DEBT

We have the following debt outstanding at September 30, 2011:



(In Thousands)
	Repayment of Funds are Due on or Before	Amount Due
Bankers Trust Company	March 23, 2012 ⁽¹⁾	50,000
Union Bank of California	November 16, 2011	3,000
Total		$	53,000

(1) The borrowing under the line of credit is due on March 23, 2012; however, we have agreed to prepay to the lender the outstanding amount of any loan or loans, plus interest, on or before the nine-month anniversary of the loan issuance date, which was March 24, 2011.

In the first quarter of 2011, we entered into a $50.0 million line of credit with Bankers Trust Company. The proceeds of our loan was used to finance our acquisition of Mercer Insurance Group. Under the terms of our credit agreement, interest on outstanding balances is adjusted monthly to the monthly London Interbank Offered Rate (“LIBOR”), as published in the Wall Street Journal, plus 180 basis points, calculated using a 360 day year and the actual days of the month the principal is outstanding. Interest payments are due monthly. In addition, the line of credit incurs an annual facility charge of $25,000. The line of credit contains certain financial covenants including covenants that require us to maintain our A.M. Best rating, a debt to capitalization ratio and minimum stockholders equity. For the nine-month period ended September 30, 2011, we have incurred $.5 million in interest expense related to this line of credit.

In addition, Mercer Insurance Group has the ability to borrow up to $7.5 million on a bank line of credit with Union Bank of California. Under the terms of that credit agreement, the line of credit bears interest at the bank’s base rate or an optional rate based on LIBOR. The effective annual interest rate as of September 30, 2011, was 3.25 percent. Interest payments are due monthly. In addition, the line of credit incurs an annual facility charge of $10,000. The line of credit contains certain financial covenants, including covenants that require Mercer Insurance Group to maintain a minimum statutory surplus and to distribute from subsidiaries no more than 50.0 percent of allowable dividends.

We were in compliance with all covenants for all credit agreements as of September 30, 2011