Exhibit 10.16
SEVENTH AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT
THIS SEVENTH AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT (the
"Agreement") dated as of the 31st day of October, 2002, made by DIRECT GENERAL
CORPORATION, a Tennessee corporation (the "Pledgor"), in favor of FIRST
TENNESSEE BANK NATIONAL ASSOCIATION, Memphis, Tennessee, as agent for itself,
and for HIBERNIA NATIONAL BANK, Baton Rouge, Louisiana ("Hibernia"), and for
U.S. BANK NATIONAL ASSOCIATION (f/k/a Firstar Bank, N.A.), St. Louis, Missouri
("U.S. Bank"), and for REGIONS BANK, Birmingham, Alabama ("Regions"), and for
CAROLINA FIRST BANK, Greenville, South Carolina ("Carolina First"), and for BANK
ONE, NA (MAIN OFFICE -- CHICAGO, ILLINOIS), Baton Rouge, Louisiana ("Bank One")
(First Tennessee Bank National Association in its agency capacity being herein
referred to as "Agent," and in its individual capacity as "FTBNA").
W I T N E S S E T H:
That for good and valuable considerations, the receipt and sufficiency
of which are hereby acknowledged, the Pledgor hereby agrees with the Agent as
follows:
1. Pledge and Grant of Security Interest. As collateral security for
all of the Obligations (as defined in Section 2 hereof), the Pledgor hereby
pledges and assigns to the Agent, and grants to the Agent a continuing security
interest in, the following (the "Pledged Collateral"):
(a) all of Pledgor's shares of outstanding capital stock
(common and preferred of whatever class) of the Subsidiaries (as
hereinafter defined) (the "Pledged Shares"), the certificates
representing the Pledged Shares, all options and other rights,
contractual or otherwise, with respect thereto and all dividends, cash,
instruments and other property (including, without limitation, any
stock dividends or stock splits) from time to time received, receivable
or otherwise distributed in respect of or in exchange for any or all of
the Pledged Shares;
(b) all additional shares of stock of the Subsidiaries (common
and preferred, of whatever class) from time to time acquired by the
Pledgor, the certificates representing such additional shares and all
dividends, cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in
exchange for any or all of such additional shares; and
(c) all proceeds of any and all of the foregoing;
in each case, whether now owned or hereafter acquired by the Pledgor and
howsoever Pledgor's interest therein may arise or appear (whether by ownership,
security interest, claim or otherwise). Notwithstanding any other term or
provision hereof, the Pledged Collateral covers all the foregoing, regardless of
whether it is deemed or determined to be a security or securities or to be a
general intangible. For the purposes hereof, the term "Subsidiaries" shall mean
the following: (i) each of the corporations identified in EXHIBIT "A," attached
hereto and incorporated herein by reference; and (ii) any and all Agency
Subsidiaries and Affiliated Insurers (as defined in the
Loan Agreement, hereinafter defined) now or hereafter existing that are owned
directly by Pledgor.
2. Security for Obligations. The security interest created hereby in
the Pledged Collateral constitutes continuing collateral security for all of the
following obligations, whether now existing or hereafter incurred (the
"Obligations"):
(a) The prompt payment by the Pledgor, as and when due and
payable, of all amounts from time to time owing under or pursuant to
that certain Eighth Amended and Restated Guaranty Agreement (the
"Guaranty Agreement") of even date herewith, pursuant to which Pledgor
has guaranteed the indebtednesses of Direct General Financial Services,
Inc., a Tennessee corporation ("Borrower"), to FTBNA, Hibernia, U.S.
Bank, Regions, Carolina First and Bank One, which indebtednesses are
evidenced by (i) Borrower's promissory note to FTBNA in the maximum
principal amount of Thirty Million Dollars ($30,000,000.00); (ii)
Borrower's promissory note to Hibernia in the maximum principal amount
of Fifteen Million Dollars ($15,000,000.00), (iii) Borrower's
promissory note to U.S. Bank in the maximum principal amount of
Twenty-Five Million Dollars ($25,000,000.00), (iv) Borrower's
promissory note to Regions in the maximum principal amount of Fifteen
Million Dollars ($15,000,000.00); (v) Borrower's promissory note to
Carolina First in the maximum principal amount of Five Million Dollars
($5,000,000.00), and (vi) Borrower's promissory note to Bank One in the
maximum principal amount of Twenty-Five Million Dollars
($25,000,000.00) [the six (6) promissory notes herein described being
collectively referred to as the "Notes," and FTBNA, Hibernia, U.S.
Bank, Regions, Carolina First and Bank One being collectively referred
to as the "Banks"], with the Notes all being dated of even date
herewith; and
(b) the due performance and observance by the Pledgor of all
of the Pledgor's covenants, agreements, duties, representations and
obligations from time to time existing pursuant to this Agreement and
that certain Eighth Amended and Restated Loan Agreement (the "Loan
Agreement") of even date herewith among Pledgor, Borrower, Agent, the
Banks and others; and in any other instrument which now or hereafter
secures the Guaranty Agreement.
3. Delivery of the Pledged Collateral. (a) The certificate representing
the Pledged Shares of Direct Insurance Company was delivered to the Agent on
December 2, 1994 pursuant to the Loan Agreement of the same date among Borrower,
Pledgor, Agent, FTBNA and others. All certificates representing the remaining
Pledged Shares were delivered to Agent prior to the date of execution and
delivery hereof. All other certificates and instruments constituting Pledged
Collateral from time to time shall be delivered to the Agent promptly upon the
receipt thereof by or on behalf of the Pledgor. Until such delivery to Agent
such certificates and instruments shall be held in trust for the benefit of
Agent. All such certificates and instruments shall be held by or on behalf of
the Agent pursuant hereto and shall be delivered in suitable form for transfer
by delivery or shall be accompanied by duly executed instruments of transfer or
assignment in blank, all in form and substance satisfactory to the Agent.
(b) If the Pledgor shall receive, by virtue of Pledgor being or having
been an owner of any Pledged Collateral, any (i) stock certificate (including,
without limitation, any certificate
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representing a stock dividend or distribution in connection with any increase or
reduction of capital, reclassification, merger, consolidation, sale of assets,
combination of shares, stock split, spinoff or split-off), promissory note or
other instrument; (ii) option or right, whether as an addition to, substitution
for, or in exchange for, any Pledged Collateral, or otherwise; (iii) dividends
payable in cash (except such dividends permitted to be retained by the Pledgor
pursuant to Section 6 hereof) or in securities or other property; or (iv)
dividends or other distributions in connection with a partial or total
liquidation or dissolution or in connection with a reduction of capital, capital
surplus or paid-in surplus, the Pledgor shall receive such stock certificate,
promissory note, instrument, option, right, payment or distribution in trust for
the benefit of the Agent, shall segregate it from the Pledgor's other property
and shall deliver it forthwith to the Agent in the exact form received, with any
necessary endorsement and/or appropriate stock powers duly executed in blank, to
be held by the Agent as Pledged Collateral and as further collateral security
for the Obligations.
4. Representations and Warranties. The Pledgor represents and warrants
as follows:
(a) The Pledgor is the legal and beneficial owner of the Pledged
Collateral free and clear of any lien, security interest or other charge or
encumbrance except for (a) the prior, first lien granted First Tennessee Bank
National Association, as Agent for itself and other banks as described in that
certain Second Amended and Restated Pledge and Security Agreement dated as of
September 8, 1999, and (b) the security interest created by this Agreement.
(b) Subject to the provisions of Chapters 10 and 11 of Title 56,
Tennessee Code Annotated, and similar statutes of the states of South Carolina,
Georgia, Louisiana and Mississippi, pertaining to notifications to and approvals
by the Tennessee Commissioner of Commerce and Insurance, and similar regulatory
officials in South Carolina, Georgia, Louisiana and Mississippi, required in the
case of mergers, acquisitions and changes of control of insurance companies,
held either directly or indirectly, and to prescribed waiting periods in
connection therewith, the exercise by the Agent of its rights and remedies
hereunder will not contravene any law or governmental regulation or any
contractual restriction binding on or affecting the Pledgor or any of Pledgor's
properties and will not result in or require the creation of any lien, security
interest or other charge or encumbrance upon or with respect to any of Pledgor's
properties.
(c) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required either
(i) for the pledge hereunder by the Pledgor of, or the grant by the Pledgor of
the security interest created hereby in, the Pledged Collateral or (ii) except
for the approval of the Tennessee Commissioner of Commerce and Insurance
provided in Tenn. Code ▇▇▇. ▇▇.▇▇. ▇▇-▇▇-▇▇▇ et seq., and of similar officials
under applicable statutes of South Carolina, Georgia, Louisiana and Mississippi;
and except as may be required by laws affecting the offering and sale of
securities generally, for the exercise by the Agent of its rights and remedies
hereunder.
(d) This Agreement creates a valid security interest in favor of the
Agent, for the benefit of the Banks, in the Pledged Collateral. The taking
possession by the Agent of the certificates representing the Pledged Shares and
all other certificates, instruments and cash constituting Pledged Collateral
from time to time will perfect, and establish the first priority of, the Agent's
security interest hereunder in the Pledged Collateral securing the Obligations.
Except as set forth
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in this Section 4(d), no action is necessary or desirable to perfect or
otherwise protect such security interest.
(e) The Pledged Shares are identified in EXHIBIT "A" attached hereto
and incorporated herein by reference; all such shares have been duly authorized
and validly issued, are fully paid and non-assessable; and such shares
constitute not less than one hundred percent (100%) of the outstanding shares of
common capital stock of the Subsidiaries.
5. Covenants as to the Pledged Collateral. So long as any of the
Obligations shall remain outstanding, the Pledgor will, unless the Agent shall
otherwise consent in writing:
(a) permit the Agent, its agents or representatives, at any
reasonable time and from time to time to examine and make copies of and
abstracts from Pledgor's records concerning the Pledged Collateral;
(b) upon Agent's request, at Pledgor's expense, promptly
deliver to the Agent a copy of each notice or other communication
received by it in respect of the Pledged Collateral;
(c) at Pledgor's expense, defend the Agent's right, title and
security interest in and to the Pledged Collateral against the claims
of any person or entity;
(d) at Pledgor's expense, at any time and from time to time,
promptly execute and deliver all further instruments and documents and
take all further action that may be necessary or desirable or that the
Agent may request in order to (i) perfect and protect security interest
created or purported to be created hereby; (ii) enable the Agent to
exercise and enforce its rights and remedies hereunder in respect of
the Pledged Collateral; or (iii) otherwise effect the purposes of this
Pledge Agreement;
(e) not sell, assign, exchange or otherwise dispose of any
Pledged Collateral or any interest therein; provided, however, that,
subject to the requirements of Section 12(j) hereof, Pledgor may
contribute the outstanding capital stock of any directly-owned
Subsidiary to the capital of any other of Pledgor's directly-owned
Subsidiaries, at which time the stock of such contributed Subsidiary
(the "Contributed Subsidiary") shall no longer be deemed Pledged
Shares; provided, further, Pledgor, acting through its directly-owned
Subsidiaries, will prevent the pledge of any Contributed Subsidiary's
stock to any lender other than to secure the Loan;
(f) not create or suffer to exist any lien, security interest
or other charge or encumbrance upon or with respect to any Pledged
Collateral except for the security interests referred to in Section
4(a) hereof;
(g) not make or consent to any amendment or other modification
or waiver with respect to any Pledged Collateral or enter into any
agreement or permit to exist any restriction with respect to any
Pledged Collateral;
(h) not take or fail to take any action which would in any
manner impair the value or enforceability of the Agent's security
interest in any Pledged Collateral;
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(i) not permit the issuance by any Subsidiary of (i) any
additional shares of any class of capital stock, (ii) any debentures,
bonds or other securities of any nature, whether or not convertible
into or exchangeable for shares of capital stock, or (iii) any
warrants, options, contracts or other commitments entitling any person
or entity to purchase or otherwise acquire any such shares of capital
stock.
6. Additional Provisions Concerning the Pledged Collateral. (a) The
Pledgor hereby agrees to take any action and to execute any instruments which
may be necessary or advisable to accomplish the purposes of this Agreement.
(b) The Pledgor hereby irrevocably appoints the Agent the Pledgor's
attorney-in-fact and proxy, with full authority in the place and stead of the
Pledgor and in the name of the Pledgor or otherwise, after the occurrence of an
Event of Default and in the Agent's discretion, to take any action and to
execute any instrument which the Agent may deem necessary or advisable to
accomplish the purposes of this Agreement subject to the rights of the Pledgor
under Section 6(e) hereof, including, without limitation, to receive, endorse
and collect all instruments made payable to the Pledgor representing any
dividend or other distribution in respect of the Pledged Collateral or any part
thereof and to give full discharge for the same.
(c) If the Pledgor fails to perform any material agreement or
obligation contained herein, the Agent itself may perform, or cause performance
of, such agreement or obligation, and the expenses of the Agent incurred in
connection therewith shall be payable by the Pledgor pursuant to Section 9
hereof.
(d) The Agent shall be deemed to have exercised reasonable care in the
custody and preservation of the Pledged Collateral in its possession if the
Pledged Collateral is accorded treatment substantially equal to that which the
Agent accords its own property, it being understood that the Agent shall not
have responsibility for (i) ascertaining or taking action with respect to calls,
options, conversions, exchanges, maturities, tenders or other matters relating
to any Pledged Collateral, whether or not the Agent has or is deemed to have
knowledge of such matters, or (ii) taking any necessary steps to preserve rights
against any parties with respect to any Pledged Collateral.
(e) Prior to the occurrence of an Event of Default (as defined in
Section 7 hereof):
(i) the Pledgor may exercise any and all voting and other
consensual rights and all options pertaining to the Pledged Collateral
or any part thereof for any purpose not inconsistent with the terms of
this Agreement;
(ii) the Pledgor may receive and retain any and all dividends
paid in respect of the Pledged Collateral; provided, however, that any
and all (A) dividends paid or payable other than in cash in respect of,
and instruments or other property received, receivable or otherwise
distributed in respect of or in exchange for, any Pledged Collateral;
(B) dividends or other distributions paid or payable in cash in respect
of any Pledged Collateral in connection with a partial or total
liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in surplus, excluding, however,
subject to the requirements of Section 12(j) hereof, any dividend (cash
or in kind) paid to the
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Pledgor by an insurance company Subsidiary of the Pledgor, followed by
the capital contribution (cash or in kind) by the Pledgor of an amount
equal to such dividend to another insurance Subsidiary of the Pledgor,
such that there is no net reduction in the aggregate amount of the
capital and surplus among all of the insurance Subsidiaries of the
Pledgor on a consolidated statutory accounting basis; and (C) cash
paid, payable or otherwise distributed in redemption of, or in exchange
for, any Pledged Collateral, shall be Pledged Collateral and shall, if
received by the Pledgor, be received in trust for the benefit of the
Agent, shall be segregated from the other property or funds of the
Pledgor, and shall be forthwith delivered to the Agent in the exact
form received with any necessary endorsement and/or appropriate stock
powers duly executed in blank, to be held by the Agent as Pledged
Collateral and as security for the Obligations.
(f) Upon the occurrence of an Event of Default (as defined in Section 7
hereof):
(i) all rights of the Pledgor to exercise the voting, option
and other consensual rights which it would otherwise be entitled to
exercise and to receive dividends which it would otherwise be
authorized to receive and retain pursuant to subsection (e) of this
Section 6 shall, at Agent's option, cease, and all such rights shall
thereupon become vested in the Agent which shall have the sole right to
exercise such voting, option and other consensual rights and to receive
and retain such dividends (and Pledgor covenants and agrees thereupon,
if requested by Agent, to deliver to Agent irrevocable proxies with
respect to the Pledged Collateral in confirmation of Agent's rights
hereunder);
(ii) without limiting the generality of the foregoing, (A) any
or all of the Pledged Collateral held by the Agent hereunder, at the
option of the Agent, may be registered in the name of the Agent or its
nominee, and (B) the Agent at its option may exercise any and all
rights of conversion, exchange, subscription or any other rights,
privileges or options pertaining to any of the Pledged Collateral as if
it were the absolute owner thereof, including, without limitation, the
right to exchange, in its discretion, any and all of the Pledged
Collateral upon the merger, consolidation, reorganization,
recapitalization or other adjustment of any of the Subsidiaries, or
upon the exercise by Pledgor or any of the Subsidiaries of any right,
privilege or option pertaining to any Pledged Collateral, and, in
connection therewith, to deposit and deliver any and all of the Pledged
Collateral with any committee, depository, transfer agent, registrar or
other designated agent upon such terms and conditions as it may
determine; and
(iii) all dividends which are received by the Pledgor contrary
to the provisions of this Section 6(f) shall be received in trust for
the benefit of the Agent, shall be segregated from other funds of the
Pledgor, and shall be forthwith paid over to the Agent in the exact
form received.
7. Events of Default. An Event of Default shall be deemed to have
occurred hereunder upon the occurrence of a failure or default in the full,
faithful and prompt payment or performance of any one or more of the
Obligations, after any applicable notice and cure period, and shall include, but
shall not be limited to:
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(a) any default in the full or prompt payment when due of all
or any part of any indebtedness constituting part of the Obligations
hereunder; or
(b) the occurrence of an Event of Default as defined in the
Loan Agreement; or
(c) any default by Pledgor in the full, faithful and prompt
payment or performance of any covenant, agreement, liability,
obligation, condition or undertaking on Pledgor's part to be paid, met,
kept, observed or performed pursuant to the provisions hereof, or of
any other instrument or document now or hereafter constituting or
securing all or any part of the Obligations; or
(d) any default in the payment or performance of any other
indebtedness, obligation or undertaking of the Pledgor to the Agent; or
(e) any representation or warranty by Pledgor set out herein
or in any other instrument or document executed by Pledgor in
connection herewith shall prove to be false or misleading in any
material respect as of the time made.
8. Remedies Upon Default. Upon the occurrence of an Event of Default:
(a) The Agent may (i) exercise in respect of the Pledged Collateral, in
addition to other rights and remedies provided for herein or otherwise available
to it, all of the rights and remedies of a secured party on default under the
Uniform Commercial Code in effect in the State of Tennessee (the "Code"); and
(ii) without limiting the generality of the foregoing and without notice except
as specified below, sell the Pledged Collateral or any part thereof in one or
more parcels at public or private sale, at any exchange or broker's board or
elsewhere, at such price or prices and on such other terms as the Agent may deem
commercially reasonable, for cash or on credit or for future delivery. The
Pledgor agrees that at least ten (10) days' notice to the Pledgor of the time
and place of any public sale or the time after which any private sale is to be
made shall constitute reasonable notification. The Agent shall not be obligated
to make any sale of Pledged Collateral regardless of notice of sale having been
given. The Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
Notwithstanding anything herein to the contrary, the Pledgor recognizes that the
Agent may deem it impracticable to effect a public sale of all or any part of
the Pledged Shares or any other securities constituting Pledged Collateral and
that the Agent may, therefore, determine to make one or more private sales of
any such securities to a restricted group of purchasers who will be obligated to
agree, among other things, to acquire such securities for their own account, for
investment and not with a view to the distribution or resale thereof. The
Pledgor acknowledges that any such private sale may be at prices and on terms
less favorable to the seller than the prices and other terms which might have
been obtained at a public sale and, notwithstanding the foregoing, agrees that
the Agent shall have no obligation to delay sale of any such securities for the
period of time necessary to permit the issuer of such securities to register
such securities for public sale under the Securities Act of 1933, as amended
(the "Securities Act"). A sale so conducted shall not be deemed to be
commercially unreasonable, within the meaning of the Code, by virtue of the
failure to register such securities or to offer them publicly in the manner
permitted only with respect to registered securities. The Pledgor further
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acknowledges and agrees that any offer to sell such securities which has been
(i) publicly advertised on a bona fide basis in a newspaper or other publication
of general circulation in Memphis, Tennessee, and in the regional edition of The
Wall Street Journal distributed in Memphis, Tennessee (to the extent that such
an offer may be so advertised without prior registration under the Securities
Act), or (ii) made privately in the manner described above to not less than six
(6) bona fide offerees shall be deemed to involve a "public sale" for the
purposes of Section 47-9-610 of the Code (or any successor or similar applicable
statutory provision) as then in effect, notwithstanding that such sale may not
constitute a "public offering" under the Securities Act, and that the Agent may,
in such event, bid for the purchase of such securities.
(b) Any cash held by the Agent as Pledged Collateral and all cash
proceeds received by the Agent in respect of any sale of, collection from, or
other realization upon, all or any part of the Pledged Collateral may, in the
discretion of the Agent, be held by the Agent as collateral for, and/or then or
at any time thereafter applied (after payment of any amounts payable to the
Agent pursuant to Section 9 hereof) in whole or in part by the Agent against,
all or any part of the Obligations in such order as the Agent shall elect. Any
surplus of such cash or cash proceeds held by the Agent and remaining after
payment in full of all of the Obligations shall be paid over to the Pledgor or
to whomsoever may be lawfully entitled to receive such surplus.
(c) In the event that the proceeds of any such sale, collection or
realization are insufficient to pay all amounts to which the Banks are legally
entitled, the Pledgor shall be liable for the deficiency, together with interest
thereon at the highest rate specified in the Notes for interest on overdue
principal thereof, together with the costs of collection and the reasonable fees
of any attorneys employed by the Agent to collect such deficiency.
9. Indemnity and Expenses. (a) The Pledgor agrees to indemnify the
Agent from and against any and all claims, losses and liabilities growing out of
or resulting from this Agreement (including, without limitation, enforcement of
this Agreement), except claims, losses or liabilities resulting from the Agent's
negligence or willful misconduct.
(b) The Pledgor will upon demand and after notice pay to the Agent the
amount of any and all reasonable expenses, including the reasonable fees and
disbursements of the Agent's counsel and of any experts and agents, which the
Agent may incur in connection with (i) the preparation and administration of
this Agreement, the Notes and the other instruments and documents executed in
connection therewith; (ii) the custody, preservation, use or operation of, or
the sale of, collection from, or other realization upon, any Pledged Collateral;
(iii) the failure by the Pledgor to perform or observe any of the provisions
hereof, except expenses resulting from the Agent's negligence or willful
misconduct or (iv) the exercise or enforcement of any of the rights of the Agent
hereunder.
10. Notices, Etc. All notices and other communications provided for
hereunder shall be in writing and shall be mailed, certified mail, return
receipt requested, or delivered by nationally recognized express courier
service, marked for next-day delivery, if to the Pledgor, to Pledgor at ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Chief Financial
Officer; with a copy (if other than a routine informational communication) to
▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, LLP, ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇; if to the Agent, to it at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Metropolitan
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Division, with a copy to Baker, Donelson, Bearman & ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Finance and Real
Estate; or as to either such person at such other address as shall be designated
by such person in a written notice to such other person complying as to delivery
with the terms of this Section 10. All such notices and other communications
shall be effective (i) if mailed, when received or three (3) business days after
mailing, whichever is earlier; or (ii) if delivered by express courier service,
upon the date scheduled for delivery.
11. Security Interest Absolute. All rights of the Agent, all security
interests and all obligations of the Pledgor hereunder shall be absolute and
unconditional irrespective of:
(a) any lack of validity or enforceability of any of the Notes
or any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or
in any other term in respect of, all or any of the Obligations, or any
other amendment or waiver of or consent to any departure from this
Agreement, the Loan Agreement, the Notes, or any other agreement or
instrument relating thereto or to any of the Obligations;
(c) any increase in, addition to, or exchange, release or
non-perfection of, any other collateral, or any release or amendment or
waiver of or consent to departure from any guaranty, for all or any of
the Obligations;
(d) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Pledgor or any other party
liable, directly or indirectly, absolutely or contingently, with
respect to all or any part of the Obligations; or
(e) the absence of any action on the part of the Agent to
obtain payment or performance of the Obligations from any person or
entity.
12. Miscellaneous. (a) No amendment or waiver of any provision of this
Agreement, and no consent to any departure by the Pledgor therefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Agent and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
(b) No failure on the part of the Agent to exercise, and no delay in
exercising, any right hereunder or under the Notes or the Loan Agreement shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right preclude any other or further exercise thereof or the exercise of any
other right. The Agent's rights and remedies provided herein and in any other
instrument or document now or hereafter securing all or any part of the
Obligations are cumulative and are in addition to, and not exclusive of, any
rights or remedies provided by law.
(c) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or invalidity without invalidating the
remaining portions hereof or thereof or affecting the validity or enforceability
of such provision in any other jurisdiction.
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(d) This Agreement shall be binding on the Pledgor and Pledgor's
successors and permitted assigns and shall inure, together with all rights and
remedies of the Agent hereunder, to the benefit of the Agent and its successors,
transferees and assigns. Without limiting the generality of the foregoing, the
Agent may assign or otherwise transfer all or part of its rights to all or any
part of the Obligations to any other person or entity, and such other person or
entity shall thereupon become vested with all of the benefits in respect thereof
granted to the Agent herein or otherwise. None of the rights or obligations of
the Pledgor hereunder may be assigned or otherwise transferred without the prior
written consent of the Agent.
(e) Upon payment and satisfaction in full of the Obligations, this
Agreement and the security interest created hereby shall terminate and all
rights to the Pledged Collateral shall revert to the Pledgor. The Agent will
thereupon, at Pledgor's request and expense, (i) return to the Pledgor such of
the Pledged Collateral as shall not have been sold or otherwise disposed of or
applied pursuant to the terms hereof; and (ii) execute and deliver to the
Pledgor such documents as the Pledgor shall reasonably request to evidence such
termination.
(f) This Agreement shall be governed by and construed in accordance
with the laws of the State of Tennessee.
(g) The captions or headings of the Sections of this Agreement are
inserted merely for convenience of reference and shall not be deemed to limit or
modify the terms and provisions hereof.
(h) Any payment of principal and/or interest on any of the Obligations
shall toll any statute of limitations which would otherwise be applicable.
(i) This Seventh Amended and Restated Pledge and Security Agreement
supersedes and replaces that certain Sixth Amended and Restated Pledge and
Security Agreement dated September 18, 2001, that certain Fifth Amended and
Restated Pledge and Security Agreement dated September 8, 1999, that certain
Fourth Amended and Restated Pledge and Security Agreement dated July 31, 1998,
that certain Third Amended and Restated Pledge and Security Agreement dated
August 29, 1996, that certain Second Amended and Restated Pledge and Security
Agreement dated February 15, 1996, that certain First Amended and Restated
Pledge and Security Agreement dated June 26, 1995, and that certain Third
Amended and Restated Pledge and Security Agreement dated December 2, 1994.
(j) Pledgor agrees that, prior to (i) the contribution of capital stock
of one directly-owned Subsidiary to that of another as permitted by Section 5(e)
hereof and (ii) the exclusion of insurance subsidiary dividends paid to Pledgor
for contribution to another insurance subsidiary from the requirement set forth
in Section 6(e)(ii)(B) that certain dividends be held in trust for Agent prior
to occurrence of an Event of Default, Borrower and Pledgor shall submit to Agent
an Officer's Certificate in the form attached hereto as EXHIBIT "B."
10
IN WITNESS WHEREOF, the Pledgor has caused this Agreement to be
executed and delivered by its officers thereunto duly authorized as of the date
first above written.
DIRECT GENERAL CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
Title: Senior Vice President & Chief
Financial Officer
----------------------------------
11
FIRST AMENDMENT
TO
SEVENTH AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO SEVENTH AMENDED AND RESTATED PLEDGE AND
SECURITY AGREEMENT (the "Amendment") made and entered into as of the 31st day of
March, 2003, by and between DIRECT GENERAL CORPORATION, a Tennessee corporation
(the "Pledgor"), and FIRST TENNESSEE BANK NATIONAL ASSOCIATION, whose address is
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Metropolitan Division
(in its agency capacity being herein referred to as "Agent," and in its
individual capacity as "FTBNA"), as agent for itself, and for HIBERNIA NATIONAL
BANK, Baton Rouge, Louisiana ("Hibernia"), and for U.S. BANK NATIONAL
ASSOCIATION, St. Louis, Missouri ("U.S. Bank"), and for REGIONS BANK,
Birmingham, Alabama ("Regions"), and for CAROLINA FIRST BANK, Greenville, South
Carolina ("Carolina First"), and for BANK ONE, NA (Main Office -- Chicago,
Illinois), Baton Rouge, Louisiana ("Bank One") (Agent, Hibernia, U.S. Bank,
Regions, Carolina First and Bank One collectively, the "Banks," and
individually, a "Bank").
Recitals of Fact
Pursuant to that certain Seventh Amended and Restated Pledge and
Security Agreement dated as of October 31, 2002 (the "Pledge Agreement"),
Pledgor pledged a second lien security interest in all of the stock in the
Agency Subsidiaries and Affiliated Insurers (as those terms are defined in the
Eighth Amended and Restate Loan Agreement dated as of October 31, 2002, as
amended, referred to hereafter as the "Loan Agreement") to the Agent for the
benefit of the Banks as security for all of Pledgor's obligations under the
Eighth Amended and Restated Guaranty Agreement dated October 31, 2002 (the
Eighth Guaranty).
Pledgor is entering into a Ninth Amended and Restated Guaranty
Agreement of even date herewith (the "Ninth Guaranty"), which Ninth Guaranty
replaces the Eighth Guaranty.
The Pledgor and the Banks now desire to modify certain terms of the
Pledge Agreement as hereinafter set forth.
NOW, THEREFORE, in consideration of the premises as set forth in the
Recitals of Fact, the mutual covenants and agreements hereinafter set out, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, it is agreed by the parties as follows:
Agreements
1. All capitalized terms used and not defined herein shall have the
meaning ascribed to them in the Loan Agreement.
2. To induce the Banks to enter into this Amendment, the Pledgor does
hereby absolutely and unconditionally, certify, represent and warrant to the
Banks, and covenants and agrees with the Banks, that:
(a) All representations and warranties made by the Pledgor in
the Loan Agreement, as amended, in the Pledge Agreement, in the
Security Agreement, and in all other loan documents (all of which are
herein sometimes called the "Loan Documents"), are true, correct and
complete in all material respects as of the date of this Amendment.
(b) As of the date hereof and with the execution of this
Amendment, there are no existing events, circumstances or conditions
which constitute, or would, with the giving of notice, lapse of time,
or both, constitute Events of Default.
(c) There are no existing offsets, defenses or counterclaims
to the obligations of the Pledgor, as set forth in the Pledge
Agreement, the Security Agreement, the Loan Agreement, or in any other
Loan Document executed by the Borrower, in connection with the Loan.
(d) The Pledgor does not have any existing claim for damages
against the Banks arising out of or related to the Loan; and, if and to
the extent (if any) that the Borrower has or may have any such existing
claim (whether known or unknown), the Borrower does hereby forever
release and discharge, in all respects, the Banks with respect to such
claim.
(e) The Loan Documents, as amended by this Amendment, are
valid, genuine, enforceable in accordance with their respective terms,
and in full force and effect.
3. Section 2(a)(iv) of the Pledge Agreement, is hereby deleted in its
entirety and the following is inserted in lieu thereof:
(iv) Borrower's promissory note to Regions in the maximum
principal amount of Twenty-Five Million Dollars ($25,000,000.00);
4. Section 2(b) of the Pledge Agreement, is hereby deleted in its
entirety and the following is inserted in lieu thereof:
(b) the due performance and observance by the Pledgor of all
of the Pledgor's covenants, agreements, duties, representations and
obligations from time to time existing pursuant to this Agreement and
that certain Eighth Amended and Restated Loan Agreement of even date
herewith, as amended by that certain First Amendment to Eighth Amended
and Restated Loan Agreement dated as of March 31, 2003 (as amended, the
"Loan Agreement") both among Pledgor, Borrower, Agent, the Banks and
others; and in any other instrument which now or hereafter secures the
Guaranty Agreement.
5. Section 4(a) of the Pledge Agreement, is hereby deleted in its
entirety and the following is inserted in lieu thereof:
2
(a) The Pledgor is the legal and beneficial owner of the
Pledged Collateral free and clear of any lien, security interest or
other charge or encumbrance except for (a) the prior, first lien
granted First Tennessee Bank National Association, as Agent for itself
and other banks as described in that certain Third Amended and Restated
Pledge and Security Agreement dated as of October 31, 2002, and (b) the
security interest created by this Agreement.
6. All terms and provisions of the Pledge Agreement, as heretofore
amended, which are inconsistent with the provisions of this Amendment are hereby
modified and amended to conform hereto; and, as so modified and amended, the
Pledge Agreement is hereby ratified, approved and confirmed. Except as otherwise
may be expressly provided herein, this Amendment shall become effective as of
the date set forth in the initial paragraph hereof.
7. All references in all Loan Documents (including, but not limited to,
the Pledge Agreement, the Security Agreement, and the Loan Agreement) to the
"Pledge Agreement" shall, except as the context may otherwise require, be deemed
to constitute references to the Pledge Agreement as amended hereby.
[SEPARATE SIGNATURE PAGES FOLLOW]
3
SIGNATURE PAGE
TO
FIRST AMENDMENT TO SEVENTH AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT
================================================================================
IN WITNESS WHEREOF, the Pledgor, the Banks and the Agent have caused
this Agreement to be executed by their duly authorized officers, all as of the
day and year first above written.
PLEDGOR:
DIRECT GENERAL CORPORATION, a
Tennessee corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
Title: Senior Vice President & Chief
Financial Officer
-----------------------------------
BANKS:
FIRST TENNESSEE BANK NATIONAL ASSOCIATION
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇
-------------------------------------
Title: Senior Vice President
----------------------------------
HIBERNIA NATIONAL BANK
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇ Rack
-------------------------------------
Title: Senior Vice President
----------------------------------
U.S. BANK NATIONAL ASSOCIATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Title: Vice President
----------------------------------
CAROLINA FIRST BANK
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-------------------------------------
Title: Executive Vice President
----------------------------------
[SIGNATURE PAGE CONTINUED]
▇-▇
▇▇▇▇ ▇▇▇, ▇▇
(▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇)
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------------
Title: Vice President
----------------------------------
REGIONS BANK
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------------------
Title: Assistant Vice President
----------------------------------
AGENT:
FIRST TENNESSEE BANK NATIONAL ASSOCIATION
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇
-------------------------------------
Title: Senior Vice President
----------------------------------
S-2
SECOND AMENDMENT
TO
SEVENTH AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT
THIS SECOND AMENDMENT TO SEVENTH AMENDED AND RESTATED PLEDGE AND
SECURITY AGREEMENT (the "Amendment") made and entered into as of the 28th day of
May, 2003, by and between DIRECT GENERAL CORPORATION, a Tennessee corporation
(the "Pledgor"), and FIRST TENNESSEE BANK NATIONAL ASSOCIATION, whose address is
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Metropolitan Division
(in its agency capacity being herein referred to as "Agent," and in its
individual capacity as "FTBNA"), as agent for itself, and for HIBERNIA NATIONAL
BANK, Baton Rouge, Louisiana ("Hibernia"), and for U. S. BANK NATIONAL
ASSOCIATION, St. Louis, Missouri ("U. S. Bank"), and for REGIONS BANK,
Birmingham, Alabama ("Regions"), and for CAROLINA FIRST BANK, Greenville, South
Carolina ("Carolina First"), and for BANK ONE, NA (Main Office -- Chicago,
Illinois), Baton Rouge, Louisiana ("Bank One"), and for NATIONAL CITY BANK OF
KENTUCKY, Louisville, Kentucky ("National City Bank") (Agent, Hibernia, U. S.
Bank, Regions, Carolina First and Bank One collectively, the "Original Banks")
(the Original Banks and National City Bank collectively, the "Banks" and
individually, a "Bank").
Recitals of Fact
Pursuant to that certain Seventh Amended and Restated Pledge and
Security Agreement dated as of October 31, 2002 (the "Original Pledge
Agreement"), Pledgor pledged a second lien security interest in all of the stock
in the Agency Subsidiaries and Affiliated Insurers (as those terms are defined
in the Eighth Amended and Restated Loan Agreement dated as of October 31, 2002,
as amended, referred to hereafter as the "Loan Agreement") to the Agent for the
benefit of the Original Banks as security for all of Pledgor's obligations under
the Eighth Amended and Restated Guaranty Agreement dated October 31, 2002 (the
Eighth Guaranty).
Pursuant to that certain First Amendment to Seventh Amended and
Restated Pledge and Security Agreement dated as of March 31, 2003 (the "First
Amendment" and the Original Pledge Agreement and the First Amendment
collectively, the "Pledge Agreement"), Pledgor pledged a second lien security
interest in all of the stock in the Agency Subsidiaries and Affiliated Insurers
(as those terms are defined in the Loan Agreement) to the Agent for the benefit
of the Original Banks as security for all of Pledgor's obligations under the
Ninth Amended and Restated Guaranty Agreement dated March 31, 2003 (the Ninth
Guaranty).
Pledgor is entering into a Tenth Amended and Restated Guaranty
Agreement of even date herewith (the "Tenth Guaranty"), which Tenth Guaranty
replaces the Ninth Guaranty.
The Pledgor and the Banks now desire to modify certain terms of the
Pledge Agreement as hereinafter set forth.
NOW, THEREFORE, in consideration of the premises as set forth in the
Recitals of Fact, the mutual covenants and agreements hereinafter set out, and
other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, it
is agreed by the parties as follows:
Agreements
1. All capitalized terms used and not defined herein shall have
the meaning ascribed to them in the Loan Agreement.
2. To induce the Banks to enter into this Amendment, the Pledgor
does hereby absolutely and unconditionally, certify, represent and warrant to
the Banks, and covenants and agrees with the Banks, that:
(a) All representations and warranties made by the
Pledgor in the Loan Agreement, in the Pledge Agreement, in the Security
Agreement, as amended, and in all other loan documents (all of which
are herein sometimes called the "Loan Documents"), are true, correct
and complete in all material respects as of the date of this Amendment.
(b) As of the date hereof and with the execution of this
Amendment, there are no existing events, circumstances or conditions
which constitute, or would, with the giving of notice, lapse of time,
or both, constitute Events of Default.
(c) There are no existing offsets, defenses or
counterclaims to the obligations of the Pledgor, as set forth in the
Pledge Agreement, the Security Agreement, as amended, the Loan
Agreement, or in any other Loan Document executed by the Borrower, in
connection with the Loan.
(d) The Pledgor does not have any existing claim for
damages against the Banks arising out of or related to the Loan; and,
if and to the extent (if any) that the Borrower has or may have any
such existing claim (whether known or unknown), the Borrower does
hereby forever release and discharge, in all respects, the Banks with
respect to such claim.
(e) The Loan Documents, as amended by this Amendment, are
valid, genuine, enforceable in accordance with their respective terms,
and in full force and effect.
3. National City Bank is hereby added as a Bank to the Pledge
Agreement.
4. Section 2(a) of the Pledge Agreement, is hereby deleted in its
entirety and the following is inserted in lieu thereof:
(a) The prompt payment by the Pledgor, as and when due
and payable, of all amounts from time to time owing under or pursuant
to that certain Tenth Amended and Restated Guaranty Agreement (the
"Guaranty Agreement") of even date herewith, pursuant to which Pledgor
has guaranteed the indebtednesses of Direct General Financial Services,
Inc., a Tennessee corporation ("Borrower"), to FTBNA, Hibernia, U.S.
Bank, Regions, Carolina First, National City Bank and Bank One, which
indebtednesses are evidenced by (i) Borrower's promissory note dated as
of October 31, 2002, to FTBNA in the maximum principal amount of Thirty
Million Dollars ($30,000,000.00); (ii) Borrower's promissory note dated
as of October 31, 2002, to Hibernia in the maximum principal amount of
Fifteen Million Dollars ($15,000,000.00), (iii) Borrower's
2
promissory note dated as of October 31, 2002, to U.S. Bank in the
maximum principal amount of Twenty-Five Million Dollars
($25,000,000.00), (iv) Borrower's promissory note dated as of March 31,
2003, to Regions in the maximum principal amount of Twenty-Five Million
Dollars ($25,000,000.00); (v) Borrower's promissory note dated as of
May 28, 2003, to Carolina First in the maximum principal amount of
Fifteen Million Dollars ($15,000,000.00); (vi) Borrower's promissory
note dated as of May 28, 2003, to National City Bank in the maximum
principal amount of Fifteen Million Dollars ($15,000,000.00); and (vii)
Borrower's promissory note dated as of May 28, 2003, to Bank One in the
maximum principal amount of Thirty-Five Million Dollars
($35,000,000.00) [the seven (7) promissory notes herein described being
collectively referred to as the "Notes," and FTBNA, Hibernia, U.S.
Bank, Regions, Carolina First, National City Bank and Bank One being
collectively referred to as the "Banks"]; and
5. Section 2(b) of the Pledge Agreement, is hereby deleted in its
entirety and the following is inserted in lieu thereof:
(b) the due performance and observance by the Pledgor of
all of the Pledgor's covenants, agreements, duties, representations and
obligations from time to time existing pursuant to this Agreement and
that certain Eighth Amended and Restated Loan Agreement of even date
herewith, as amended by that certain First Amendment to Eighth Amended
and Restated Loan Agreement dated as of March 31, 2003, as amended by
that certain Second Amendment to Eighth Amended and Restated Loan
Agreement dated as of May 28, 2003 (as amended, the "Loan Agreement")
both among Pledgor, Borrower, Agent, the Banks and others; and in any
other instrument which now or hereafter secures the Guaranty Agreement.
6. All terms and provisions of the Pledge Agreement, as
heretofore amended, which are inconsistent with the provisions of this Amendment
are hereby modified and amended to conform hereto; and, as so modified and
amended, the Pledge Agreement is hereby ratified, approved and confirmed. Except
as otherwise may be expressly provided herein, this Amendment shall become
effective as of the date set forth in the initial paragraph hereof.
7. All references in all Loan Documents (including, but not
limited to, the Pledge Agreement, the Security Agreement, and the Loan
Agreement) to the "Pledge Agreement" shall, except as the context may otherwise
require, be deemed to constitute references to the Pledge Agreement as amended
hereby.
[SEPARATE SIGNATURE PAGES FOLLOW]
3
SIGNATURE PAGE
TO
SECOND AMENDMENT TO SEVENTH AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT
================================================================================
IN WITNESS WHEREOF, the Pledgor, the Banks and the Agent have caused
this Agreement to be executed by their duly authorized officers, all as of the
day and year first above written.
PLEDGOR:
DIRECT GENERAL CORPORATION, a
Tennessee corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
Title: SVP/CFO
------------------------
BANKS:
FIRST TENNESSEE BANK NATIONAL
ASSOCIATION
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇
---------------------------
Title: Senior Vice President
------------------------
HIBERNIA NATIONAL BANK
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇ Rack
---------------------------
Title: Senior Vice President
------------------------
U. S. BANK NATIONAL ASSOCIATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
Title: Vice President
------------------------
CAROLINA FIRST BANK
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
---------------------------
Title: Executive Vice President
------------------------
[SIGNATURE PAGE CONTINUED]
▇-▇
▇▇▇▇ ▇▇▇, ▇▇
(▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇)
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
----------------------------
Title: Vice President
-------------------------
REGIONS BANK
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇▇▇
----------------------------
Title: Assistant Vice President
-------------------------
NATIONAL CITY BANK OF KENTUCKY
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------
Title: Senior Vice President
-------------------------
AGENT:
FIRST TENNESSEE BANK NATIONAL
ASSOCIATION
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇
----------------------------
Title: Senior Vice President
-------------------------
S-2
THIRD AMENDMENT
TO
SEVENTH AMENDED AND RESTATED SECURITY AGREEMENT
THIS THIRD AMENDMENT TO SEVENTH AMENDED AND RESTATED SECURITY AGREEMENT
(the "Amendment") made and entered into as of the 30th day of June, 2003, by and
between DIRECT GENERAL FINANCIAL SERVICES, INC., a Tennessee corporation whose
address is ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (f/k/a Direct
Financial Services, Inc.) ("Grantor"), and FIRST TENNESSEE BANK NATIONAL
ASSOCIATION, whose address is ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: Metropolitan Division (in its agency capacity being herein referred
to as "Agent," and in its individual capacity as "FTBNA"), as agent for itself,
and for HIBERNIA NATIONAL BANK, Baton Rouge, Louisiana ("Hibernia"), and for
U.S. BANK NATIONAL ASSOCIATION, St. Louis, Missouri ("U. S. Bank"), and for
REGIONS BANK, Birmingham, Alabama ("Regions"), and for CAROLINA FIRST BANK,
Greenville, South Carolina ("Carolina First"), and for BANK ONE, NA (Main Office
-- Chicago, Illinois), Baton Rouge, Louisiana ("Bank One"), and for NATIONAL
CITY BANK OF KENTUCKY, Louisville, Kentucky ("National City Bank"), and for
FIFTH THIRD BANK, Franklin, Tennessee ("Fifth Third") (Agent, Hibernia, U. S.
Bank, Regions, Carolina First, National City Bank, and Bank One collectively,
the "Original Banks") (the Original Banks and Fifth Third collectively, the
"Banks," and individually, a "Bank"), pursuant to the Eighth Amended and
Restated Loan Agreement dated as of October 31, 2002, as amended (the "Loan
Agreement") among Grantor, Banks and the other parties named therein.
Recitals of Fact
Pursuant to that certain Seventh Amended and Restated Security
Agreement dated as of October 31, 2002, as amended by that certain First
Amendment to Seventh Amended and Restated Security Agreement dated as of March
31, 2003, and as amended by that certain Second Amendment to Seventh Amended and
Restated Security Agreement dated as of May 28, 2003 (as amended, the "Security
Agreement"), between Grantor and the Original Banks, Grantor assigned and
pledged Receivables (as defined in the Loan Agreement) and other contractual
rights to the Agent for the benefit of the Original Banks as collateral security
for all of the Obligations (as defined in the Security Agreement) of Grantor to
the Original Banks.
The Grantor and the Banks now desire to modify certain terms of the
Security Agreement as hereinafter set forth.
NOW, THEREFORE, in consideration of the premises as set forth in the
Recitals of Fact, the mutual covenants and agreements hereinafter set out, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, it is agreed by the parties as follows:
Agreements
1. All capitalized terms used and not defined herein shall have the
meaning ascribed to them in the Loan Agreement.
2. To induce the Banks to enter into this Amendment, the Grantor
does hereby absolutely and unconditionally, certify, represent and warrant to
the Banks, and covenants and agrees with the Banks, that:
(a) All representations and warranties made by the Grantor
in the Loan Agreement, as amended, in the Security Agreement, and in
all other loan documents (all of which are herein sometimes called the
"Loan Documents"), are true, correct and complete in all material
respects as of the date of this Amendment.
(b) As of the date hereof and with the execution of this
Amendment, there are no existing events, circumstances or conditions
which constitute, or would, with the giving of notice, lapse of time,
or both, constitute Events of Default.
(c) There are no existing offsets, defenses or counterclaims
to the obligations of the Grantor, as set forth in the Notes, the
Security Agreement, the Loan Agreement, as amended, or in any other
Loan Document executed by the Grantor, in connection with the Loan.
(d) The Grantor does not have any existing claim for damages
against the Banks arising out of or related to the Loan; and, if and to
the extent (if any) that the Grantor has or may have any such existing
claim (whether known or unknown), the Grantor does hereby forever
release and discharge, in all respects, the Banks with respect to such
claim.
(e) The Loan Documents, as amended by this Amendment, are
valid, genuine, enforceable in accordance with their respective terms,
and in full force and effect.
3. Fifth Third is hereby added as a Bank to the Security Agreement.
4. The first paragraph of Section 1 of the Security Agreement is
hereby deleted in its entirety and the following is inserted in lieu thereof:
1. Grant of Security Interest. As collateral security for
all of the Obligations (as defined in Section 2 hereof), the Grantor
hereby pledges and assigns to Agent, as agent for itself, Hibernia,
U.S. Bank, Regions, Bank One, Fifth Third and Carolina First
(collectively, the "Banks"), and grants to Agent for the benefit of the
Banks a continuing security interest in the following (the
"Collateral"):
5. Section 2(a) of the Security Agreement, is hereby deleted in its
entirety and the following is inserted in lieu thereof:
2
(a) The full and prompt payment, when due, of the
indebtedness (and interest thereon) evidenced and to be evidenced by
those certain promissory notes,
(i) dated as of October 31, 2002, in the principal
sum of Thirty Million Dollars ($30,000,000.00),
executed by Grantor and payable to the order of
First Tennessee Bank National Association;
(ii) dated as of June 30, 2003, in the principal sum
of Twenty Million Dollars ($20,000,000.00),
executed by Grantor and payable to the order of
Hibernia;
(iii) dated as of June 30, 2003, in the principal sum
of Thirty Million Dollars ($30,000,000.00),
executed by Grantor and payable to the order of
U. S. Bank;
(iv) dated as of March 31, 2003, in the principal sum
of Twenty-Five Million Dollars ($25,000,000.00),
executed by Grantor and payable to the order of
Regions;
(v) dated as of May 28, 2003, in the principal sum
of Fifteen Million Dollars ($15,000,000.00),
executed by Grantor and payable to the order of
Carolina First;
(vi) dated as of May 28, 2003, in the principal sum
of Fifteen Million Dollars ($15,000,000.00),
executed by Grantor and payable to the order of
National City Bank;
(vii) dated as of June 30, 2003, in the principal sum
of Ten Million Dollars ($10,000,000.00),
executed by Grantor and payable to the order of
Fifth Third; and
(viii) dated as of May 28, 2003, in the principal sum
of Thirty-Five Million Dollars ($35,000,000.00),
executed by Grantor and payable to the order of
Bank One,
together with and any and all renewals, modifications, and extensions
of any of said notes, in whole or in part; and
6. All terms and provisions of the Security Agreement, as
heretofore amended, which are inconsistent with the provisions of this Amendment
are hereby modified and amended to conform hereto; and, as so modified and
amended, the Security Agreement is hereby ratified, approved and confirmed.
Except as otherwise may be expressly provided herein, this Amendment shall
become effective as of the date set forth in the initial paragraph hereof.
7. All references in all Loan Documents (including, but not limited
to, the Notes, the Security Agreement, and the Loan Agreement) to the "Security
Agreement" shall, except as the context may otherwise require, be deemed to
constitute references to the Security Agreement as amended hereby.
[SEPARATE SIGNATURE PAGES FOLLOW]
3
SIGNATURE PAGE
TO
THIRD AMENDMENT TO SEVENTH AMENDED AND RESTATED SECURITY AGREEMENT
================================================================================
IN WITNESS WHEREOF, the Grantor, the Banks and the Agent have caused
this Agreement to be executed by their duly authorized officers, all as of the
day and year first above written.
GRANTOR:
DIRECT GENERAL FINANCIAL SERVICES, INC., a
Tennessee corporation
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------------
Title: President
--------------------------------------
BANKS:
FIRST TENNESSEE BANK NATIONAL ASSOCIATION
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------------
Title: Senior Vice President
--------------------------------------
HIBERNIA NATIONAL BANK
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇ Rack
-----------------------------------------
Title: Senior Vice President
--------------------------------------
U. S. BANK NATIONAL ASSOCIATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
Title: Vice President
--------------------------------------
CAROLINA FIRST BANK
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-----------------------------------------
Title: Executive Vice President
--------------------------------------
[SIGNATURE PAGE CONTINUED]
S-1
BANKS (continued):
▇▇▇▇ ▇▇▇, ▇▇
(▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇)
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------------------------
Title: Vice President
--------------------------------------
REGIONS BANK
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------------
Title: Assistant Vice President
--------------------------------------
NATIONAL CITY BANK OF KENTUCKY
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------------
Title: Senior Vice President
--------------------------------------
FIFTH THIRD BANK
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------------
Title: Vice President Managing Director
--------------------------------------
AGENT:
FIRST TENNESSEE BANK NATIONAL ASSOCIATION
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------------
Title: Senior Vice President
--------------------------------------
S-2