all shares of American
Financial Corporation ("AFC") common stock were exchanged for 28.3 million
shares of AFG common stock. As a result, all of the common stock of APU
and AFC is owned by AFG and AFG is APU's successor as the issuer of
publicly held common stock.
B. Accounting Policies
Basis of Presentation The accompanying consolidated financial statements
for APU are unaudited; however, management believes that all adjustments
(consisting only of normal recurring accruals unless otherwise disclosed
herein) necessary for fair presentation have been made. The results of
operations for interim periods are not necessarily indicative of results to
be expected for the year. The financial statements have been prepared in
accordance with the instructions to Form 10-Q and therefore do not include
all information and footnotes necessary to be in conformity with generally
accepted accounting principles.
Certain reclassifications have been made to prior years to conform to the
current year's presentation. All significant intercompany balances and
transactions have been eliminated. All acquisitions have been treated as
purchases. The results of operations of companies since their formation or
acquisition are included in the consolidated financial statements.
The preparation of the financial statements requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Changes in circumstances could cause
actual results to differ materially from those estimates.
Investments Debt securities are classified as "held to maturity" and
reported at amortized cost if APU has the positive intent and ability to
hold them to maturity. Debt and equity securities are classified as
"available for sale" and reported at fair value with unrealized gains and
losses reported as a separate component of shareholder's equity if the
securities are not classified as held to maturity or bought and held
principally for selling in the near term. Only in certain limited
circumstances, such as significant issuer credit deterioration or if
required by insurance or other regulators, may a company change its intent
to hold a certain security to maturity without calling into question its
intent to hold other debt securities to maturity in the future.
<PAGE>
Premiums and discounts on mortgage-backed securities are amortized over
their expected average lives using the interest method. Gains or losses
on sales of securities are recognized at the time of disposition with the
amount of gain or loss determined on the specific identification basis.
When a decline in the value of a specific investment is considered to be
other than temporary, a provision for impairment is charged to earnings
and the carrying value of that investment is reduced.
APU's investments in equity securities of companies that are 20% to 50%
owned by AFG and its subsidiaries are carried at cost, adjusted for a
proportionate share of their undistributed earnings or losses.
5
<PAGE>
AMERICAN PREMIER UNDERWRITERS, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
APU's investment in investee corporation reflects APU's 6% ownership (3.2
million shares) of the common stock of Chiquita Brands International, Inc.
("Chiquita") which is accounted for under the equity method. AFG and its
other subsidiaries own an additional 37% of the common stock of Chiquita.
Chiquita is a leading international marketer, producer and distributor of
bananas and other quality fresh and processed food products. The market
value of APU's investment in Chiquita was approximately $50.2 million at
March 31, 1996.
Short-term investments are carried at cost; loans receivable are stated
primarily at the aggregate unpaid balance.
Cost in Excess of Net Assets Acquired The excess of cost of subsidiaries
over APU's equity in the underlying net assets ("goodwill") is being
amortized over 40 years.
APU's management continually monitors whether significant changes in
certain industry and regulatory conditions or prolonged trends of declining
profitability have occurred which would lead APU to question the
recoverability of the carrying value of its goodwill. APU's evaluation of
its recorded goodwill would be based primarily on estimates of future
earnings, as well as all other available factors which may provide
additional evidence relevant to the assessment of recoverability of its
goodwill.
Insurance As discussed under "Reinsurance" below, unpaid losses and loss
adjustment expenses and unearned premiums have not been reduced for
reinsurance recoverable.
Reinsurance In the normal course of business, APU's insurance subsidiaries
cede reinsurance to other companies to diversify risk and limit maximum
loss arising from large claims. To the extent that any reinsuring
companies are unable to meet obligations under the agreements covering
reinsurance ceded, APU's insurance subsidiaries would remain liable.
Amounts recoverable from reinsurers are estimated in a manner consistent
with the claim liability associated with the reinsurance policies. APU's
insurance subsidiaries report as assets (a) the estimated reinsurance
recoverable on unpaid losses, including an estimate for losses incurred but
not reported, and (b) amounts paid to reinsurers applicable to the
unexpired terms of policies in force. APU's insurance subsidiaries also
assume reinsurance from other companies. Income on reinsurance assumed is
recognized based on reports received from ceding reinsurers.
Deferred Acquisition Costs Policy acquisition costs (principally
commissions, premium taxes and other underwriting expenses) related to the
production of new business are deferred ("DPAC"). The deferral of
acquisition costs is limited based upon their recoverability without any
consideration for anticipated investment income. DPAC is charged against
income ratably over the term of the related policies.
<PAGE>
Unpaid Losses and Loss Adjustment Expenses The net liabilities stated for
unpaid claims and for expenses of investigation and adjustment of unpaid
claims are based upon (a) the accumulation of case estimates for losses
reported prior to the close of the accounting period on the direct business
written; (b) estimates received from ceding reinsurers and insurance pools
and associations; (c) estimates of unreported losses based on past
experience; (d) estimates based on experience of expenses for investigating
and adjusting claims, and (e) the current state of the law
6
<PAGE>
AMERICAN PREMIER UNDERWRITERS, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
and coverage litigation. These liabilities are subject to the impact
of changes in claim amounts and frequency and other factors. In spite of
the variability inherent in such estimates, management believes that the
liabilities for unpaid losses and loss adjustment expenses are adequate.
Changes in estimates of the liabilities for losses and loss adjustment
expenses are reflected in the Statement of Earnings in the period in which
determined.
Premium Recognition Premiums are earned over the terms of the policies on
a pro rata basis. Unearned premiums represent that portion of premiums
written which is applicable to the unexpired terms of policies in force.
On reinsurance assumed from other insurance companies or written through
various underwriting organizations, unearned premiums are based on reports
received from such companies and organizations.
Policyholder Dividends Dividends payable to policyholders represent
management's estimate of amounts payable on participating policies which
share in favorable underwriting results. The estimate is accrued during
the period in which the related premium is earned. Changes in estimates
are included in income in the period determined. Policyholder dividends do
not become legal liabilities unless and until declared by the boards of
directors of the insurance companies.
Income Taxes APU files a consolidated income tax return which includes all
80%-owned U.S. subsidiaries and its parent company, AFG. Deferred income
taxes are calculated using the liability method. Under this method,
deferred income tax assets and liabilities are determined based on
differences between financial reporting and tax bases and are measured
using enacted tax rates. Deferred tax assets are recognized if it is more
likely than not that a tax benefit will be realized. An analysis of the
likelihood of realizing tax benefits is reviewed and updated periodically.
Any adjustments to deferred tax assets are made in the period in which
developments on which they are based become known.
Benefit Plans APU provides retirement benefits, primarily through
contributory and noncontributory defined contribution plans. In addition,
APU sponsors employee savings plans under which APU matches a specified
portion of contributions made by eligible employees. Contributions to
benefit plans are charged against earnings during the period in which
employee wages, upon which the amount of such contributions are based, are
earned.
Capital Surplus Adjustments to claims and contingencies arising from
events or circumstances preceding APU's 1978 reorganization are reflected
in capital surplus if the adjustments are not clearly attributable to post-
reorganization events or circumstances. Such pre-reorganization claims and
contingencies consist principally of personal injury claims by former
employees of APU's predecessor and claims relating to the generation,
disposal or release into the environment of allegedly hazardous substances
arising out of railroad operations disposed of prior to the 1978
reorganization.
<PAGE>
Statement of Cash Flows For cash flow purposes, "investing activities"
are defined as making and collecting loans and acquiring and disposing of
debt or equity instruments and property and equipment. "Financing
activities" include obtaining resources from owners and providing them with
a return on their investments, borrowing money and repaying amounts
borrowed. All other activities are considered "operating". Short-term
investments having original maturities of three months or less when
purchased are considered to be cash equivalents for purposes of the
financial statements.
7
<PAGE>
AMERICAN PREMIER UNDERWRITERS, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
C. Divestitures
In March 1996, APU sold the stock of a subsidiary, Buckeye Management
Company ("Buckeye"), to an investment group consisting of members of
Buckeye's management and employees for approximately $60 million in cash,
net of transaction costs. Buckeye holds, directly and indirectly, a 2%
general partnership interest in Buckeye Partners, L.P. which, through its
subsidiary entities, is an independent pipeline common carrier of refined
petroleum products. APU recorded a pretax gain of approximately $53
million from the sale. The Chairman of the Board and Chief Executive
Officer of Buckeye was also a director of APU, until resigning in March
1996.
In February 1995, APU sold its Apparatus unit, which manufactured aerial
lift trucks, for cash and notes of approximately $13 million, net of
expenses and post-closing adjustments. A provision of $4.0 million for
the anticipated loss on this sale had been recorded in 1994.
D. Long-term Debt
Long-term debt of APU consisted of the following (in millions):
March 31, December 31,
1996 1995
Parent Company:
Subordinated notes, 10 7/8%, due 2011 $ 47.3 $ 50.5
Subordinated notes, 10 5/8%, due 2000 101.2 113.0
Subordinated notes, 9 3/4%, due 1999 136.8 157.1
285.3 320.6
Subsidiaries:
Note payable to banks by Pennsylvania
Company 11.0 -
Other 8.9 9.1
Total $305.2 $329.7
During the first quarter of 1996, APU repurchased $35.4 million of its
subordinated notes for approximately $38.3 million which resulted in an
extraordinary loss of $1.9 million. During the second quarter of 1996
(through May 10), APU repurchased an additional $13.5 million of its
subordinated notes.
In December 1995, Pennsylvania Company ("Pennco"), a wholly-owned
subsidiary of APU, entered into a new collateralized five-year
reducing revolving credit agreement with several banks, under which it
can borrow up to $75 million.
8
<PAGE>
AMERICAN PREMIER UNDERWRITERS, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
E. Capital Stock
APU is authorized to issue 200,000,000 shares of Common Stock. At March
31, 1996 and December 31, 1995, there were 47,000,000 shares of Common
Stock outstanding, all of which were owned by AFG. A progression of APU's
Shareholder's Equity is as follows (in millions):
<TABLE>
<CAPTION>
Unrealized
Common Stock Gains on
and Capital Retained Marketable
Surplus Earnings Securities
<S> <C> <C> <C>
Balance at December 31, 1995 $626.1 $881.8 $44.0
Net earnings - 55.7 -
Change in unrealized gains on investments - - (34.6)
Other (.2) - -
Balance at March 31, 1996 $625.9 $937.5 $ 9.4
</TABLE>
F. Cash Flows - Fixed Maturity Investments
"Investing activities" related to fixed maturity investments in APU's
Statement of Cash Flows consisted of the following (in millions):
Held to Available
Maturity for Sale Total
1996
Purchases $ 8.6 $114.2 $122.8
Maturities and redemptions 17.8 14.6 32.4
Sales - 82.3 82.3
1995
Purchases $23.5 $ 55.8 $ 79.3
Maturities and redemptions 18.7 8.7 27.4
Sales - 205.9 205.9
G. Contingencies There have been no significant changes to the matters
discussed in Note K - "Contingencies" in APU's Annual Report on Form 10-K
for 1995.
9
<PAGE>
AMERICAN PREMIER UNDERWRITERS, INC. 10-Q
ITEM 2
Management's Discussion and Analysis
of Financial Condition and Results of Operations
GENERAL
American Premier is organized as a holding company with almost all of its
operations being conducted by subsidiaries. The parent corporation,
however, has continuing cash needs for administrative expenses, the payment
of principal and interest on borrowings and common stock dividends. Thus,
APU relies primarily on dividends and tax payments from its subsidiaries for
funds to meet its obligations.
LIQUIDITY AND CAPITAL RESOURCES
Ratios The ratio of holding company (APU and Pennco) long-term debt to total
capital was 16% at March 31, 1996 compared to 17% at December 31, 1995. APU's
ratio of earnings to fixed charges on a total enterprise basis was 4.79
(excluding the gain on sale of subsidiary) for the first three months of 1996
compared to 3.35 for the entire year of 1995.
Sources of Funds Management believes APU has sufficient resources to meet
its liquidity requirements through operations in the short-term and long-term
future. If funds generated from operations, including dividends from
subsidiaries, are insufficient to meet fixed charges in any period, APU would be
required to generate cash through borrowings, sales of securities or other
assets, or similar transactions.
During 1995, APU entered into separate credit agreements with AFG and AFC.
Under such agreements, at March 31, 1996, amounts receivable from AFC
totaled $675 million (plus $19.9 million of accrued interest), and amounts
payable to AFG totaled $172.8 million (plus $2.4 million of accrued
interest).
During the first quarter of 1996, APU and Pennsylvania Company ("Pennco"), a
wholly-owned subsidiary of APU, entered into separate credit agreements with
two AFC subsidiaries under which aggregate loans are available to those
subsidiaries of up to $170 million. Loans made under the credit lines bear
interest at floating rates based on prime or LIBOR. At March 31, 1996,
aggregate amounts outstanding under the credit lines totaled $108 million.
APU's federal income tax loss carryforward is available to offset taxable
income and, as a result, APU's requirement to pay federal income tax for
1996 is substantially eliminated.
<PAGE>
Investments Approximately 94% of the bonds and redeemable preferred stocks
held by APU were rated "investment grade" (credit rating of AAA to BBB) by
nationally recognized rating agencies at March 31, 1996. Investment grade
securities generally bear lower yields and lower degrees of risk than those
that are unrated and non-investment grade. Management believes that the
high quality investment portfolio should generate a stable and predictable
investment return.
10
<PAGE>
AMERICAN PREMIER UNDERWRITERS, INC. 10-Q
Management's Discussion and Analysis
of Financial Condition and Results of Operations - Continued
RESULTS OF OPERATIONS
General Pretax earnings for the three months ended March 31, 1996 were $95.5
million, an increase of $69.3 million over the comparable 1995 period. Results
for 1996 include a $53 million gain from the sale of Buckeye Management Company.
Excluding the Buckeye gain and net gains and losses realized on sales of
securities, pretax earnings increased $11 million due primarily to a $7 million
increase in investment income (including equity in net earnings of investee) and
a $3 million decrease in interest expense. These items were partially offset by
a $3 million deterioration in underwriting results.
Property and Casualty Insurance APU manages and operates its property and
casualty business as two major sectors. The nonstandard automobile
insurance companies ("NSA Group") insure risks not typically accepted for
standard automobile coverage because of the applicant's driving record, type
of vehicle, age or other criteria. Republic Indemnity is engaged in the sale
of workers' compensation insurance in California and, to a lesser extent, in
Arizona. Workers' compensation policies provide coverage for statutory
prescribed benefits that employers are required to pay employees who are
injured in the course of employment and for an employer's liability for
losses suffered by its employees which are not included within the statutory
prescribed workers' compensation coverage.
Underwriting profitability is measured by the combined ratio which is a sum of
the ratios of underwriting expenses, losses, and loss adjustment expenses to
premiums. When the combined ratio is under 100%, underwriting results are
generally considered profitable; when the ratio is over 100%, underwriting
results are generally considered unprofitable. The combined ratio does not
reflect investment income, other income or federal income taxes.
Results for APU's property and casualty insurance subsidiaries are as follows
(dollars in millions):
Three months ended
March 31,
1996 1995
Net Written Premiums (GAAP)
NSA Group $271.3 $311.0
Republic Indemnity 59.3 91.1
Other Lines - 1.6
$330.6 $403.7
Combined Ratios (GAAP)
NSA Group 102.1% 101.1%
Republic Indemnity 92.4% 96.3%
Aggregate 100.6% 99.5%
<PAGE>
NSA Group For the first three months of 1996, the 13% decrease in net written
premiums of the NSA Group from the comparable 1995 period was due primarily to
significant rate increases implemented in 1995 and early 1996. While the 1996
combined ratio increased compared with the first three months of 1995, the
results were a significant improvement from the full year 1995 combined ratio of
105.7%.
11
<PAGE>
AMERICAN PREMIER UNDERWRITERS, INC. 10-Q
Management's Discussion and Analysis
of Financial Condition and Results of Operations - Continued
Republic Indemnity The 35% decline in Republic Indemnity's net written
premiums reflects the continuing impact of the extremely competitive pricing
environment in the California workers' compensation market resulting from the
recently enacted open rating system. The improvement in the 1996 combined ratio
compared with the comparable 1995 period was due to a reduction in policyholder
dividends, slightly offset by increases in the loss, loss adjustment expense and
other underwriting expense ratios.
Investment Income Average investments declined 27% in the first quarter of 1996
compared with the same period in 1995, reflecting the use of previously invested
funds for advances to affiliates and repurchases of debt. Investment income,
however, increased $5.7 million (12%) due to the higher rate of return earned on
funds advanced to affiliates compared to the short-term investments in which
they had been invested prior to the Mergers. Investment income includes $20
million earned in 1996 on amounts due from affiliates.
Investee Corporations Equity in net earnings of investee corporations
(companies in which AFG owns a significant portion of the voting stock) in 1996
represents APU's proportionate share of the earnings of Chiquita Brands. APU
purchased 3.2 million shares of Chiquita common stock from AFC during the second
quarter of 1995.
Interest on Borrowed Money Excluding interest expense of $2.4 million in 1996
on amounts due to affiliates, interest expense decreased by $5.8 million (44%)
for the quarter ended March 31, 1996 from the comparable 1995 period. The
decrease reflects a 37% reduction in long-term debt resulting from the
repurchase of subordinated notes during the last nine months of 1995 and first
quarter of 1996.
12
<PAGE>
AMERICAN PREMIER UNDERWRITERS, INC. 10-Q
PART II
OTHER INFORMATION
Item 6
Exhibits and Reports on Form 8-K
(a) Exhibits:
Number Description
10(a) Credit Agreement dated April 3, 1995, between
Pennsylvania Company (lender) and American
Financial Corporation (borrower).
10(b) Reducing Revolving Credit Agreement dated
March 29, 1996, between Pennsylvania Company
(lender) and Great American Holding Corporation
(borrower).
10(c) Amended Credit Agreement dated April 3, 1995,
between American Premier Underwriters, Inc.
and American Financial Group, Inc.
27 Financial Data Schedule - Included in Report filed
electronically with the Securities and Exchange
Commission.
(b) Report on Form 8-K: None
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, American
Premier Underwriters, Inc. has duly caused this Report to be signed on its
behalf by the undersigned duly authorized.
American Premier Underwriters, Inc.
May 14, 1996 BY: FRED J. RUNK
Fred J. Runk
Senior Vice President and
Treasurer
13
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
This schedule contains summary financial information extracted from the American
Premier Underwriters, Inc. Quarterly Report on Form 10-Q for the three months
ended March 31, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<DEBT-HELD-FOR-SALE> 1,507,800
<DEBT-CARRYING-VALUE> 324,600
<DEBT-MARKET-VALUE> 326,000
<EQUITIES> 45,300<F1>
<MORTGAGE> 0
<REAL-ESTATE> 8,400
<TOTAL-INVEST> 1,922,800<F2>
<CASH> 67,700
<RECOVER-REINSURE> 7,600
<DEFERRED-ACQUISITION> 88,700
<TOTAL-ASSETS> 3,917,300
<POLICY-LOSSES> 1,165,400
<UNEARNED-PREMIUMS> 428,000
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 42,600
<NOTES-PAYABLE> 305,200
0
0
<COMMON> 47,000
<OTHER-SE> 1,525,800
<TOTAL-LIABILITY-AND-EQUITY> 3,917,300
339,800
<INVESTMENT-INCOME> 53,800
<INVESTMENT-GAINS> 4,800
<OTHER-INCOME> 58,100<F3>
<BENEFITS> 262,000
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 78,600
<INCOME-PRETAX> 95,500<F4>
<INCOME-TAX> (37,900)
<INCOME-CONTINUING> 57,600
<DISCONTINUED> 0
<EXTRAORDINARY> (1,900)
<CHANGES> 0
<NET-INCOME> 55,700
<EPS-PRIMARY> 0<F5>
<EPS-DILUTED> 0<F5>
<RESERVE-OPEN> 1,195,000
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
<FN>
<F1>Includes an investment in investee of $42.0 million.
<F2>Includes loans receivable of $32.7 million and other investments of $4.0
million.
<F3>Includes equity in net earnings of investee of $1.2 million, gain on sale of
subsidiary of $53.0 million and other income of $3.9 million.
<F4>Includes policyholder dividends of $.9 million, interest charges on borrowed
money of $9.8 million and other operating and general expenses of $9.7 million.
<F5>Not applicable since all common shares are owned by American Financial Group,
Inc.
</FN>
</TABLE>
CREDIT AGREEMENT
This Credit Agreement is made and entered into as of the 3rd day of
April, 1995 by and between Pennsylvania Company, a Delaware corporation
("Lender"), and American Financial Corporation, an Ohio corporation
("Borrower").
WHEREAS, Borrower and Lender wish to enter into this Credit Agreement
pursuant to which Borrower may borrow from Lender up to Six Hundred Seventy-
Five Million Dollars ($675,000,000);
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereby agree as follows:
Section 1. Revolving Loans. From and after the date hereof to
and including April 2, 2005, Lender will make available to the Borrower loans
as requested by Borrower pursuant to the provisions hereof. Each such loan
shall be referred to herein as a "Loan". Borrower may borrow, repay and
reborrow Loans hereunder from time to time so long as the aggregate amount of
Loans outstanding hereunder at any one time does not exceed $675,000,000.
The Lender shall, and is hereby irrevocably authorized by the Borrower to,
endorse on the schedule to the attached Subordinated Promissory Note ("Note")
or a continuation of such schedule, an appropriate notation evidencing
advances and repayments of Loans pursuant to this Credit Agreement.
<PAGE>
On March 31, 2005, the outstanding principal balance on the revolving
credit will be converted to a term note which will be repaid in sixteen equal
installments, one of which will be due and payable, along with any accrued
interest under this note, on each April 1, July 1, October 1, and January 1
beginning April 1, 2005 and ending January 1, 2009.
Borrower may pay any and all amounts outstanding hereunder at any time
without penalty.
Section 2. The Note. The absolute and unconditional obligation
of the Borrower to repay to Lender the principal of Loans pursuant to this
Credit Agreement shall be evidenced by a Note in the form attached; provided
that the principal amount and interest on the Note are and shall be
subordinate and junior to all principal of, premium, if any, and interest on
all Senior Debt (as defined in the Note) to the extent set forth in the Note.
Section 3. Procedure for Obtaining Loans. Whenever the
Borrower desires to receive a Loan, the Borrower will furnish to the Lender a
written or telephonic request therefor which shall (1) be received by the
Lender not less than two and not more than ten Business Days prior to the
date of such Loan, (2) state the amount of such Loan, (3) state the bank
account of the Borrower to which payment of the proceeds of such Loan is to
be made. Any telephonic application made by the Borrower pursuant to the
provisions of this Section 3 shall be promptly confirmed in writing.
Section 4. Conditions to each Loan. The obligation of Lender
to make each Loan hereunder shall be subject to the satisfaction, prior
thereto or concurrently therewith, of each of the following conditions
precedent:
(a) Request. Lender shall have received the request therefor as
provided in Section 3 hereof;
(b) No Defaults. There does not exist any Event of Default or any
condition which would or would with the passage of time or lapse of any cure
period constitute an Event of Default, nor shall there exist any "Event of
Default" or any condition which would or would with the passage of time or
lapse of any cure period constitute an "Event of Default" under any debt
instrument of Borrower pursuant to which $10,000,000 or more is outstanding
at the time of default; and
<PAGE>
(c) Accuracy. The representations, covenants and warranties
contained in this Credit Agreement are true in all material respects, and the
Borrower has complied in all material respects with all of the covenants
contained in this Credit Agreement.
Section 5. Principal/Interest Payable on Note.
(a) The principal of each Loan shall be repaid according to the
schedule set forth in the Note. Notwithstanding, in the case of an Event of
Default hereunder, the entire principal of the Note may become or be declared
due and payable as provided herein.
(b) Interest shall be paid on the outstanding principal amount of
the Note quarterly on each Interest Payment Date (as defined below) until the
principal sum or the unpaid portion thereof shall have been fully paid as
hereinafter provided. The applicable interest rate shall be 11-5/8% per
annum.
The Borrower will pay interest quarterly on April 1, July 1, October 1
and January 1 of each year or if such date is not a Business Day, on the next
succeeding Business Day (each an "Interest Payment Date"). Interest on
amounts outstanding under the Credit Agreement will accrue from the most
recent date to which interest has been paid; provided that the first Interest
Payment Date shall be July 1, 1995. Interest will be computed on the basis
of a 365 or 366-day year, as appropriate, and actual number of days elapsed.
(c) Each overdue amount payable by the Borrower under this Credit
Agreement shall (to the extent permitted by applicable law) bear interest,
from the date on which such amount shall have first become due and payable by
the Borrower to the date on which such amount shall be paid (whether before
or after judgment), at the lesser of the prime rate announced from time to
time by The Provident Bank in Cincinnati, Ohio plus 4% or the maximum
interest rate permitted by law. The unpaid interest accrued on any overdue
amount in accordance with this subsection (c) shall become and be absolutely
due and payable by the Borrower on demand by the Lender at any time.
Interest on each overdue amount will continue to accrue and will (to the
extent permitted by applicable law) be compounded daily until the obligations
of the Borrower in respect of the payment of such overdue amount are
discharged (whether before or after judgment).
Section 6. Representations and Warranties. To induce the
Lender to make the Loans herein contemplated, the Borrower hereby represents
and warrants as follows:
<PAGE>
(a) Organization. The Borrower is a corporation duly organized
and in good standing under the laws of the State of Ohio and has the power
and authority to own and operate its assets and to conduct its business as is
now done.
(b) Litigation, etc. As of the date hereof, there are no
actions, suits, proceedings or governmental investigations pending or, to the
knowledge of the Borrower, its shareholders, directors or officers,
threatened against the Borrower which, if adversely determined could result
in a material adverse change in the financial condition, business or assets
of the Borrower and there is no basis known to the Borrower, its officers,
directors or shareholders for any such actions, suits, proceedings or
investigations.
(c) Taxes. As of the date hereof, the Borrower has filed all
returns and reports that are now required to be filed by it in connection
with any federal, state or local tax, duty or charge levied, assessed or
imposed upon it, or its property, including unemployment, social security and
similar taxes; and all of such taxes have been either paid or adequate
reserves or other provisions have been made therefor.
(d) Authority. The Borrower has full corporate power and
authority to enter into the transactions provided for in this Credit
Agreement and has been duly authorized to do so by appropriate action of its
board of directors. This Credit Agreement, when executed and delivered by
the Borrower, will constitute the legal, valid and binding obligations of the
Borrower enforceable in accordance with their respective terms except as such
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws in effect from time to time affecting
the rights of creditors generally and except as such enforceability may be
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in law or in equity).
(e) Other Defaults. There does not now exist any default or
violation by the Borrower of or under any of the terms, conditions or
obligations of: (i) its Articles of Incorporation or Code of Regulations;
(ii) any indenture, mortgage, or deed of trust, and (iii) any law,
regulation, ruling, order, injunction, decree, condition or other requirement
applicable to or imposed upon it by any law or by any governmental authority,
court or agency; and the consummation of this Credit Agreement and of the
transactions set forth herein will not result in any such default or
violation.
<PAGE>
Section 7. Covenants. The Borrower agrees that from the date
of execution of this Credit Agreement until all Loans to the Lender have been
fully paid it will:
(a) Books and Records. Maintain proper books of account
and other records and enter therein complete and accurate entries and records
of all of its transactions in accordance with generally accepted accounting
principles and give representatives of the Lender access thereto at all
reasonable times, including permission to examine, copy and make abstracts
from any of such books and records and such other information which may be
helpful to the Lender in evaluating the status of the Loans as it may from
time to time reasonably request.
(b) Quarterly Statements. Furnish the Lender within 60
days after the end of each fiscal quarter with copies of its financial
statements.
(c) Annual Statements. Furnish the Lender within 120
days after the end of each fiscal year of the Borrower, annual financial
statements, a balance sheet as of the end of such year, a profit and loss
statement, a statement of stockholder equity, and a statement of cash flows
for such year.
(d) Taxes. Pay and discharge when due all tax
indebtedness and all taxes, assessments, charges, levies and other
liabilities imposed upon it, its income, profits, property or business,
except those which currently are being contested in good faith by appropriate
proceedings and for which the Borrower will have set aside adequate reserves
or made other adequate provision with respect thereto, but any such disputed
item will be paid forthwith upon the commencement of any proceeding for the
foreclosure of any lien which may have attached with respect thereto, unless
the Lender will have received an opinion in form and substance and from legal
counsel acceptable to it that such proceeding is without merit.
(e) Operations. Continue in operation in substantially
the same manner as at present, except where such operation is rendered
impossible by a fire, strike or other events beyond its control; keep its
real and personal properties in good operating condition and repair; make all
necessary and proper repairs, renewals, replacements, additions and
improvements thereto and comply with the provisions of all leases to which it
is party or under which it occupies or holds real or personal property so as
to prevent any loss or forfeiture thereof or thereunder.
<PAGE>
(f) Compliance with Laws. Comply with all laws and
regulations applicable to the Borrower and to the operation of its business,
including without limitation those relating to environmental and health
matters.
(g) Use of Proceeds. Use the proceeds of the Loans for
the following purposes and for no other purposes:
(1) repayment of outstanding indebtedness;
(2) working capital; and
(3) advances to affiliates.
(h) Maintenance of Existence. Take such action as may
be required to remain in good standing under the laws of the State of Ohio
and to become or remain, as the case may be (i) duly qualified in all
jurisdictions where required by the conduct of its business or ownership of
its assets and (ii) duly licensed to carry on such business in each
jurisdiction where it conducts such business; and
(i) Notice of Default. Notify the Lender in writing
within five days after the Borrower knows or has reason to know of the
occurrence of an Event of Default.
Section 8. Events of Default. The occurrence of any one or
more of the following events shall constitute an "Event of Default"
hereunder.
(a) Note. The non-payment of any principal amount of
the Note when due, whether by acceleration or otherwise, or the nonpayment of
any interest upon the Note within 5 days of when the same is due and payable;
(b) Other Indebtedness. The non-payment of any
principal amount of any indebtedness outstanding of more than $10,000,000
when due, whether by acceleration or otherwise, or the nonpayment of any
interest upon any such indebtedness within 5 days of when the same is due and
payable;
(c) Covenants. The default in the due observance of any
affirmative covenant or agreement to be kept or performed by the Borrower
under the terms of this Credit Agreement and the failure or inability of the
Borrower to cure such default within 30 days of the occurrence thereof;
provided that such 30 day grace period will not apply to any material default
which in the Lender's good faith determination is incapable of cure;
<PAGE>
(d) Representations and Warranties. Any representation
or warranty made by the Borrower in this Credit Agreement or in any report,
certificate, financial statement or other instrument furnished in connection
with the transactions contemplated hereby is false or erroneous in any
material respect or any material breach thereof has been committed.
(e) Obligations. Except as provided above, the default
by the Borrower in the due observance of any covenant, negative covenant or
agreement to be kept or performed by the Borrower under the terms of the Loan
and the lapse of any applicable cure period provided with respect to such
default, or, if so defined therein, the occurrence of any Event of Default or
Default under the Note;
(f) Judgments. Unless in the opinion of the Lender the
Borrower is adequately insured or bonded, the entry of a final judgment for
the payment of money involving more than $5,000,000 against the Borrower and
the failure by the Borrower to discharge the same, or cause it to be
discharged, within 10 days from the date of the order, decree or process
under which or pursuant to which such judgment was entered, or to secure a
stay of execution pending appeal of such judgment; the entry of one or more
final monetary or non-monetary judgment(s) or order(s) against the Borrower
which, singly or in the aggregate, does or could reasonably be expected to
(1) cause a material adverse change in the condition (financial or
otherwise), operations or properties of the Borrower, (2) have a material
adverse effect on the ability of the Borrower to perform its obligations
under this Credit Agreement, or (3) have a material adverse effect on the
rights and remedies of the Lender under this Credit Agreement or the Note;
and
(g) Bankruptcy, etc. Borrower dissolves or becomes the
subject of any dissolution, a winding up or liquidation, or the Borrower: (1)
makes a general assignment for the benefit of creditors; (2) files or has
filed against it a petition in bankruptcy, for a reorganization or an
arrangement, or for a receiver, trustee or similar creditors' representative
for the property or assets of the Borrower or any material part thereof, or
any other proceeding under any federal or state insolvency law, and the same
has not been dismissed or discharged within 60 days thereof.
Section 9. Termination of Commitments and Acceleration of
Loans. If any one or more of the Events of Default shall occur:
<PAGE>
(a) Lender's obligations to make any Loan hereunder shall be
suspended until such Event of Default is cured.
(b) Notwithstanding any other provision of this Section, Lender
may proceed to protect and enforce all or any of its rights, remedies, power
and privileges under this Credit Agreement or the Note by action at law, suit
in equity or other appropriate proceedings, whether for specific performance
of any covenant contained in this Credit Agreement or the Note.
If an Event of Default occurs and is continuing, the Lender may
declare the principal of and accrued interest on any Loan to be due and
payable. Upon such declaration the principal and interest shall be due and
payable. Upon payment of such principal amount and interest, any interest
payable on overdue payments of principal or interest hereunder, and all other
obligations under the Credit Agreement, all of the Borrower's obligations
under the Credit Agreement shall terminate.
Section 10. Binding Effect. This Credit Agreement shall be
binding upon and inure to the benefit of the Borrower and the Lender and
their respective successors and assigns. The Borrower shall not have the
right to assign its rights hereunder or any interest herein without the prior
written consent of the Lender.
The Lender shall have the right to assign all or any part of its
obligations to make the loan to any affiliate or subsidiary; provided,
however, such Assignment shall not relieve the Lender of its obligations
hereunder. In the event of such Assignment by the Lender, the assignee, in
addition to the Lender, shall be deemed to have been named the "Lender" in
the first paragraph of this Credit Agreement and all representations,
warranties and covenants of the Borrower made herein shall be deemed to have
been made to and shall inure to the benefit of such assignee.
Section 11. Governing Law. The Loan Documents shall be deemed
to be contracts made under the laws of, executed and delivered in the State
of Ohio, and for all purposes shall be construed in accordance with the laws
of said State.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Credit
Agreement on the day and year first above written.
PENNSYLVANIA COMPANY
By: Robert W. Olson
-----------------------------
Senior Vice President
AMERICAN FINANCIAL CORPORATION
By: Fred J. Runk
----------------------------
Vice President & Treasurer
<PAGE>
SUBORDINATED PROMISSORY NOTE
As of April 3, 1995
1. FOR VALUE RECEIVED, the undersigned, AMERICAN FINANCIAL CORPORATION,
an Ohio corporation (the "Company"), hereby promises to pay Pennsylvania
Company (the "Lender"), the aggregate unpaid principal amount of the loans
made by the Lender to the Company pursuant to the Credit Agreement referred
to below. The Company promises to pay daily interest from the date hereof,
computed as provided in such Credit Agreement, on the aggregate principal
amount of such loans from time to time unpaid at the rate of 11-5/8% per
annum and to pay interest on overdue principal and, to the extent not
prohibited by applicable law, on overdue installments of interest and
principal and fees at the rate specified in such Credit Agreement, all such
interest being payable at the time specified in such Credit Agreement, except
that all accrued interest shall be paid at the stated or accelerated maturity
hereof or upon the prepayment in full hereof.
2. Payments hereunder shall be made to Pennsylvania Company at One East
Fourth Street, Cincinnati, Ohio 45202.
3. All Loans made by the Lender pursuant to the Credit Agreement
referred to below and all repayments of the principal thereof shall be
recorded by the Lender and, prior to any transfer hereof, appropriate
notations to evidence the foregoing information with respect to each such
loan then outstanding shall be endorsed by the Lender on the schedule
attached hereto or on a continuation of such schedule attached to and made
part hereof; provided, however, that the failure of the Lender to make any
such recordation or endorsement shall not affect the obligations of the
Company under this Subordinated Promissory Note ("Note") or the Credit
Agreement.
4. This Note evidences borrowings under and is entitled to the benefits
of and is subject to the provisions of the Credit Agreement dated as of April
3, 1995, as from time to time in effect (the "Credit Agreement"), among the
maker and the payee hereof. The principal of this Note is prepayable in any
amount and may be prepaid in whole or from time to time in part. Terms
defined in the Credit Agreement and not otherwise defined herein are used
herein with the meanings so defined.
5. In case an Event of Default shall occur, the entire principal of this
Note may become or be declared due and payable in the manner and
<PAGE>
with the effect provided in the Credit Agreement subject to the provisions of
paragraph 6 hereof.
6. The principal amount of and the interest on this Note are and shall
be subordinate and junior in right of payment to all principal of, premium,
if any, and interest on all Senior Debt (as hereinafter defined) of the
Company whether outstanding at the date of this Note or created or incurred
by the Company after the date of this Note but prior to the maturity of this
Note (whether such maturity occurs as a result of lapse of time, acceleration
or otherwise). As used herein, "Senior Debt" shall mean the principal of,
premium, if any, and interest owed by the Company on all present and future
(i) indebtedness of the Company for borrowed money (other than this Note),
whether short-term or long-term, including all indebtedness evidenced by
notes, bonds, debentures or other securities sold by the Company for money,
(ii) indebtedness incurred or assumed by the Company in connection with the
purchase or the acquisition of any property (including any securities of the
Company or any other entity), business or entity, (iii) guarantees by the
Company of indebtedness of others of the type referred to in (i) or (ii)
above, and (iv) renewals, extensions, refundings, deferrals, restructurings,
amendments and modifications of any such indebtedness, obligation or
guarantee, unless in each case by the terms of the instrument creating or
evidencing such indebtedness, obligation or guarantee or such renewals,
extension, refunding, deferral, restructuring, amendment or modification it
is provided that such indebtedness, obligation or guarantee is not superior
in right of payment to this Note. Specifically:
(a) Upon maturity of any Senior Debt by lapse of time,
acceleration or otherwise, then all principal of, premium, if any, and
interest on all such matured Senior Debt shall first be paid in full before
any payment on account of principal or interest is made upon this Note.
(b) In the event of any insolvency, bankruptcy, liquidation,
reorganization or other similar proceedings, or any receivership proceedings
in connection therewith, relative to the Company or its creditors or its
property, and in the event of any proceedings for partial or total
liquidation, dissolution or other winding up of the Company, whether or not
involving insolvency or bankruptcy proceedings, then all principal, premium,
if any, and interest due on Senior Debt shall first be paid in full, or such
payment shall have been provided for, before any payment on account of
principal or interest is made upon this Note. In any of the proceedings
referred to in the first sentence of this subparagraph (b), any payment or
distribution of any kind or
<PAGE>
character, whether in cash, property, stock or obligations, which may be
payable or deliverable in respect of the principal amount of or interest on
this Note shall be paid or delivered directly to the holders of Senior Debt
(or to a banking institution selected by the court or person making the
payment or delivery or designated by any holder of Senior Debt) for
application in payment thereof, unless and until all principal of, premium,
if any, and interest on all Senior Debt shall have been paid in full, or such
payment shall have been provided for; provided, however, that in the event
that payment or delivery of such holder of this Note is authorized by an
order of decree giving effect, and stating in such order or decree that
effect is given, to the subordination of this Note to Senior Debt, and made
by a court of competent jurisdiction in a reorganization proceeding under any
applicable bankruptcy or reorganization law, no payment or delivery of such
cash, property, stock or obligations payable or deliverable with respect to
the principal amount of or interest on this Note shall be made to the holders
of Senior Debt.
(c) The Company shall not make any payment of principal of, or
purchase or acquire for value, this Note during the continuance of any
default in the payment of principal, premium, if any, or interest on any
Senior Debt.
(d) No right of any present or future holder of Senior Debt to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any good faith act or failure to act on the part of
the Company or by any good faith act or failure to act by such holders, or by
any non-compliance by the Company with the terms, provisions and covenants of
any agreement relating to Senior Debt, regardless of any knowledge thereof
any such holder may have or be otherwise charged with.
(e) Subject to the payment in full of all Senior Debt, the legal
holder of this Note shall be subrogated to the rights of the holders of
Senior Debt to receive payments or distributions of assets of the Company
payable or distributable to the holders of Senior Debt until this Note and
interest hereon shall be paid in full. As between the Company, its creditors
other than the holders of Senior Debt, and the legal holder of this Note (i)
no payments or distributions otherwise payable (or deliverable) in respect of
this Note but, by virtue of the subordination provisions hereof, paid (or
delivered) to the holders of Senior Debt shall be deemed to be a payment by
the Company on account of Senior Debt, and (ii) no payments paid to the legal
holder of this Note by virtue of the subrogation herein provided for shall be
deemed to be a payment by the Company on account of this Note.
<PAGE>
The provisions of this paragraph 6 are for the purpose of defining
the relative rights of the holders of the Senior Debt, on the one hand, and
the holder of this Note, on the other hand, and as between the Company and
the holder of this Note, nothing herein shall impair the obligation of the
Company, which is unconditional and absolute, to pay to the legal holder
hereof the principal hereof and interest hereon in accordance with its terms,
nor shall anything herein prevent the legal holder of this Note from
exercising all remedies otherwise permitted by applicable law upon default
hereunder, subject to the rights under this paragraph 6 of holders of Senior
Debt in respect of cash, property, stock or obligations received upon the
exercise of such remedies.
7. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS (OTHER THAN THE CONFLICT OF LAWS RULES) OF THE STATE OF OHIO.
8. The Company hereby waives presentment, demand, notice, protest and
all other demands and notices in connection with the delivery, acceptance,
performance and enforcement of this Note, except as specifically otherwise
provided in the Credit Agreement, and assent to extensions of time of
payment, or forbearance or other indulgence without notice.
AMERICAN FINANCIAL CORPORATION
By: Fred J. Runk
-----------------------
Vice President & Treasurer
REDUCING REVOLVING CREDIT AGREEMENT
This Credit Agreement is made and entered into as of the 29th day of
March, 1996 by and between Pennsylvania Company, a Delaware corporation
("Lender"), and Great American Holding Corporation, an Ohio corporation
("Borrower").
WHEREAS, Borrower and Lender wish to enter into this Reducing
Revolving Credit Agreement pursuant to which Borrower may borrow from Lender
up to $150,000,000;
WHEREAS, Lender and The First National Bank of Boston, as Agent have
entered into a Credit Agreement dated as of December 29, 1995 ("Bank of
Boston Agreement") which provides that Lender may borrow up to $75,000,000
upon the terms and conditions set forth in the Bank of Boston Agreement;
WHEREAS, Lender and Borrower believe it to be mutually beneficial to
enter into an agreement similar to the Bank of Boston Agreement;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereby agree as follows:
Section 1. Revolving Loans. From and after the date hereof to
and including December 31, 2000, Lender will make available to the Borrower
loans as requested by Borrower
<PAGE>
pursuant to the provisions hereof. Each such loan shall be referred to
herein as a "Loan". Borrower may borrow and repay Loans hereunder from time
to time so long as the aggregate amount of Loans outstanding hereunder at any
one time does not exceed the amounts on and after each date set forth in the
following table:
Maximum Amount
Date of Loan Outstanding
- -----------------------------------------------------------------------
December 31, 1998 $150,000,000
March 31, 1999 140,000,000
June 30, 1999 120,000,000
September 30, 1999 100,000,000
December 31, 1999 80,000,000
March 31, 2000 60,000,000
June 30, 2000 40,000,000
September 30, 2000 20,000,000
December 31, 2000 - 0 -
The Lender shall, and is hereby irrevocably authorized by the Borrower to,
endorse on the schedule to the attached Promissory Note ("Note") or a
continuation of such schedule, an appropriate notation evidencing advances
and repayments of Loans pursuant to this Credit Agreement.
On December 31, 2000, the outstanding principal balance on the Loans
will be due and payable.
Borrower may pay any and all amounts outstanding hereunder at any time
without penalty.
Section 2. The Note. The absolute and unconditional obligation
of the Borrower to repay to Lender the principal amount of Loans pursuant to
this Credit Agreement shall be evidenced by a Note in the form attached. The
obligations of Borrower hereunder are not secured by any assets of Borrower.
Section 3. Procedure for Obtaining Loans. Whenever the
Borrower desires to receive a Loan, the Borrower will furnish to the Lender a
written or telephonic request therefor which shall (1) be received by the
Lender not less than one and not more than ten Business Days prior to the
date of such Loan, unless waived by Lender, (2) state the amount of such
Loan, (3) state the bank account of the Borrower to which payment of the
proceeds of such Loan is to be made. Any telephonic application made by the
Borrower pursuant to the provisions of this Section 3 shall be promptly
confirmed in writing.
Section 4. Interest Payable on Note.
<PAGE>
Interest shall be paid on the outstanding principal amount of the Note
until the principal sum or the unpaid portion thereof shall have been fully
paid. The applicable interest rate shall be the rate at which Borrower could
borrow under the Bank of Boston Agreement.
<PAGE>
Section 5. Term, Conditions, Covenants, Representations,
Warranties and Provisions of this Agreement. Other than as set forth in this
Credit Agreement and except for Sections 5 and 6 of the Bank of Boston
Agreement, all of the terms, conditions, covenants, representations,
warranties and provisions of the Bank of Boston Agreement are incorporated by
reference in this Agreement, including, without limitation, provisions
relating to default and events of default.
Section 6. Binding Effect. This Credit Agreement shall be
binding upon and inure to the benefit of the Borrower and the Lender and
their respective successors and assigns. The Borrower shall not have the
right to assign its rights hereunder or any interest herein without the prior
written consent of the Lender.
The Lender shall have the right to assign all or any part of its
obligations to make the loan to any affiliate or subsidiary; provided,
however, such Assignment shall not relieve the Lender of its obligations
hereunder. In the event of such Assignment by the Lender, the assignee, in
addition to the Lender, shall be deemed to have been named the "Lender" in
the first paragraph of this Credit Agreement and all representations,
warranties and covenants of the Borrower made herein shall be deemed to have
been made to and shall inure to the benefit of such assignee.
Section 7. Governing Law. The Loan Documents shall be deemed
to be contracts made under the laws of, executed and delivered in the State
of Ohio, and for all purposes shall be construed in accordance with the laws
of said State.
IN WITNESS WHEREOF, the parties hereto have executed this Credit
Agreement on the day and year first above written.
PENNSYLVANIA COMPANY
By: Fred J. Runk
-------------------------------
Sr. Vice President & Treasurer
GREAT AMERICAN HOLDING CORPORATION
By: James E. Evans
-----------------------------
Vice President
<PAGE>
PROMISSORY NOTE
As of March 29, 1996
1. FOR VALUE RECEIVED, the undersigned, GREAT AMERICAN HOLDING
CORPORATION (the "Company"), hereby promises to pay Pennsylvania Company (the
"Lender"), the aggregate unpaid principal amount of the loans made by the
Lender to the Company pursuant to the Credit Agreement referred to below.
The Company promises to pay daily interest from the date hereof, computed as
provided in such Credit Agreement, on the aggregate principal amount of such
loans from time to time unpaid at the rate determined as set forth in Section
4 of the Credit Agreement and to pay interest on overdue principal and, to
the extent not prohibited by applicable law, on overdue installments of
interest and principal and fees at the rate specified in such Credit
Agreement, all such interest being payable at the time specified in such
Credit Agreement, except that all accrued interest shall be paid at the
stated or accelerated maturity hereof or upon the prepayment in full hereof.
2. Payments hereunder shall be made to the Lender at One East Fourth
Street, Cincinnati, Ohio 45202.
3. All Loans made by the Lender pursuant to the Credit Agreement
referred to below and all repayments of the principal thereof shall be
recorded by the Lender and, prior to any transfer hereof, appropriate
notations to evidence the foregoing information with respect to each such
loan then outstanding shall be endorsed by the Lender on the schedule
attached hereto or on a continuation of such schedule attached to and made
part hereof; provided, however, that the failure of the Lender to make any
such recordation or endorsement shall not affect the obligations of the
Company under this Promissory Note ("Note") or the Credit Agreement.
4. This Note evidences borrowings under and is entitled to the benefits
of and is subject to the provisions of the Credit Agreement dated as of
March 29, 1996, as from time to time in effect (the "Credit Agreement"),
among the maker and the payee hereof. The principal of this Note is
prepayable in any amount and may be prepaid in whole or from time to time in
part. Terms defined in the Credit Agreement and not otherwise defined herein
are used herein with the meanings so defined.
5. In case an Event of Default shall occur, the entire principal of this
Note may become or be declared due and payable.
6. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS (OTHER THAN THE CONFLICT OF LAWS RULES) OF THE STATE OF OHIO.
7. The Company hereby waives presentment, demand, notice, protest and
all other demands and notices in connection with the delivery, acceptance,
performance and enforcement of this Note, except as specifically otherwise
provided in the Credit Agreement, and assent to extensions of time of
payment, or forbearance or other indulgence without notice.
GREAT AMERICAN HOLDING CORPORATION
By: Fred J. Runk
---------------------------
Vice President & Treasurer
AMENDED
CREDIT AGREEMENT
This Amended Credit Agreement is made and entered into as of the 3rd
day of April, 1995 by and between American Premier Underwriters, Inc., a
Pennsylvania corporation ("APU"), and American Financial Group, Inc., an Ohio
corporation ("AFG").
WHEREAS, APU and AFG wish to enter into this Credit Agreement pursuant
to which each may borrow from the other up to Two Hundred Million Dollars
($200,000,000);
WHEREAS, as used in this Credit Agreement the terms "lender" and
"borrower" refer to APU and AFG as is appropriate under the circumstances;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereby agree as follows:
Section 1. Revolving Loans. From and after the date hereof to
and including December 31, 2010, the lender will make available to the
borrower loans as requested by borrower pursuant to the provisions hereof.
Each such loan shall be referred to herein as a "Loan". The borrower may
borrow, repay and reborrow Loans hereunder from time to time so long as the
aggregate amount of Loans outstanding hereunder at any one time owed by one
party to the other does not exceed $200,000,000. The lender shall, and is
hereby irrevocably authorized by the borrower to, endorse on the schedule to
the attached
<PAGE>
Promissory Note ("Note") or a continuation of such schedule, an appropriate
notation evidencing advances and repayments of Loans pursuant to this Credit
Agreement.
On December 31, 2010, the outstanding principal balance on the
revolving credit will be due and payable, along with any accrued interest
under the Note.
The borrower may pay any and all amounts outstanding hereunder at any
time without penalty.
Section 2. The Note. The absolute and unconditional obligation
of the borrower to repay to the lender the principal of Loans pursuant to
this Credit Agreement shall be evidenced by a Note in the form attached; the
Note shall provide that the amount of any Loans pursuant to this Credit
Agreement shall be due upon demand.
Section 3. Procedure for Obtaining Loans. Whenever the
borrower desires to receive a Loan, the borrower will furnish to the lender a
written or telephonic request therefor which shall (1) be received by the
lender not less than two Business Days prior to the date of such Loan, (2)
state the amount of such Loan, (3) state the bank account of the borrower to
which payment of the proceeds of such Loan is to be made. Any telephonic
application made by the borrower pursuant to the provisions of this Section 3
shall be promptly confirmed in writing. The parties to this Credit Agreement
may agree to waive any notice required by this Section 3.
Section 4. Conditions to each Loan. The obligation of the
lender to make each Loan hereunder shall be subject to the satisfaction,
prior thereto or concurrently therewith, of each of the following conditions
precedent:
(a) Request. The lender shall have received the request therefor
as provided in Section 3 hereof; and
(b) No Defaults. There does not exist any Event of Default or any
condition which would or would with the passage of time or lapse of any cure
period constitute an Event of Default, nor shall there exist any "Event of
Default" or any condition which would or would with the passage of time or
lapse of any cure period constitute an "Event of Default" under any debt
instrument of borrower pursuant to which $10,000,000 or more is outstanding
at the time of default.
Section 5. Principal/Interest Payable on Note.
(a) The principal of each Loan shall be repaid upon the demand of
the lender according to the schedule set forth in the Note. Notwithstanding,
in the case of an Event of Default hereunder, the entire principal of the
Note may become or be declared due and payable as provided herein.
<PAGE>
<PAGE>
(b) Interest shall be paid on the outstanding principal amount of
the Note quarterly on each Interest Payment Date (as defined below) until the
principal sum or the unpaid portion thereof shall have been fully paid as
hereinafter provided. The applicable interest rate shall be 1% per annum
over LIBOR.
LIBOR means for each Quarterly Period during which any Loans are
outstanding subsequent to the first Quarterly Period, the rate determined by
the lender on the basis of the offered rates for deposits in U.S. dollars for
a period of three months, as set forth in the Wall Street Journal (or other
published sources agreed to from time to time by APU and AFG).
"Quarterly Period" means the period from and including an Interest
Payment Date (as defined below) through the day next preceding the following
Interest Payment Date, except that the first Quarterly Period shall commence
on and include April 3, 1995.
"Interest Rate Determination Date" means, with respect to any
Quarterly Period, the second Business Day on which banks in New York are open
prior to the first day of such Quarterly Period.
"Business Day" means any day which is not a Saturday, Sunday or a day
on which national banking institutions in Cincinnati, Ohio or New York, New
York are not required or permitted to be open.
The borrower will pay interest quarterly on April 1, July 1, October 1
and January 1 of each year or if such date is not a Business Day, on the next
succeeding Business Day (each an "Interest Payment Date"). Interest on
amounts outstanding under the Credit Agreement will accrue from the most
recent date to which interest has been paid; provided that the first Interest
Payment Date shall be October 2, 1995. Interest will be computed on the
basis of a 365 or 366-day year, as appropriate, and actual number of days
elapsed.
(c) Each overdue amount payable by the borrower under this Credit
Agreement shall (to the extent permitted by applicable law) bear interest,
from the date on which such amount shall have first become due and payable by
the borrower to the date on which such amount shall be paid (whether before
or after judgment), at the lesser of the prime rate announced from time to
time by The Provident Bank in Cincinnati, Ohio plus 4% or the maximum
interest rate permitted by law. The unpaid interest accrued on any overdue
amount in accordance with this subsection (c) shall become and be absolutely
due and payable by the borrower on demand by the lender at any time.
Interest on each overdue amount will continue to accrue and will (to the
extent permitted by applicable law) be compounded daily until the obligations
of the borrower in respect of the payment of such overdue amount are
discharged (whether before or after judgment).
<PAGE>
<PAGE>
Section 6. Events of Default. The occurrence of any one or
more of the following events shall constitute an "Event of Default"
hereunder.
(a) Note. The non-payment of any principal amount of
the Note when due, whether by acceleration or otherwise, or the nonpayment of
any interest upon the Note within 5 days of when the same is due and payable;
(b) Other Indebtedness. The non-payment of any
principal amount of any indebtedness outstanding of more than $10,000,000
when due, whether by acceleration or otherwise, or the nonpayment of any
interest upon any such indebtedness within 5 days of when the same is due and
payable;
(c) Judgments. Unless in the opinion of the lender the
borrower is adequately insured or bonded, the entry of a final judgment for
the payment of money involving more than $5,000,000 against the borrower and
the failure by the borrower to discharge the same, or cause it to be
discharged, within 10 days from the date of the order, decree or process
under which or pursuant to which such judgment was entered, or to secure a
stay of execution pending appeal of such judgment; the entry of one or more
final monetary or non-monetary judgment(s) or order(s) against the borrower
which, singly or in the aggregate, does or could reasonably be expected to
(1) cause a material adverse change in the condition (financial or
otherwise), operations or properties of the borrower, (2) have a material
adverse effect on the ability of the borrower to perform its obligations
under this Credit Agreement, or (3) have a material adverse effect on the
rights and remedies of the lender under this Credit Agreement or the Note;
and
(d) Bankruptcy, etc. The borrower dissolves or becomes
the subject of any dissolution, a winding up or liquidation, or the borrower:
(1) makes a general assignment for the benefit of creditors; (2) files or has
filed against it a petition in bankruptcy, for a reorganization or an
arrangement, or for a receiver, trustee or similar creditors' representative
for the property or assets of the borrower or any material part thereof, or
any other proceeding under any federal or state insolvency law, and the same
has not been dismissed or discharged within 60 days thereof.
Section 7. Termination of Commitments and Acceleration of
Loans. If any one or more of the Events of Default shall occur:
(a) The lender's obligations to make any Loan hereunder shall be
suspended until such Event of Default is cured.
(b) Notwithstanding any other provision of this Section, the
lender may proceed to protect and enforce all or any of its rights, remedies,
power and privileges under this Credit Agreement or the Note by action at
law, suit in equity or other appropriate proceedings, whether for specific
performance of any covenant contained in this Credit Agreement or the Note.
<PAGE>
<PAGE>
If an Event of Default occurs and is continuing, the principal of and
accrued interest on any Loan shall be due and payable. Upon payment of such
principal amount and interest, any interest payable on overdue payments of
principal or interest hereunder, and all other obligations under the Credit
Agreement, all of the borrower's obligations under the Credit Agreement shall
terminate.
Section 8. Binding Effect. This Credit Agreement shall be
binding upon and inure to the benefit of the borrower and the lender and
their respective successors and assigns. The borrower shall not have the
right to assign its rights hereunder or any interest herein without the prior
written consent of the lender.
APU and AFG shall have the right to assign all or any part of its
obligations to make the loan to any affiliate or subsidiary; provided,
however, such Assignment shall not relieve either party of its obligations
hereunder.
Section 9. Governing Law. The Loan Documents shall be deemed
to be contracts made under the laws of, executed and delivered in the State
of Ohio, and for all purposes shall be construed in accordance with the laws
of said State.
IN WITNESS WHEREOF, the parties hereto have executed this Amended
Credit Agreement as of December 26, 1995.
AMERICAN PREMIER UNDERWRITERS, INC.
By: Neil M. Hahl
--------------------------------
Senior Vice President
AMERICAN FINANCIAL GROUP, INC.
By: Fred J. Runk
----------------------------------
Senior Vice President & Treasurer
<PAGE>
PROMISSORY NOTE
As of April 3, 1995
1. FOR VALUE RECEIVED, the undersigned, AMERICAN FINANCIAL GROUP, INC.,
an Ohio corporation ("AFG"), hereby promises to pay American Premier
Underwriters, Inc. ("APU"), the aggregate unpaid principal amount of the
loans made by APU to AFG pursuant to the Credit Agreement referred to below.
AFG promises to pay daily interest from the date hereof, computed as provided
in such Credit Agreement, on the aggregate principal amount of such loans
from time to time unpaid at the rate of 1% per annum over LIBOR (as defined
in the Credit Agreement) and to pay interest on overdue principal and, to the
extent not prohibited by applicable law, on overdue installments of interest
and principal and fees at the rate specified in such Credit Agreement, all
such interest being payable at the time specified in such Credit Agreement,
except that all accrued interest shall be paid at the stated or accelerated
maturity hereof or upon the prepayment in full hereof.
2. Payments hereunder shall be made to APU at One East Fourth Street,
Cincinnati, Ohio 45202.
3. All Loans made by APU pursuant to the Credit Agreement referred to
below and all repayments of the principal thereof shall be recorded by APU
and, prior to any transfer hereof, appropriate notations to evidence the
foregoing information with respect to each such loan then outstanding shall
be endorsed by APU on the schedule attached hereto or on a continuation of
such schedule attached to and made part hereof; provided, however, that the
failure of APU to make any such recordation or endorsement shall not affect
the obligations of AFG under this Promissory Note ("Note") or the Credit
Agreement.
4. This Note evidences borrowings under and is entitled to the benefits
of and is subject to the provisions of the Credit Agreement dated as of April
3, 1995, as from time to time in effect (the "Credit Agreement"), among the
maker and the payee hereof. The principal of this Note is prepayable in any
amount and may be prepaid in whole or from time to time in part. Terms
defined in the Credit Agreement and not otherwise defined herein are used
herein with the meanings so defined.
5. In case an Event of Default shall occur, the entire principal of this
Note may become or be declared due and payable in the manner and with the
effect provided in the Credit Agreement subject to the provisions of
paragraph 6 hereof.
6. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS (OTHER THAN THE CONFLICT OF LAWS RULES) OF THE STATE OF OHIO.
<PAGE>
7. AFG hereby waives presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance, performance
and enforcement of this Note, except as specifically otherwise provided in
the Credit Agreement, and assent to extensions of time of payment, or
forbearance or other indulgence without notice.
AMERICAN FINANCIAL GROUP, INC.
By: Fred J. Runk
------------------------------
Senior Vice President and
Treasurer
<PAGE>
PROMISSORY NOTE
As of April 3, 1995
1. FOR VALUE RECEIVED, the undersigned, AMERICAN PREMIER UNDERWRITERS,
INC., a Pennslyvania corporation ("APU"), hereby promises to pay American
Financial Group, Inc. ("AFG"), the aggregate unpaid principal amount of the
loans made by AFG to APU pursuant to the Credit Agreement referred to below.
APU promises to pay daily interest from the date hereof, computed as provided
in such Credit Agreement, on the aggregate principal amount of such loans
from time to time unpaid at the rate of 1% per annum over LIBOR (as defined
in the Credit Agreement) and to pay interest on overdue principal and, to the
extent not prohibited by applicable law, on overdue installments of interest
and principal and fees at the rate specified in such Credit Agreement, all
such interest being payable at the time specified in such Credit Agreement,
except that all accrued interest shall be paid at the stated or accelerated
maturity hereof or upon the prepayment in full hereof.
2. Payments hereunder shall be made to AFG at One East Fourth Street,
Cincinnati, Ohio 45202.
3. All Loans made by AFG pursuant to the Credit Agreement referred to
below and all repayments of the principal thereof shall be recorded by AFG
and, prior to any transfer hereof, appropriate notations to evidence the
foregoing information with respect to each such loan then outstanding shall
be endorsed by AFG on the schedule attached hereto or on a continuation of
such schedule attached to and made part hereof; provided, however, that the
failure of AFG to make any such recordation or endorsement shall not affect
the obligations of APU under this Promissory Note ("Note") or the Credit
Agreement.
4. This Note evidences borrowings under and is entitled to the benefits
of and is subject to the provisions of the Credit Agreement dated as of April
3, 1995, as from time to time in effect (the "Credit Agreement"), among the
maker and the payee hereof. The principal of this Note is prepayable in any
amount and may be prepaid in whole or from time to time in part. Terms
defined in the Credit Agreement and not otherwise defined herein are used
herein with the meanings so defined.
5. In case an Event of Default shall occur, the entire principal of this
Note may become or be declared due and payable in the manner and with the
effect provided in the Credit Agreement subject to the provisions of
paragraph 6 hereof.
<PAGE>
6. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS (OTHER THAN THE CONFLICT OF LAWS RULES) OF THE STATE OF OHIO.
7. APU hereby waives presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance, performance
and enforcement of this Note, except as specifically otherwise provided in
the Credit Agreement, and assent to extensions of time of payment, or
forbearance or other indulgence without notice.
AMERICAN PREMIER UNDERWRITERS, INC.
By: Neil M. Hahl
-------------------------------
Senior Vice President
