Exhibit 10.15
EIGHTH AMENDED AND RESTATED LOAN AGREEMENT
TABLE OF CONTENTS
Page
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Exhibits:
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Exhibit "A" Eligible States..............................................A-1
Exhibit "B" Facility Commitments of the Banks............................B-1
Exhibit "C" Form of Promissory Note......................................C-1
Exhibit "D" Permitted Encumbrances.......................................D-1
Exhibit "E" Borrowing Base Certificate...................................E-1
Exhibit "F" Disclosure Schedule..........................................F-1
Exhibit "G" Forms of Premium Finance Agreements..........................G-1
Exhibit "H" Compliance Certificate.......................................H-1
EIGHTH AMENDED AND RESTATED LOAN AGREEMENT
THIS EIGHTH AMENDED AND RESTATED LOAN AGREEMENT ("Loan Agreement") is
made as of the 31st day of October, 2002, by and among DIRECT GENERAL FINANCIAL
SERVICES, INC., a Tennessee corporation whose address is ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (f/k/a Direct Financial Services, Inc.) ("Borrower"),
DIRECT GENERAL CORPORATION, a Tennessee corporation (formerly known as Direct
Corporation) ("DGC"), DIRECT GENERAL INSURANCE AGENCY, INC., a Tennessee
corporation, DIRECT GENERAL INSURANCE AGENCY, INC., an Arkansas corporation,
DIRECT GENERAL INSURANCE AGENCY, INC., a Mississippi corporation, DIRECT GENERAL
INSURANCE AGENCY OF LOUISIANA, INC., a Louisiana corporation, DIRECT GENERAL
AGENCY OF KENTUCKY, INC., a Kentucky corporation, DIRECT ADJUSTING COMPANY,
INC., a Tennessee corporation, DIRECT ADMINISTRATION, INC., a Tennessee
corporation, DIRECT GENERAL INSURANCE AGENCY, INC., a Texas corporation, DIRECT
GENERAL CONSUMER PRODUCTS, INC., a Tennessee corporation, FIRST TENNESSEE BANK
NATIONAL ASSOCIATION, a national banking association organized and existing
under the statutes of the United States of America, with offices at ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("FTBNA"), for itself and as agent for the
other Banks hereinafter named, HIBERNIA NATIONAL BANK, a national banking
association organized and existing under the laws of the United States of
America, with offices at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
("Hibernia"), U.S. BANK NATIONAL ASSOCIATION, a national banking association
(f/k/a U.S. Bank , N. A., which was f/k/a Mercantile Bank National Association)
with offices located at ▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇., ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("U.S.
Bank"), CAROLINA FIRST BANK, a state bank formed under the laws of the State of
South Carolina with offices located at ▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ("Carolina First"), BANK ONE, NA (MAIN OFFICE - CHICAGO, ILLINOIS) a
national banking association with offices located at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Mail
Code LA2-2714, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Bank One") and REGIONS BANK, an
Alabama state banking association with offices located at ▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Regions") (FTBNA, Hibernia, U.S. Bank, Carolina
First, Bank One and Regions collectively, the "Banks," and individually, a
"Bank").
Recitals of Fact
Borrower is a premium finance company licensed under the provisions of
the Tennessee Premium Finance Company Act of 1980 (Title 56, Chapter 37 of
Tennessee Code Annotated) and is a subsidiary of DGC. In addition to Borrower,
DGC owns all of the stock of Direct Insurance Company, a Tennessee corporation
and the Agency Subsidiaries.
Prior to the execution of the Seventh Loan Agreement, Borrower
requested that FTBNA, Hibernia, Firstar (now U.S. Bank), Bank of Oklahoma, N.A.
("Bank of Oklahoma"), Carolina First and Bank One commit to make advances to it
on a revolving credit basis in an amount not to exceed at any one time
outstanding the aggregate principal sum of One Hundred Million Dollars
($100,000,000.00) to enable it to finance premiums due on insurance contracts
(including those written by Affiliated Insurers then existing or thereafter
acquired or created). FTBNA, Hibernia, Firstar (now U.S. Bank), Bank of
Oklahoma, Carolina First and Bank One
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severally agreed to make such advances in proportion to their Facility
Commitments, subject to the terms and conditions set forth in that certain
Seventh Amended and Restated Loan Agreement, dated as of September 18, 2001 (as
subsequently amended, the "Seventh Loan Agreement"), as amended by that certain
Amendment to Seventh Amended and Restated Loan Agreement, dated as of June 30,
2002. The Seventh Loan Agreement superseded and replaced in all respects the
Sixth Loan Agreement (hereinafter defined).
Prior to the execution of the Sixth Loan Agreement, Borrower requested
that FTBNA, Hibernia, Dresdner Bank AG ("Dresdner"), First American National
Bank (now AmSouth Bank), and Mercantile Bank National Association (now U.S. Bank
and formerly Firstar) commit to make advances to it on a revolving credit basis
in an amount not to exceed at any one time outstanding the aggregate principal
sum of One Hundred Million Dollars ($100,000,000.00) to enable it to finance
premiums due on insurance contracts (including those written by Affiliated
Insurers then existing or thereafter acquired or created). FTBNA, Hibernia,
Dresdner, First American (now AmSouth) and Mercantile (now U.S. Bank and
formerly Firstar) severally agreed to make such advances in proportion to their
Facility Commitments, subject to the terms and conditions set forth in that
certain Sixth Amended and Restated Loan Agreement, dated as of September 9, 1999
(as subsequently amended, the "Sixth Loan Agreement"). The Sixth Loan Agreement
superseded and replaced in all respects the Fifth Loan Agreement (hereinafter
defined).
Prior to the execution of the Fifth Loan Agreement, Borrower requested
that FTBNA, Hibernia and Dresdner commit to make advances to it on a revolving
credit basis in an amount not to exceed at any one time outstanding the
aggregate principal sum of Seventy-Five Million Dollars ($75,000,000.00) to
enable it to finance premiums due on insurance contracts (including those
written by Affiliated Insurers now existing or thereafter acquired or created).
FTBNA, Hibernia and Dresdner severally agreed to make such advances in
proportion to their Facility Commitments, subject to the terms and conditions
set forth in that certain Fifth Amended and Restated Loan Agreement, dated July
31, 1998 (as amended, the "Fifth Loan Agreement"). The Fifth Loan Agreement
superseded and replaced in all respects the Fourth Loan Agreement (hereinafter
defined).
Prior to the execution of the Fourth Loan Agreement, Borrower requested
that FTBNA, Hibernia and Dresdner commit to make advances to it on a revolving
credit basis in an amount not to exceed at any one time outstanding the
aggregate principal sum of Fifty Million Dollars ($50,000,000.00) to enable it
to finance premiums due on insurance contracts (including those written by
Affiliated Insurers then existing or thereafter acquired or created). FTBNA,
Hibernia and Dresdner severally agreed to make such advances in proportion to
their Facility Commitments, subject to the terms and conditions set forth in
that certain Fourth Amended and Restated Loan Agreement, dated August 29, 1996
(as amended, the "Fourth Loan Agreement"), as amended by that certain First
Amendment to Fourth Amended and Restated Loan Agreement, dated as of July 31,
1997. The Fourth Loan Agreement superseded and replaced in all respects the
Third Loan Agreement (hereinafter defined).
Prior to the execution of the Third Loan Agreement, Borrower requested
that FTBNA, Hibernia, NationsBank, N.A. ("NationsBank") and Boatmen's Bank of
Tennessee ("Boatmen's") commit to make advances to it on a revolving credit
basis in an amount not to exceed at any one time outstanding the aggregate
principal sum of Thirty-Five Million Dollars ($35,000,000.00) to
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enable it to finance premiums due on insurance contracts (including those
written by Affiliated Insurers then existing or thereafter acquired or created).
FTBNA, Hibernia, NationsBank and Boatmen's severally agreed to make such
advances in proportion to their Facility Commitments, subject to the terms and
conditions set forth in that certain Third Amended and Restated Loan Agreement
(the "Third Loan Agreement"), dated February 15, 1996, which superseded and
replaced that certain Second Amended and Restated Loan Agreement (the "Second
Loan Agreement") dated August 11, 1995, which superseded and replaced that
certain First Amended and Restated Loan Agreement dated June 26, 1995, which
superseded and replaced that certain Loan Agreement December 2, 1994 (the
"Original Loan Agreement").
NationsBank and Boatmen's ceased to be participating Banks, and
Dresdner joined as a Bank pursuant to various instruments of assignment and the
First Amendment to the Third Amended and Restated Loan Agreement dated July 31,
1996. First American (now AmSouth) and Mercantile (now U.S. Bank and formerly
Firstar) joined as Banks pursuant to the Sixth Amended and Restated Loan
Agreement dated as of September 8, 1999, upon execution by Borrower of Revolving
Credit Notes dated September 8, 1999 in the amount of Fifteen Million Dollars
($15,000,000.00) each. First American (now AmSouth) and Dresdner ceased to be
participating Banks, and Bank One joined as a Bank, pursuant to various
instruments of assignment and the Seventh Amended and Restated Loan Agreement
dated as of September 18, 2001 whereby First American (now AmSouth) and Dresdner
assigned their respective notes (in the original principal amounts of
$12,000,000 and $20,000,000, respectively) to Bank One, following which Borrower
executed a Restated Revolving Credit Note dated September 18, 2001 payable to
Bank One in the amount of Thirty Million Dollars ($30,000,000.00). Bank of
Oklahoma ceased to be a participating Bank pursuant to the Amendment to the
Seventh Amended and Restated Loan Agreement dated as of June 30, 2002.
Borrower further requests that FTBNA, Hibernia, U.S. Bank, Carolina
First, Bank One and Regions commit, to and including June 30, 2004, to make
advances not to exceed at any one time outstanding One Hundred Fifteen Million
Dollars ($115,000,000.00), and said Banks have agreed to do so, subject to the
terms and conditions herein set out. In order to set forth the terms and
conditions of the new Facility Commitments, the parties hereby enter into this
Loan Agreement.
NOW, THEREFORE, incorporating the Recitals of Fact set forth above and
in consideration of the mutual agreements herein contained, the parties agree as
follows:
Agreements
SECTION 1: DEFINITIONS AND ACCOUNTING TERMS
1.1 CERTAIN DEFINED TERMS. For the purposes of this Loan Agreement, the
following terms shall have the following meanings (such meanings to be
applicable equally to both the singular and plural forms of such terms) unless
the context otherwise requires:
"Advances" means advances of principal on the Loan by the Banks under
the terms of this Loan Agreement to the Borrower pursuant to Section 2.1.
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"Affiliated Insurers" means, collectively, Affiliated Life Insurers and
Affiliated P&C Insurers.
"Affiliated Life Insurers" means Direct Life Insurance Company, a
Georgia corporation, and any other life insurance company wholly owned, directly
or indirectly, by DGC.
"Affiliated P&C Insurers" means DIC, DGIC, Direct General Insurance
Company of Mississippi, a Mississippi corporation, Direct General Insurance
Company of Louisiana, a Louisiana corporation and any other property and
casualty insurance company wholly owned, directly or indirectly, by DGC.
"Agency Subsidiaries" means, collectively, Direct General Insurance
Agency, Inc., a Tennessee corporation, Direct General Insurance Agency, Inc., an
Arkansas corporation, Direct General Insurance Agency, Inc., a Mississippi
corporation, Direct General Insurance Agency of Louisiana, Inc., a Louisiana
corporation, Direct General Agency of Kentucky, Inc., a Kentucky corporation,
Direct Adjusting Company, Inc., a Tennessee corporation, Direct Administration,
Inc., a Tennessee corporation, Direct General Insurance Agency, Inc., a Texas
corporation, and Direct General Consumer Products, Inc., a Tennessee
corporation.
"Agent" means FTBNA, and any successor appointed pursuant to the
provisions of Section 9 hereof.
"Allowable Investments" shall mean, as to Affiliated Insurers, (a) any
investment in Borrower, another Affiliated Insurer, or in any Agency Subsidiary,
subject to any required prior approval or consent of the applicable insurance
regulatory authorities; (b) real estate owned and occupied by Affiliated
Insurers or Related Persons; (c) investments in real estate owned by DGC; and
(d) any investments expressly permitted by the insurance department regulations
and/or statutes of any state where any Affiliated Insurer is domiciled;
provided, however, that notwithstanding the foregoing, (i) investments in shares
of stock of real estate companies (as permitted by clause (4)(B) of Section
56-3-402, Tennessee Code Annotated) shall not be Allowable Investments; (ii)
municipal or corporate debt or securities which are either not rated by ▇▇▇▇▇'▇
Investors Service or Standard and Poor's Corporation or are rated less than Baa2
by Moody's or less than BBB by Standard and Poor's shall not be Allowable
Investments; and (iii) nonliquid investments such as real estate and real
estate-related entities shall not be Allowable Investments except as expressly
permitted in clauses (b) and (c) of this paragraph.
"Bank One Note" means the restated promissory note executed by the
Borrower to Bank One which evidences Bank One's Facility Commitment,
substantially in the form attached hereto as EXHIBIT "C," as such note may be
modified, renewed or extended from time to time; and any other note or notes
executed at any time to evidence the indebtedness of Borrower to Bank One under
this Loan Agreement, in whole or in part, and any renewals, modifications and
extensions thereof, in whole or in part.
"Banks" means, collectively, FTBNA (acting for itself and not as
Agent), Hibernia, U.S. Bank, Regions, Carolina First and Bank One, and any
successor or assignee which at any time is a holder of a Note.
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"Base Rate" means the base commercial rate of interest established from
time to time by FTBNA. The Base Rate is one of several interest rate indices
employed by FTBNA. The Borrower acknowledges that FTBNA has made, and may
hereafter make, loans bearing interest at rates which are lower and higher than
the Base Rate.
"Borrowing Base" is the limitation on (a) the aggregate Loan
indebtedness which may be outstanding at any time during the term of this
Agreement and (b) the indebtedness under the Junior Facility which may be
outstanding at any time during the term thereof, and which shall be eighty-five
percent (85%) of Eligible Receivables.
"Business Day" means any day, other than Saturday, Sunday or any
holiday upon which a bank located in Memphis, Tennessee, Baton Rouge, Louisiana,
or New York, New York is authorized or permitted to be closed and [in the case
of the making, continuing, prepayment or repayment of any Loans bearing interest
at the Adjusted LIBOR Rate (as defined in the Notes)] on which dealings in
dollars are carried on in the London interbank market.
"Carolina First Note" means the restated promissory note executed by
the Borrower to Carolina First which evidences Carolina First's Facility
Commitment, substantially in the form attached hereto as EXHIBIT "C," as such
note may be modified, renewed or extended from time to time; and any other note
or notes executed at any time to evidence the indebtedness of Borrower to
Carolina First under this Loan Agreement, in whole or in part, and any renewals,
modifications and extensions thereof, in whole or in part.
"Commissioner" means, with respect to Tennessee, the Tennessee
Commissioner of Commerce and Insurance, and with respect to any other state the
administrative head of the department of such state charged with responsibility
for regulation of insurance companies.
"DGC Banks" means, collectively, FTBNA and Hibernia.
"DGC Loan" means the loan indebtedness from time to time outstanding
pursuant to the DGC Loan Agreement.
"DGC Loan Agreement" means that certain Second Amended and Restated
Loan Agreement dated September 8, 1999, as amended by a First Amendment to Loan
Documents dated July 28, 2001 and a Second Amendment to Loan Documents dated
September 18, 2001, among the DGC Banks, DGC and the Borrower, as previously
amended and as the same may be amended, modified, extended and/or restated from
time to time.
"DGIC" means Direct General Insurance Company, a South Carolina
corporation.
"DIC" means Direct Insurance Company, a Tennessee corporation.
"Effective Date" shall mean the date set forth in the first paragraph
of this Loan Agreement.
"Eighth Amended and Restated Guaranty Agreement" shall mean the
guaranty agreement executed by each of the Guarantors, dated as of the Effective
Date, guaranteeing the payment of
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indebtednesses of Borrower to the Banks not to exceed One Hundred Fifteen
Million Dollars ($115,000,000.00), plus interest and costs of collection.
"Eligible Receivables" shall mean the outstanding balance of (a)
Receivables (net of unearned interest, unearned finance charges and unearned
service charges) owed to Borrower by Policyholders residing in an Eligible State
pursuant to Premium Finance Agreements or under an Installment Arrangement with
the applicable Agency Subsidiary, which Premium Finance Agreements and
Installment Arrangements are in the form submitted to and approved by the
Required Banks (i) in which Receivables the Agent holds for the benefit of the
Banks a valid, perfected first security interest; (ii) with respect to which no
setoffs, counterclaims or defenses exist or are claimed by the Policyholder;
(iii) which constitute the valid, binding and enforceable obligation of the
Policyholder; (iv) which do not remain unpaid after the cancellation effective
date as established by the Borrower in the Notice of Intent to Cancel sent to
the Policyholder, provided that the cancellation effective date does not extend
beyond the point that return premium due would be less than the principal
balance of the Premium Finance Agreement or the Installment Arrangement; (v)
with respect to which no extension of the maturity set out in the Premium
Finance Agreement or the due date on the invoice issued pursuant to the
Installment Arrangement has been granted; (vi) with respect to which the
Policyholder is not a Related Person or any officer, director, agent or employee
of a Related Person; (vii) with respect to which, the original of the Premium
Finance Agreement or of any other writing which evidences the Policyholder's
obligation to pay is located at Borrower's principal place of business at the
address set out in the initial paragraph of this Loan Agreement; and (viii) with
respect to which the Affiliated Insurer, which issued the policy of insurance,
has signed a notification of assignment of interest in unearned premiums, as
described in Section 4.1(j) hereof; plus (b) Receivables owed by an insurer to a
Policyholder residing in an Eligible State (and assigned to Borrower) with
respect to policies that have been cancelled by the Borrower pursuant to a
Premium Finance Agreement or by an Agency Subsidiary pursuant to an Installment
Arrangement. However, Receivables arising from the financing of premiums on
policies issued by insurance companies other than an Affiliated Insurer shall be
Eligible Receivables only if the insurance companies issuing such policies have
a current A.M. Best rating in compliance with Section 8.13 hereof. Receivables
arising from the financing of premiums on policies issued by an Affiliated
Insurer shall not be Eligible Receivables in the event that a violation of any
of the ratios or provisions set out in Sections 8.5 through 8.12 hereof has
occurred. In the event that any Affiliated Insurer defaults, beyond any cure
period applicable thereto, with respect to any agreement or obligation of any
sort and if such default or the consequences thereof will or may, in the
reasonable judgment of the Required Banks, have a material adverse effect on the
business of such Affiliated Insurer, then the Receivables theretofore or
thereafter generated from policies issued by such Affiliated Insurers shall
immediately cease to be Eligible Receivables. Unearned interest, unearned
service charges or unearned finance charges owed by a Policyholder pursuant to
or in connection with a Premium Finance Agreement or Installment Arrangement
shall not be Eligible Receivables; and the amount by which the sum of the
periodic installments payable under an Installment Arrangement during any annual
period exceeds the aggregate premium amount which would be payable during such
annual period if an Installment Arrangement were not used shall not be Eligible
Receivables. Unearned premiums payable to a Policyholder from or by an Insurance
Guaranty Fund and assigned to Borrower shall not be Eligible Receivables.
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"Eligible States" means those states of the United States of America
which are approved from time to time by the Required Banks in accordance with
the provisions of Section 11.1 hereof, subject, however, to disqualification of
previously Eligible States in the manner set out in Sections 11.2 and 11.3
hereof. As of the date of this Loan Agreement those states listed in EXHIBIT "A"
hereto are Eligible States.
"Event of Default" has the meaning assigned to that phrase in Section
8.
"Facility Commitment" shall mean, with respect to each Bank, the
commitment of such Bank to make advances to the Borrower pursuant to Section 2.1
hereof not to exceed at any one time outstanding the amount set forth opposite
such Bank's name on EXHIBIT "B," attached hereto and incorporated herein by
reference.
"FTBNA Note" means the restated promissory note executed by the
Borrower to FTBNA which evidences FTBNA's Facility Commitment, substantially in
the form attached hereto as EXHIBIT "C," as such note may be modified, renewed
or extended from time to time; and any other note or notes executed at any time
to evidence the indebtedness of Borrower to FTBNA under this Loan Agreement, in
whole or in part, and any renewals, modifications and extensions thereof, in
whole or in part.
"GAAP" shall mean generally accepted accounting principles applied on a
basis consistent with the financial statements heretofore furnished to Agent.
"Guarantors" shall mean, collectively, DGC and the Agency Subsidiaries.
"Hibernia Note" means the restated promissory note executed by the
Borrower to Hibernia which evidences Hibernia's Facility Commitment,
substantially in the form attached hereto as EXHIBIT "C," as such note may be
modified, renewed or extended from time to time; and any other note or notes
executed at any time to evidence the indebtedness of Borrower to Hibernia under
this Loan Agreement, in whole or in part, and any renewals, modifications and
extensions thereof, in whole or in part.
"Installment Arrangement" means an agreement or arrangement (however
evidenced) pursuant to which a Policyholder agrees to pay an Agency Subsidiary
the premium cost on an insurance policy at a future date in one or more
installments, together with a service charge.
"Insurance Guaranty Fund" means the fund established under the statutes
or laws of any state to provide for the payment of claims against insolvent
insurance companies, including but not limited to the Tennessee Insurance
Guaranty Association Act (Tennessee Code Annotated Section ▇▇-▇▇-▇▇▇, et seq.).
"Junior Facility" means that certain credit facility between Borrower,
DGC, and ZC Specialty Insurance Company, as further described in the Junior
Secured Credit Facility Term Sheet dated October ___, 2002 which Borrower
contemplates entering into subsequent to the date hereof. Said Junior Facility
shall be formally subordinated to this Loan by means of an Intercreditor
Agreement in form and substance satisfactory to Banks.
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"Lien" means any interest in Property securing an obligation owed to,
or a claim by, a Person, whether such interest is based on the common law,
statute or contract, and including but not limited to the security interest or
lien arising from a deed of trust, mortgage, encumbrance, pledge, conditional
sale or trust receipt or a lease, consignment or bailment for security purposes,
and including but not limited to reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions, leases, and other
title exceptions and encumbrances affecting Property.
"Loan" means the aggregate indebtedness of the Borrower from time to
time outstanding pursuant to the provisions of this Loan Agreement.
"Loan Agreement" means this Eighth Amended and Restated Loan Agreement
among the Borrower, the Guarantors and the Banks.
"Loan Documents" means this Loan Agreement, the Notes, the Seventh
Amended and Restated Security Agreement, the Eighth Amended and Restated
Guaranty Agreement, the Seventh Amended and Restated Pledge and Security
Agreement and any other instrument or document now or hereafter evidencing or
securing the Loan.
"Loan Termination Date" shall mean the earlier of (a) June 30, 2004, or
in the event that the Banks and Borrower shall hereafter mutually agree in
writing that the Loan and the Banks' commitments hereunder shall be extended to
another date, and the Notes shall be modified or amended to reflect such
extension, such other date mutually agreed upon between the Agent, the Banks and
Borrower to which the Banks' commitments shall have been extended, or (b) the
date as of which Borrower shall have terminated the Banks' commitment under the
provisions of Section 2.5 hereof.
"Maximum Rate" means the maximum variable contract rate of interest
which the Bank which holds the applicable Note may lawfully charge under
applicable statutes and laws from time to time in effect.
"NAIC" means National Association of Insurance Commissioners.
"Notes" means the FTBNA Note, the Hibernia Note, the U.S. Bank Note,
the Regions Note, the Carolina First Note and the Bank One Note.
"Permitted Encumbrances" shall mean and include:
(a) liens for taxes, assessments or similar governmental
charges not in default or being contested in good faith by appropriate
proceedings;
(b) workmen's, vendors', mechanics' and materialmen's liens
and other liens imposed by law incurred in the ordinary course of
business, and easements and encumbrances which are not substantial in
character or amount and do not materially detract from the value or
interfere with the intended use of the properties subject thereto and
affected thereby;
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(c) liens in respect of pledges or deposits under social
security laws, workmen's compensation laws, unemployment insurance or
similar legislation and in respect of pledges or deposits to secure
bids, tenders, contracts (other than contracts for the payment of
money), leases or statutory obligations;
(d) those certain other liens and encumbrances as set out on
EXHIBIT "D" hereto.
"Person" means an individual, partnership, corporation, trust,
unincorporated organization, association, joint venture or a government or
agency or political subdivision thereof.
"Policyholder" means an owner of an insurance policy the premiums on
which are financed by Borrower under a Premium Finance Agreement or by an Agency
Subsidiary under an Installment Arrangement.
"Premium Finance Agreement" means an agreement (however evidenced) by
which a Policyholder agrees to pay Borrower the premium cost on an insurance
policy at a future date in one or more installments, together with a finance
charge.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, tangible or intangible.
"Receivable" means all accounts and accounts receivable of Borrower;
all amounts owed to the Borrower under any Premium Finance Agreement, any other
agreement or any instrument evidencing indebtedness of any Policyholder to
Borrower; all amounts owed to an Agency Subsidiary by any Policyholder pursuant
to an Installment Arrangement and assigned by the Agency Subsidiary to Borrower;
and the amount of any unearned premium at any time owed by an insurer or by an
Insurance Guaranty Fund to a Policyholder (and assigned to Borrower) or owed to
Borrower.
"Regions Note" means the promissory note executed by the Borrower to
Regions which evidences Regions' Facility Commitment, substantially in the form
attached hereto as EXHIBIT "C," as such note may be modified, renewed or
extended from time to time; and any other note or notes executed at any time to
evidence the indebtedness of Borrower to Regions under this Loan Agreement, in
whole or in part, and any renewals, modifications and extensions thereof, in
whole or in part.
"Reinsurer" means an insurance company which reinsures risks and policy
liabilities of an Affiliated Insurer and to which the Affiliated Insurer cedes
risk and policy liabilities under a contract of reinsurance.
"Related Person" means the Borrower, the Guarantors, any Affiliated
Insurer and any other Person (a) which now or hereafter directly or indirectly
through one or more intermediaries controls, or is controlled by, or is under
common control with, Borrower, any Guarantor, or any Affiliated Insurer, or (b)
which now or hereafter beneficially owns or holds five percent (5%) or more of
the capital stock of Borrower, any Guarantor, or any Affiliated Insurer, or (c)
five percent (5%) or more of the capital stock, partnership interest or other
form of ownership interest
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of which is beneficially owned or held by Borrower, any Guarantor, or any
Affiliated Insurer. For the purposes hereof, "control" shall mean possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
stock or interests, by contract or otherwise.
"Required Banks" shall mean Banks which hold, in the aggregate,
sixty-six percent (66%) (in principal dollar amount) of the outstanding Loan
indebtedness.
"Securities Purchase Agreement" means that certain Series A Convertible
Preferred Securities Purchase Agreement among DGC, SSM Venture Partners, L.P.,
Noro-▇▇▇▇▇▇ Partners II, L.P., and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ dated December 2, 1994.
"Seventh Amended and Restated Pledge and Security Agreement" means the
Seventh Amended and Restated Pledge and Security Agreement of even date
herewith, pursuant to which DGC has granted to Agent for the benefit of the
Banks a second lien security interest in all of the stock in the Agency
Subsidiaries and Affiliated Insurers, as security for its obligations under the
Eighth Amended and Restated Guaranty Agreement.
"Seventh Amended and Restated Security Agreement" means the Seventh
Amended and Restated Security Agreement of even date herewith, pursuant to which
Borrower has assigned and pledged Receivables and other contractual rights to
the Agent for the benefit of the Banks.
"Statutory Accounting Basis" means a basis of accounting or financial
reporting which is prescribed or permitted by the state of domicile of the
reporting entity and is in accordance with the NAIC Accounting Practices and
Procedures Manual in effect for the period covered by the financial report or
statement.
"Subordinated Debt" means any indebtedness owed by Borrower or DGC to
any Person which indebtedness has, by formal, binding agreement, in form and
substance satisfactory to the Required Banks, been deferred and subordinated in
priority of payment to the indebtedness and obligations of Borrower to the
Banks, which shall specifically include the Junior Facility.
"Tangible Net Worth" means the excess of the book value of the assets
of the Borrower or DGC, as applicable, over its liabilities calculated in
accordance with GAAP, provided, however, that in performing such calculation
there shall be (a) excluded from the assets of Borrower or DGC, as applicable,
(i) start-up costs, goodwill and covenants not to compete, and (ii) receivables
from employees or Related Persons other than unearned premiums due or claims
receivable from Affiliated Insurers and Agency Subsidiaries in the ordinary
course of business, and (b) included, as equity of Borrower and DGC (and
excluded from liabilities), any Subordinated Debt.
"U.S. Bank Note" means the restated promissory note executed by the
Borrower to U.S. Bank (formerly Firstar, formerly Mercantile) which evidences
U.S. Bank's Facility Commitment, substantially in the form attached hereto as
EXHIBIT "C," as such note may be modified, renewed or extended from time to
time; and any other note or notes executed at any time to evidence the
indebtedness of Borrower to U.S. Bank under this Loan Agreement, in whole or in
part, and any renewals, modifications and extensions thereof, in whole or in
part.
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1.2 DEFINED TERMS RELATING TO FINANCIAL STANDARDS PERTAINING TO
AFFILIATED INSURERS. For purposes of Section 8 hereof, the following terms shall
have the following meanings, construed on the Statutory Accounting Basis:
"Affiliated Insurer Liquid Assets" means cash, plus cash equivalents,
plus Allowable Investments (but excluding from Allowable Investments investments
by any Affiliated Insurer in DGC, Borrower or any Related Person, real estate
owned by Affiliated Insurers or upon which an Affiliated Insurer holds a
mortgage, and investments permitted by subparagraph (16) of Section 56-3-402 of
Tennessee Code Annotated, as in effect from time to time), plus amounts due
Affiliated Insurers from Borrower, plus amounts due from Reinsurers, plus any
amounts paid as Federal income tax which are receivable or recoverable, minus
amounts due to Reinsurers.
"Available Dividend" means, with respect to any Affiliated Insurer for
any consecutive four (4) fiscal quarters, the aggregate maximum amount of
dividends that is or would be permitted by the insurance regulatory authority of
its jurisdiction of domicile, under applicable requirements of law (without the
necessity of any consent, approval or other action of such insurance regulatory
authority involving the granting of permission or the exercise of discretion by
such insurance regulatory authority), to be paid by such Affiliated Insurer to
DGC in respect of such four (4) quarter period as if such period were a fiscal
year (whether or not such dividends are actually declared or paid).
"Capital Adequacy Ratio" means the ratio of gross written premiums
(excluding inter-company reinsurance of the Affiliated P&C Insurers) to
policyholder surplus.
"DGC Liquid Assets" means, on an unconsolidated basis, the sum of (a)
Affiliated Insurer Liquid Assets (as defined in this Section 1.2), plus (b) cash
of DGC and Borrower, plus cash equivalents of DGC and Borrower, plus municipal
or corporate debt securities of DGC and Borrower rated Baa2 or better by ▇▇▇▇▇'▇
Investors Service or BBB or better by Standard and Poor's Corporation, plus U.S.
Treasury and U.S. Government Agency obligations of DGC and Borrower, plus any
other investments requested by DGC and approved by the Required Banks, all
marked to market unless determined under GAAP to be held to maturity, and on a
consolidating basis for all such companies.
"Incurred Losses" shall mean incurred losses reported and incurred
losses not reported, but excluding amounts accrued above that amount indicated
by actuarial calculations performed by an outside, independent auditor.
"Liquidity Ratio" means the ratio of (a) Affiliated Insurers Liquid
Assets minus aggregate loss reserves of all Affiliated Insurers, plus DGC Liquid
Assets, to (b) aggregate unearned premiums of all Affiliated Insurers.
"NAIC Risk Based Capital" means the results of the formula and
methodology adopted by NAIC, as amended from time to time, for measuring capital
adequacy after considering the risk of particular assets and lines of business.
1.3 ACCOUNTING TERMS. All accounting terms not specifically defined
herein with respect to Affiliated Insurers or with respect to the business of
insurance shall be construed on a
11
Statutory Accounting Basis (unless otherwise herein specified). All other
accounting terms not specifically defined herein shall be construed in
accordance with GAAP.
SECTION 2: COMMITMENT, FUNDING AND TERMS OF LOAN
2.1 THE COMMITMENT. Subject to the terms and conditions herein set out,
the Banks severally agree and commit to make loan Advances to the Borrower from
time to time, from the Effective Date until the Loan Termination Date, ratably
in proportion to their respective Facility Commitments and in such amount that,
the aggregate principal amount of the Loan at any one time outstanding shall not
exceed the lesser of (i) One Hundred Fifteen Million Dollars ($115,000,000.00)
or (ii) the Borrowing Base. On the Effective Date the Banks will make
adjustments among themselves so that the outstanding principal balances of the
Loan indebtedness shall be held by them in proportion to their respective
Facility Commitments.
In the event that any Bank fails to fund its Facility Commitment, the
remaining Banks are not obligated to fund any amount to make up the shortfall,
nor shall the remaining Banks incur any liability to the Borrower as a result of
any non-funding Bank's failure to fund.
2.2 FUNDING THE LOAN.
(a) Each Advance hereunder shall be made upon the written request of
the Borrower to the Agent by facsimile transmission or given in accordance with
Section 10.2 hereof, specifying the date and amount thereof, which request must
be received by Agent prior to 10:30 A.M., Central Time (standard or daylight
savings, as applicable) on (i) in the case of an Advance bearing interest at the
Base Rate (as defined in the Notes), the day of the requested Advance, and (ii)
in the case of an Advance bearing interest at the Adjusted LIBOR Rate (as
defined in the Notes), on the third Business Day preceding the date of requested
Advance. Each request for an Advance bearing interest at the Adjusted LIBOR Rate
shall also request the initial Interest Period (as defined in the Notes) for
such Advance. It is agreed that only three (3) Adjusted LIBOR Rates and three
(3) Interest Periods (as defined in the Notes) shall be permitted to be in
effect at any time during the term hereof. In the event the LIBOR Rate is not
reported by the Telerate Computer Service, the Banks and Borrower agree to
negotiate expeditiously and in good faith in an attempt to determine an
alternative method of establishing the LIBOR Rate.
(b) Provided Agent shall have received notice in the manner set forth
in Section 2.2(a) hereof, the Agent will use its reasonable efforts to notify
each Bank from which an advance is requested of such advance prior to 12:00
noon, Central Time (standard or daylight savings, as applicable).
(c) Each Bank shall, not later than 2:00 P.M., Central Time (standard
or daylight savings, as applicable) on the date specified in such notice, make
available to Agent at its main office in Memphis, Tennessee, an amount in
immediately available funds equal to such Bank's pro rata share of the requested
Advance. Proceeds received by Agent from the other Banks, and amounts advanced
by FTBNA hereunder, shall promptly be made available to Borrower by depositing
the same to Borrower's checking account.
2.3 THE NOTES AND INTEREST. The Loan shall be evidenced by the Notes.
The Loan shall bear interest at the rate set forth in the Notes, said interest
shall be payable quarterly as
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provided in the Notes, with the final installment of interest, together with the
outstanding principal balance of the Loan, being due and payable on the Loan
Termination Date.
2.4 FEES AND CHARGES.
(a) On October 31, 2002, and on the last day of each January, April,
July and October thereafter to and including the Loan Termination Date, the
Borrower agrees to pay to the Agent for the benefit of the Banks a facility fee
equal to one-quarter percent (0.25%) per annum of the average unused amount of
the Facility Commitments (payable quarterly) for the immediately preceding
quarter (the "Facility Fee") in consideration of the Banks' agreement to make
funds available to Borrower under the terms and provisions hereof from the
Effective Date until the initial Loan Termination Date. Agent and Banks
acknowledge that the Termination Date may occur on a date other than the last
day of a quarter, in which case the Facility Fee payment due on the Loan
Termination Date will be prorated for that portion of a quarter for which the
Facility Fee is due. Borrower and Guarantors agree that the Facility Fee is fair
and reasonable considering the condition of the money market, the
creditworthiness of Borrower, the interest rate to be paid, and the nature of
the security for the Loan. The average unused amount of the Facility Commitments
for the immediately preceding quarter shall equal (i) the sum of the unused
amount of the Facility Commitments for each day of the immediately preceding
quarter, divided by (ii) the number of days in the immediately preceding
quarter.
(b) On the Effective Date, the Borrower agrees to pay to the Agent a
commitment fee in the amount of Two Hundred Eighty Seven Thousand Five Hundred
Dollars ($287,500.00) [one-quarter percent (0.25%) of total Facility Commitments
(the "Commitment Fee")], in consideration of the Banks' agreement to make funds
available to Borrower under the terms and provisions hereof from the Effective
Date until the Loan Termination Date specified in Section 1.1 hereof. Borrower
agrees that the Commitment Fee is fair and reasonable considering the condition
of the money market, the creditworthiness of Borrower, the interest rate to be
paid, and the nature of the security for the Loan. In the event that Borrower
and Banks shall hereafter mutually agree to extend the term of the Banks'
commitments hereunder, they may also agree at that time as to an additional
commitment fee to be paid for such further commitment by the Banks, but not to
exceed the maximum permitted by applicable law.
(c) On the Effective Date, the Borrower agrees to pay to the Agent for
its services in obtaining the commitment from the other Banks and servicing,
administering and verifying the Loan and the collateral therefor an Agent's fee
of fifteen-hundredths percent (0.15%) of the amount of the Facility Commitments.
Borrower and Guarantors agree that the Agent's fee is fair and reasonable
compensation to the Agent for expenses incurred and to be incurred and for
service rendered and to be rendered in connection with the Loan.
(d) In the event that Borrower and Banks shall hereafter mutually agree
to extend the term of the Banks' commitment hereunder, they may also agree at
that time as to additional fees to be paid for such further commitment by the
Banks and services to be rendered by Agent, but not to exceed the maximum
permitted by applicable law.
2.5 PREPAYMENTS OR TERMINATION OF THE LOAN. Subject to the terms and
conditions hereof and of the Notes, the Borrower may, at its option, from time
to time, borrow, repay and reborrow amounts under the Loan; provided, however,
that as a condition of making such
13
prepayment, Borrower shall pay any prepayment premium owed pursuant to the
provisions of the Notes. By notice to the Agent in writing, Borrower shall be
entitled to terminate the Banks' commitment to make further advances on the
Loan; and provided that the Loan and all interest thereon (and any other
indebtedness which may then be outstanding and which is secured by the
collateral which secures the Loan) shall have been paid in full, Agent shall
thereupon at Borrower's request release its security interest under the Sixth
Amended and Restated Security Agreement and the Sixth Amended and Restated
Pledge and Security Agreement (though not under any other security agreement or
instrument held by the Agent to secure any other loan indebtedness including,
but not limited to, the DGC Loan).
2.6 PRO RATA TREATMENT AND PAYMENTS.
(a) Each borrowing of Advances by the Borrower from the Banks shall be
made pro rata according to the respective Facility Commitments of the Banks.
(b) All payments (including prepayments) to be made by the Borrower on
account of principal, interest and fees shall be made without set-off or
counterclaim and shall be made to the Agent, for the account of the Banks at the
Agent's office located at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, in
lawful money of the United States of America and in immediately available funds.
The Agent shall promptly distribute such payments upon receipt in like funds as
received in proportion to their respective Facility Commitments; provided,
however, that in the event that the indebtedness of Borrower to the several
Banks at any time is not in proportion to the Facility Commitments of the Banks
(as a result of failure or refusal of a Bank to fund a requested Advance,
receipt by a Bank of a payment not shared pro rata with the other Banks, expense
incurred in connection herewith not borne proportionately by the Banks or
otherwise), further payments shall be paid to the Bank or Banks to which the
Borrower's indebtedness is disproportionately greater than such Banks' pro rata
share until such proportionality is reestablished.
(c) The failure of any Bank to make an Advance required to be made by
it shall not relieve any other Bank of its obligation, if any, hereunder to make
its Advance, but no Bank shall be responsible for the failure of any other Bank
to make the Advance to be made by such other Bank.
(d) Each Bank agrees to bear its pro rata share of the risks of the
collectibility of the Loan, of Borrower's financial condition, of any fraud or
forgery of the Borrower or any Guarantors, of the non-enforceability of the Loan
Documents, of usury or claims of usury, whether valid or invalid, and of the
adequacy of the security for the Loan; and the Banks shall share in accordance
with their respective Facility Commitments any losses and expenses sustained or
incurred in connection with the Loan. If under any bankruptcy, insolvency,
fraudulent transfer or other law affecting the rights of creditors generally,
any Bank is required by a court to return any sum previously collected by that
Bank, the other Banks will promptly repay to such Bank their pro rata shares of
such sums.
(e) Notwithstanding the foregoing or any other provision set forth in
this Loan Agreement, Borrower shall be permitted to prepay in whole, but not in
part, the indebtedness evidenced by any Note if Borrower incurs expenses
pursuant to the terms of such Note in addition to principal and interest
required to be paid under such Note, as long as no Event of
14
Default, or any event which, with notice, lapse of time, or both, would
constitute an Event of Default, shall have occurred and be continuing hereunder
or under any of the Loan Documents. Any such prepayment shall be made in
accordance with the terms and provisions of the applicable Note, after two (2)
Business Days' prior written notice to Agent, and shall be accompanied by all
accrued and unpaid interest on such Note and other amounts owing thereunder.
Upon the prepayment of any such Note(s), the aggregate commitment amount set
forth in Section 2.1(a) hereof shall be reduced by an amount equal to the
Facility Commitment of the Bank(s) to which the prepaid Note(s) was payable.
This Section 2.6(e) sets forth the only circumstances under which any one or
more of the Notes may be prepaid in any manner other than on a pro rata basis
with all of the Notes.
SECTION 3: REQUIRED PAYMENT; PLACE OF PAYMENT, ETC.
3.1 REQUIRED REPAYMENTS. In the event that the outstanding principal
balance of the Loan shall at any time exceed the Borrowing Base, the Borrower
will immediately upon discovery of the existence of such excess borrowings, make
a principal payment which will reduce the outstanding principal balance of the
Loan to an amount which does not exceed the Borrowing Base, such payment to be
applied ratably in the manner set out in Section 2.6 hereof. Without limiting
the generality of the foregoing, if a Receivable shall cease to be an Eligible
Receivable or a state shall cease to be an Eligible State, then Borrower will
immediately make a principal payment, if necessary, in order to reduce the
principal balance of the Loan to an amount which does not exceed the Borrowing
Base.
3.2 PLACE OF PAYMENTS. All payments of principal and interest on the
Loan and all payments of fees required hereunder shall be made to the Agent, at
its address listed in Section 10.2 of this Agreement in immediately available
funds.
3.3 TIME OF PAYMENTS. All payments of principal, interest or fees shall
be made so as to be received by Agent not later than 10:30 A.M. Central Time
(standard or daylight savings, as applicable) on the date such payment is due.
If so received by Agent, Agent shall use its reasonable efforts to send to each
Bank such Bank's pro rata share of such payment, as applicable, prior to 2:00
P.M. Central Time (standard or daylight savings, as applicable) on the date
received.
3.4 PAYMENT ON NON-BUSINESS DAYS. Whenever any payment of principal,
interest or fees to be made on the indebtednesses evidenced by the Notes shall
fall due on a day which is not a Business Day, such payment shall be made on the
next succeeding Business Day.
SECTION 4: CONDITIONS OF LENDING
4.1 CONDITIONS PRECEDENT TO CLOSING AND FUNDING THE FACILITY
COMMITMENTS. The obligations of the Banks to fund their respective Facility
Commitments from and after the Effective Date are subject to the condition
precedent that the Agent shall have received, on or before the Effective Date,
or such later date acceptable to the Agent and Banks in their sole discretion,
all of the following in form and substance satisfactory to the Agent:
(a) This Eighth Amended and Restated Loan Agreement.
15
(b) The Notes.
(c) The Seventh Amended and Restated Security Agreement,
together with such financing statements or amendments thereto as Agent
may require to perfect its security interest therein.
(d) The Eighth Amended and Restated Guaranty Agreement,
unconditionally guaranteeing the indebtedness of Borrower.
(e) The Seventh Amended and Restated Pledge and Security
Agreement.
(f) Certified corporate resolutions of Borrower, DGC and the
Agency Subsidiaries and certificate(s) of good standing for Borrower,
DGC, Agency Subsidiaries, and Affiliated Insurers from the states of
their incorporation and such other states as Agent shall require.
(g) Current financial statements of the Borrower and the
Guarantors in form satisfactory to the Agent.
(h) On the Effective Date, a Borrowing Base Certificate
executed by a duly authorized officer of Borrower, in the form of
EXHIBIT "E" attached hereto.
(i) Such UCC lien searches from such recording offices as
Agent shall specify, evidencing the priority of the Agent's lien under
the Seventh Amended and Restated Security Agreement over any other
liens or encumbrances.
(j) A notification of assignment of interest in unearned
premium, in form satisfactory to the Agent, signed by each insurer
issuing policies, the premiums of which are financed under Premium
Finance Agreements or Installment Arrangements and evidence of the
delivery of such notice to the insurance guaranty funds of the states
in which such insurers are doing business, if required in order to
perfect a security interest in amounts payable from the insurance
guaranty fund of said state.
(k) Such other information and documentation as Agent shall
deem to be necessary or desirable in connection with the funding of the
Loan.
4.2 CONDITIONS PRECEDENT TO ALL ADVANCES. The obligation of the Agent
and the Banks to make Advances pursuant hereto shall be subject to the following
additional conditions precedent:
(a) The Borrower shall have furnished to the Agent each of the
items referred to in Section 4.1 hereof, all of which shall remain in
full force and effect as of the date of such Advance (notwithstanding
that the Agent may not have required any such item to be furnished on
or prior to the Effective Date).
(b) The Borrower shall not be in default of any of the terms
and provisions hereof or of any instrument or document now or at any
time hereafter evidencing or securing all or any part of the Loan
indebtednesses. Each of the Warranties and
16
Representations of the Borrower and Guarantors, as set out in Section 5
hereof shall remain true and correct in all material respects as of the
date of such Advance.
SECTION 5: REPRESENTATIONS AND WARRANTIES
Borrower and Guarantors jointly and severally represent and warrant
that:
5.1 INCORPORATION OF BORROWER. Each of Borrower, DGC, the Agency
Subsidiaries and the Affiliated Insurers is a corporation duly organized,
validly existing and in good standing under the laws of the State of its
incorporation, as set out in the initial paragraph of this Loan Agreement; each
has the power and authority to own its properties and assets and is duly
qualified to carry on its business in every jurisdiction wherein such
qualification is necessary.
5.2 POWER AND AUTHORITY. The execution, delivery and performance of the
Loan Agreement, the Notes and the Seventh Amended and Restated Security
Agreement, by the Borrower, of the Eighth Amended and Restated Guaranty
Agreement by the Guarantors and of the Seventh Amended and Restated Pledge and
Security Agreement by DGC have been duly authorized by all requisite action and
will not violate any provision of law, any order of any court or other agency of
government, the Charter or Certificate of Incorporation or Bylaws of the
Borrower or any Guarantor, any provision of any indenture, agreement or other
instrument to which Borrower or any Guarantor is a party, or by which Borrower's
and any Guarantor's respective properties or assets are bound, or be in conflict
with, result in a breach of, or constitute (with due notice or lapse of time or
both) a default under any such indenture, agreement or other instrument, or
result in the creation or imposition of any lien, charge or encumbrance of any
nature whatsoever upon any of the properties or assets of Borrower or any
Guarantor, except for liens and other encumbrances provided for and securing the
indebtedness covered by this Loan Agreement.
5.3 FINANCIAL CONDITION.
(a) Copies of the following financial statements have been furnished to
the Agent: (i) DIC audited (Statutory Basis) financial statements for the year
ended December 31, 2001; (ii) DGC audited (GAAP Basis) consolidated financial
statements for the year ended December 31, 2001; (iii) Borrower preliminary
unaudited (GAAP Basis) balance sheet and income statement for the period ended
June 30, 2002; and (iv) DGC preliminary unaudited (GAAP Basis) consolidated
financial statements for the period ended June 30, 2002.
(b) There has been no material adverse change in the business,
properties or condition, financial or otherwise, of Borrower, DGC, or any
Affiliated Insurer since June 30, 2002.
5.4 TITLE TO ASSETS. Except as disclosed in EXHIBIT "F," Borrower, DGC,
Affiliated Insurers and each Guarantor has good and marketable title to all
properties and assets as reflected in the balance sheets of the financial
statements referred to in Section 5.3. None of the Receivables is evidenced by a
Negotiable Instrument (as defined in the Uniform Commercial Code in effect in
the state of Tennessee), and the Agent has valid, perfected first security
interests for the benefit of the Banks in the collateral described in the
Seventh Amended and
17
Restated Security Agreement and the Seventh Amended and Restated Pledge and
Security Agreement.
5.5 LITIGATION. Except as disclosed in EXHIBIT "F," there is no action,
suit or proceeding at law or in equity or by or before any governmental
instrumentality or other agency now pending, or, to the knowledge of the
Borrower, DGC or any Guarantor threatened against or affecting Borrower, DGC,
any Affiliated Insurer or any Guarantor (other than those provided for, if any,
in financial statements referred to in Section 5.3), not otherwise covered by
insurance which would otherwise materially affect the financial condition of
Borrower, DGC, any Guarantor, or any Affiliated Insurer.
5.6 TAXES. Except as disclosed on EXHIBIT "F," each of Borrower, the
Guarantor and Affiliated Insurers (a) has filed or caused to be filed all
federal, state or local tax returns which are required to be filed, and (b) has
paid all taxes as shown on said returns or on any assessment received by it, to
the extent that such taxes have become due, except (i) as otherwise permitted by
the provisions hereof, or (ii) those taxes or assessments the nonpayment of
which would not have a material adverse effect on the financial condition of
Borrower, DGC or any Affiliated Insurer; provided that, in either case, such
amount shall not exceed the aggregate amount of Two Hundred Thousand Dollars
($200,000.00).
5.7 CONTRACTS OR RESTRICTIONS. None of Borrower, any Guarantor or any
Affiliated Insurer is a party to any agreement or instrument or subject to any
charter or other corporate restrictions materially adversely affecting its
business, properties or assets, operations or condition (financial or
otherwise).
5.8 NO DEFAULT. None of Borrower, any Guarantor or any Affiliated
Insurer is in default in the performance, observance or fulfillment of any of
the obligations, covenants, or conditions contained in any agreement or
instrument to which it is a party, which default if not cured would materially
and substantially affect the financial condition, property or operations of any
such Person. As of the Effective Date, except as discussed in EXHIBIT "F," none
of Borrower, any Guarantor, or any Affiliated Insurer is in default in the
performance, observance or fulfillment of any of the obligations, covenants, or
conditions contained in this Eighth Amended and Restated Loan Agreement.
5.9 PATENTS AND TRADEMARKS. Each of Borrower, the Guarantors and
Affiliated Insurers possesses all patents, trademarks, trade names, copyrights,
and licenses necessary to the conduct of its business.
5.10 ERISA. Each of Borrower, the Guarantors and Affiliated Insurers is
in material compliance with all applicable provisions of the Employees
Retirement Income Security Act of 1974 ("ERISA") and all other laws, state or
federal, applicable to any employees' retirement plan maintained or established
by it.
5.11 SUBSIDIARIES. Neither Borrower, any Agency Subsidiary nor any
Affiliated Insurer owns all or a substantial part of the stock (or other
ownership interest) in any corporation (or other form of business organization),
except for that of another Agency Subsidiary or Affiliated Insurer. DGC owns,
directly or indirectly, all of the outstanding stock in the Affiliated Insurers,
Borrower (exclusive of DGIC's preferred stock in Borrower) and the Agency
18
Subsidiaries. DGC does not own all or a substantial part of the stock (or other
ownership interest) in any other corporation (or other forms of business
organization), except for Direct Insurance Agency Midwest, Inc., a Minnesota
corporation.
5.12 FORM OF PREMIUM FINANCE AGREEMENT. The forms of Premium Finance
Agreement furnished to the Agent by Borrower, copies of which are attached
hereto as EXHIBITS "▇-▇," "▇-▇," AND "G-3" are forms which are currently
outstanding and/or which are currently being used to evidence the financing of
all current, new and renewal insurance premiums produced by the Agency
Subsidiaries in the Eligible States. The forms attached as EXHIBIT "G-1" are the
same forms attached as Exhibit "G-1" to the Seventh Loan Agreement, and such
forms have not been revised or amended since the date of the Seventh Loan
Agreement except for nonsubstantive formatting changes. The form attached as
EXHIBIT "G-2" relating to the state of Georgia is a revised version of premium
finance agreement which is being used for new and renewal business in that
state. The form attached as EXHIBIT "G-3" is being used to evidence the
financing of all current, new and renewal insurance premiums in the state of
South Carolina, which has been newly added to the list of Eligible States under
this Loan Agreement. Where required, the forms, new or revised, have been filed
with and approved by the appropriate regulatory authorities. As of the date
hereof, there are no Installment Arrangements in use by Borrower or any Agency
Subsidiary.
SECTION 6: AFFIRMATIVE COVENANTS
Borrower and Guarantors covenant and agree that from the Effective Date
and until payment in full of the principal of and interest on indebtednesses
evidenced by the Notes, unless the Required Banks shall otherwise consent in
writing, Borrower and Guarantors will:
6.1 BUSINESS AND EXISTENCE. Perform all things necessary to preserve
and keep in full force and effect each of Borrower's, the Guarantors' and each
Affiliated Insurer's existence, rights, licenses and franchises, comply in all
material respects with all laws applicable to each such Person (including, but
not limited to, licensing laws of the states in which they conduct business),
and continue to conduct and operate their respective businesses substantially as
conducted and operated during the present and preceding calendar years, except
as allowed by Section 7.7 hereof.
6.2 MAINTAIN PROPERTY. Maintain, preserve, and protect all leases,
franchises, and trade names and preserve all the remainder of the properties
used or useful in the conduct of the business of Borrower, the Guarantors and
Affiliated Insurers substantially as conducted and operated during the present
and preceding fiscal year (subject to normal wear and tear), so that the
business carried on in connection therewith may be properly conducted at all
times.
6.3 OBLIGATIONS, TAXES, LIENS AND INSURANCE. Pay and cause each
Affiliated Insurer to pay, all of their respective indebtednesses and
obligations promptly in accordance with normal terms and practices of their
businesses; maintain such insurance coverage as is customary for similar
businesses; and pay and discharge or cause to be paid and discharged promptly
all taxes, assessments, and governmental charges or levies imposed upon them or
upon any of their income and profits, or upon any of their properties, real,
personal or mixed, or upon any part thereof, before the same shall become in
default, as well as all lawful claims for labor, materials, and supplies which
otherwise, if unpaid, might become a lien or charge upon such properties or
19
any part thereof; provided, however, that no such Person shall be required to
pay and discharge or to cause to be paid and discharged any such tax,
assessment, trade payable, charge, levy or claim so long as the validity thereof
shall be contested in good faith by appropriate proceedings satisfactory to
Agent, and Agent shall be furnished, if Agent shall so request, bond or other
security protecting it against loss in the event that such contest should be
adversely determined.
6.4 FINANCIAL REPORTS AND OTHER DATA. Furnish or cause to be furnished
to each of the Banks as soon as available and in any event:
(a) Within one hundred fifty (150) days after the end of each
fiscal year of DGC, an unqualified audit of DGC and its subsidiaries on
a consolidated and consolidating basis, as of the close of such fiscal
year, including a balance sheet and statement of income and surplus,
with notes thereon, together with the unqualified audit report and
opinion of an independent Certified Public Accountant acceptable to the
Required Banks, showing the financial condition of DGC and its
subsidiaries at the close of such year and the results of operations
during such year, such financial statements to be prepared in
accordance with GAAP;
(b) Within sixty-five (65) days after the end of each fiscal
year of each Affiliated Insurer, unaudited financial statements
prepared on a Statutory Accounting Basis in the form required to be
filed with the Commissioner;
(c) Within ninety (90) days after the end of each fiscal year
of DGC, unaudited, consolidated and consolidating financial statements
of DGC;
(d) Within one hundred fifty (150) days after the end of each
fiscal year of each Affiliated Insurer, an audit of such Affiliated
Insurer and its subsidiaries, as prescribed by its state of domicile,
as of the close of such fiscal year, together with the audit report and
opinion of said independent Certified Public Accountant, showing the
financial condition of such Affiliated Insurer and its subsidiaries at
the close of such year and the results of operations during such year,
such financial statements to be prepared on the Statutory Accounting
Basis and to contain no qualifications which are unacceptable to the
Required Banks;
(e) Within forty-five (45) days after the end of each fiscal
quarter, financial statements of DGC, such financial statements to
include an income statement and balance sheet, certified as accurate by
an officer of DGC;
(f) Within forty-five (45) days after the end of each fiscal
quarter, quarterly financial statements for each Affiliated Insurer
prepared on a Statutory Accounting Basis, in the form required to be
filed with the Commissioner;
(g) Within twenty (20) days after the end of each calendar
month, a Borrowing Base Certificate substantially in the form of
EXHIBIT "E" attached hereto stating the Borrowing Base as of the last
day of such calendar month certified by an officer of Borrower.
20
6.5 NOTICE OF DEFAULT. At the time of Borrower's or any Guarantor's
first knowledge or notice, promptly furnish Agent with written notice of the
occurrence of any event or the existence of any condition which constitutes or
upon written notice or lapse of time or both would constitute an Event of
Default under the terms of this Loan Agreement.
6.6 FURTHER ASSURANCES. Furnish such other information regarding the
operations, business affairs and financial condition of the Borrower, each
Guarantor and each Affiliated Insurer, and execute and/or deliver all such other
instruments and documents as any Bank may reasonably request, including, but not
limited to, originals of premium finance contracts and any other instrument or
document at any time evidencing or governing any indebtedness of a Policyholder
to Borrower, written confirmation of requests for Advances, true and exact
copies of its books of account and tax returns, and all information furnished to
any governmental authority, and permit the copying of the same.
6.7 RIGHT OF INSPECTION; FIELD AUDIT. Permit any person designated by
any Bank, at that Bank's expense, to visit and inspect any of the properties,
books and financial reports of the Borrower, the Guarantors and Affiliated
Insurers, and to discuss their affairs, finances and accounts with their
principal officers, at all such reasonable times and as often as such Bank may
reasonably request. The parties recognize and acknowledge that the Agent intends
to engage the services of an independent audit firm to audit the Receivables,
procedures and systems of Borrower at an anticipated frequency of once per year.
6.8 NOTICE OF ADVERSE CHANGE IN ASSETS. At the time of Borrower's or
any Guarantor's first knowledge or notice, immediately notify Agent of any
information that may adversely affect in any material manner the assets or
business operations of the Borrower, any Guarantor or any Affiliated Insurer,
including, but not limited to, any change of a state insurance law or regulation
or the application thereof by the Commissioner, and administrative or judicial
proceedings initiated or threatened against Borrower, any Guarantor or any
Affiliated Insurer by any governmental agency or instrumentality.
6.9 CHANGES IN MATTERS DISCLOSED. At the time of Borrower's or any
Guarantor's first knowledge or notice, immediately notify Agent of any material
adverse developments or changes in any of the matters referred to in Sections
5.4, 5.5, 5.6 and 5.8 hereof.
6.10 COMPLIANCE CERTIFICATE. Furnish to each of the Banks concurrently
with the furnishing of each financial statement or report required hereunder, a
Compliance Certificate substantially in the form of EXHIBIT "H" attached hereto,
together with all supporting documentation.
6.11 MINIMUM CONSOLIDATED NET INCOME. Maintain, beginning December 31,
2002, as to DGC on a consolidated basis, on a rolling four (4) quarter basis, as
of the end of each fiscal quarter net income after taxes (GAAP basis) of at
least Ten Million Dollars ($10,000,000.00).
6.12 LOAN AMOUNT TO NET WORTH. Maintain as to DGC at all times
beginning on the Effective Date a ratio of (i) the sum of the total disbursed
and unpaid principal balances of the Loan, DGC Loan and Junior Facility
outstanding from time to time, to (ii) Tangible Net Worth (as defined in Section
1), of less than 3.0 to 1.0, declining to 2.25 to 1.0 upon the closing of the
21
Junior Facility or completion of an initial public offering by DGC of not less
than Fifty Million Dollars ($50,000,000.00).
6.13 MINIMUM TANGIBLE NET WORTH. Maintain at all times beginning on the
Effective Date a Tangible Net Worth (as defined in Section 1) of not less than
(a) as to Borrower, Six Million Five Hundred Thousand Dollars ($6,500,000.00);
and (b) as to DGC, Forty-Four Million Dollars ($44,000,000.00), and provided
further that, with respect to DGC only, such Tangible Net Worth calculation
shall be (x) decreased by (i) 100% of the goodwill purchase price associated
with DGC's contemplated purchase of Cash Register, Inc. and (ii) 100% of the
amount of any treasury stock purchase of DGC common stock currently held by
Mutual Service Casualty Insurance Company, and (y) (i) commencing in DGC's
fiscal fourth quarter, increased by 25% of all future net income after taxes,
measured at the end of each fiscal quarter, and (ii) increased by 50% of the
amount of any equity proceeds realized from any equity placement or offering.
6.14 RATIO OF ELIGIBLE RECEIVABLES TO DEBT. Maintain at all times after
the Effective Date a ratio of (a) Eligible Receivables, to (b) the aggregate
unpaid principal balances of the Loan plus the Borrower's net indebtedness to
insurers related to premiums financed on behalf of insureds plus the aggregate
unpaid principal balance of the Junior Facility that has been advanced to
Borrower, of not less than 1.05 to 1.0.
6.15 RATIO OF UNEARNED PREMIUMS TO LOAN AMOUNT. Maintain at all times
after the Effective Date a ratio of (a) unearned premiums assigned to Borrower
as collateral for Policyholder obligations under Premium Finance Agreements and
Installment Arrangements, and pledged by Borrower to the Agent as collateral for
the Loan, plus receivables from insurers qualifying under clause (b) of the
definition of Eligible Receivables, to (b) the aggregate outstanding Loan
Amount, of not less than 1.1 to 1.0, provided that the amount of unearned
premiums shall be decreased by the amount of any monthly premium settlements
which are greater than 30 days past due from Borrower to any Affiliated Insurer.
6.16 DEBT SERVICE COVERAGE RATIO. Maintain as to DGC as of the end of
each fiscal quarter, beginning December 31, 2002, a ratio (the "Debt Service
Coverage Ratio") of (a) net income plus interest plus taxes plus depreciation
plus amortization (herein "EBITDA") of DGC on a consolidated basis for such
quarter and the three (3) preceding fiscal quarters to (b) Debt Service
(hereinafter defined) during the same period of four (4) fiscal quarters, of not
less than 1.50 to 1.0. For purposes hereof, "Debt Service" shall mean the sum of
(w) all scheduled principal payments plus paid interest plus accrued interest as
to the Loans, (x) all interest and borrowing costs incurred in connection with
the Junior Facility, (y) preferred stock dividends and (z) the amount of
principal payment requirements on the DGC Loan.
6.17 NOTIFICATION OF PREMIUM FINANCE. Promptly upon the extension of
credit under a Premium Finance Agreement or Installment Arrangement, send to the
insurer issuing the policy the premiums on which are being financed, a copy of
the specific Premium Finance Agreement or Installment Arrangement, as
applicable, or otherwise notify said insurer of the assignment by the insured to
the Borrower of the rights to unearned premiums.
6.18 MINIMUM CAPITAL SURPLUS OF AFFILIATED INSURERS. Maintain as to DGC
at all times hereafter, commencing December 31, 2002, a minimum capital surplus
(including surplus notes) of all Affiliated Insurers on a combined GAAP basis of
not less than Forty-Five Million
22
Dollars ($45,000,000.00), increased by the amount of any capital surplus
realized from Borrower's and/or DGC's closing of the Junior Facility.
SECTION 7: NEGATIVE COVENANTS
Each of Borrower, DGC and the Agency Subsidiaries covenants and agrees
that at all times from and after the Effective Date, unless the Required Banks
shall otherwise consent in writing, it will not, either directly or indirectly:
7.1 INDEBTEDNESS. Incur, create, assume or permit to exist against
Borrower, DGC, any Agency Subsidiary or any Affiliated Insurer any indebtedness
or liability, including, but not limited to, indebtedness evidenced by notes,
bonds, debentures or similar obligations, except:
(a) Indebtedness of Borrower to the Banks pursuant to this
Loan Agreement;
(b) Trade accounts payable, taxes payable, accrued employees'
bonuses and withheld amounts, accrued liabilities with respect to
contributions to pension plans and other similar short-term obligations
incurred by Borrower, DGC, the Agency Subsidiaries or any Affiliated
Insurer in the normal course of operating its business (and not for
borrowed money), provided that the amount of such obligations shall not
be unduly large, in the reasonable judgment of the Agent, considering
the size and nature of its business, and provided that it shall not be
in default with respect to any of such obligations;
(c) Indebtedness of DGC to the DGC Banks pursuant to the DGC
Loan;
(d) Indebtedness of Borrower and/or DGC pursuant to the Junior
Facility; and
(e) Leases of offices, furniture and equipment in the ordinary
course of business;
provided, however, the Agency Subsidiaries may incur indebtedness owed to one or
more institutional lenders for the purpose of funding short-term working capital
needs not to exceed in the aggregate Two Million Dollars ($2,000,000.00).
7.2 MORTGAGES, LIENS, ETC. Create, assume or suffer to exist any
mortgage, pledge, lien, charge or other encumbrance of any nature whatsoever on
any of the assets of Borrower, DGC, any Agency Subsidiary or any Affiliated
Insurer, now or hereafter owned, except for:
(a) Liens securing payment of the Notes;
(b) Junior, subordinated Liens securing payment of the Junior
Facility; and
(c) Permitted Encumbrances.
7.3 GUARANTEES. Guarantee or otherwise in any way become or be
responsible for, or permit any Affiliated Insurer to guarantee or otherwise in
any way become or be responsible for, the indebtedness or obligations of any
other Person, by any means whatsoever, whether by agreement to purchase the
indebtedness of any other Person or agreement for the furnishing of funds to any
other Person, for the purpose of paying or discharging the indebtedness of any
other
23
Person, or otherwise, without the prior written consent of the Required Banks,
except for the endorsement of negotiable instruments by the Borrower, DGC, the
Agency Subsidiaries or Affiliated Insurers in the ordinary course of business
for collection, except for the obligation of DGC and the Agency Subsidiaries
pursuant to the Eighth Amended and Restated Guaranty Agreement, except for the
guaranty by DGC of indebtedness of the Agency Subsidiaries permitted under
Section 7.1 hereof, except for the guaranty by DGC of any obligation of any
Agency Subsidiaries or Affiliated Insurers, and except for any guaranty given in
connection with the Junior Facility, provided such obligation is not prohibited
by this Loan Agreement and does not cause DGC to be in default under any other
provision of this Loan Agreement.
7.4 SALE OF ASSETS. Sell, lease, transfer or dispose of all or a
substantial part of its assets, or permit any Affiliated Insurer to sell, lease,
transfer or dispose of all or a substantial part of its assets, except for sales
in the ordinary course of business and sales or leases of DIC-owned real estate,
computers or other fixed assets.
7.5 LOANS AND INVESTMENTS. Make, or permit an Affiliated Insurer to
make, any loans to or investments in, or purchase any stock, other securities or
evidence of indebtedness of any Person, except for (a) the ownership by DGC,
directly or indirectly, of all of the stock in Borrower, the Affiliated Insurers
and the Agency Subsidiaries, (b) the investment by Borrower or any of the Agency
Subsidiaries in the Borrower or any of the Agency Subsidiaries, (c) the purchase
of insurance agencies or insurance companies at an aggregate price (excluding
capital and surplus) (for the Affiliated Insurers, the Agency Subsidiaries and
DGC, taken as a whole) not to exceed Four Million Five Hundred Thousand Dollars
($4,500,000.00), (d) as to Affiliated Insurers, Allowable Investments, and (e)
as may occur in connection with the Junior Facility.
7.6 SALE OF RECEIVABLES. Sell, discount or otherwise dispose of any of
its Receivables or any promissory note or obligation held by it, with or without
recourse, except for (a) an Agency Subsidiary's assignment sale of Receivables
to Borrower, and (b) provided that the Required Banks shall have consented in
writing, such consent not to be unreasonably withheld, Borrower's sale from time
to time to Affiliated Insurers of Receivables which are identified in a written
notice given to Agent at least thirty (30) days prior to such sale, for cash at
a price equal to the full face amount of such Receivables, with the entire cash
purchase price to be used to repay the outstanding balance of the Loan.
7.7 NEW BUSINESS. Directly or indirectly whether in its own name or
through one or more subsidiaries (a) expand, acquire or enter into any business
other than (i) the business of DGC and its subsidiaries providing any type of
insurance, related financial products, or related business (such as auto club)
and (ii) the Agency Subsidiaries providing or offering products and services not
related to the insurance business (such as payday loans, consumer loans,
personal communication equipment, tax filing services, money transfer services)
provided that Borrower, DGC and the Agency Subsidiary will not, in the
aggregate, invest more than Two Million Dollars ($2,000,000.00), either directly
or as joint venturers, in such activities; or (b) enter into any management
contract whereby the effective management or control of DGC or any of its
subsidiaries is delegated to third parties, without the prior written consent of
the Required Banks.
7.8 CONSOLIDATION OR MERGER; ACQUISITION OF ASSETS. Enter into any
transaction of merger or consolidation, acquire any other business or
corporation, or acquire all or substantially all of the property or assets of
any other Person, except as permitted by Section 7.5 hereof or
24
except as permitted by Section 8.20 hereof; provided, however, that any such
transaction or acquisition permitted by Section 7.5 or Section 8.20 shall only
be permitted if such transaction (i) does not cause or result in an Event of
Default and (ii) does not cause or result in an event which with notice, lapse
of time or both may become an Event of Default hereunder.
7.9 DIVIDENDS, REDEMPTIONS AND OTHER PAYMENTS. Declare or pay, or set
apart any funds for the payment of, any dividends on any shares of capital stock
of Borrower or DGC (except as hereinafter set out), or apply any funds,
properties, or assets of Borrower or DGC to or set apart any funds properties or
assets for, the purchase, redemption or other retirement of or make any other
distribution (whether by reduction of capital or otherwise) in respect of, any
shares of capital stock of Borrower or DGC (common or preferred), provided,
however, that DGC shall be permitted to redeem shares of shareholders to the
extent that the expenditures required by such redemption(s) do not result in a
violation of any of the financial covenants set forth in this Loan Agreement or
otherwise cause the occurrence of a default hereunder. Notwithstanding the
foregoing, Borrower and DGC shall be permitted to pay dividends to the holders
of the preferred stock held by SSM Venture Partners, L.P., Noro-▇▇▇▇▇▇ Partners
II, L.P., ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇ Capital, provided that no Event of Default
nor any event which with notice, lapse of time or both may become an Event of
Default hereunder shall have occurred and be continuing, and that such payment
will not result in an Event of Default hereunder.
7.10 [Intentionally Deleted.]
7.11 [Intentionally Deleted.]
7.12 [Intentionally Deleted.]
SECTION 8: EVENTS OF DEFAULT
An "Event of Default" shall exist if any of the following shall occur:
8.1 PAYMENT OF PRINCIPAL, INTEREST. The Borrower defaults in the
payment of principal or interest due at the Loan Termination Date; or Borrower
defaults for more than ten (10) days after the same shall be due, in the payment
of principal or interest due at any other time on the Notes or for more than ten
(10) days after demand by the Agent in the payment of any fees due under this
Loan Agreement; or Borrower or any Guarantor shall default beyond any cure
period applicable thereto in the prompt payment when due of any other
indebtednesses, liabilities, or obligations to the Banks, whether now existing
or hereafter created or arising, direct or indirect, absolute or contingent,
including, but not limited to, the DGC Loan.
8.2 PAYMENT OR PERFORMANCE OF OTHER OBLIGATIONS. DGC shall default,
beyond any cure period applicable thereto, with respect to the Securities
Purchase Agreement or DGC's preferred stock provisions adopted pursuant thereto;
or the Borrower, any Guarantor or any Affiliated Insurer defaults, beyond any
cure period applicable thereto, with respect to any other agreement if such
default or the consequences thereof will or may, in the reasonable judgment of
the Required Banks, have a material adverse effect on the business or operations
of Borrower (considered separately), or of the Affiliated Insurers (considered
as a whole), or of DGC (considered separately), or of DGC and its subsidiaries
on a consolidated basis, or of Borrower, Affiliated Insurers and DGC, as a
whole; or the Borrower or any Guarantor defaults, beyond any
25
cure period applicable thereto, with respect to any settlement with insurers for
policies financed when due, or the payment or performance of any other
obligation incurred in connection with any indebtedness for borrowed money, if
the effect of such default is to accelerate the maturity of such indebtedness,
or if the effect of such default is to cause such indebtedness to become due
prior to its stated maturity; or the Borrower, any Guarantor or any Affiliated
Insurer shall default in the payment or performance of any other duty, liability
or obligation at any time owed to the Banks or any of them.
8.3 REPRESENTATION OR WARRANTY. Any representation or warranty made by
the Borrower or any Guarantor herein, or in any report, certificate, financial
statement or other writing furnished in connection with or pursuant to this Loan
Agreement shall prove to be false, misleading or incomplete in any material
respect on the date as of which made.
8.4 [Intentionally Deleted.]
8.5 LIQUIDITY RATIO. If the Liquidity Ratio shall at any time be less
than 1.0 to 1.0.
8.6 [Intentionally Deleted.]
8.7 [Intentionally Deleted.]
8.8 RISK BASED CAPITAL. If NAIC Risk Based Capital (measured annually)
of the Affiliated P&C Insurers on a consolidated basis, computed in accordance
with standards adopted by NAIC, as amended from time to time, shall at any time
be less than two hundred fifty percent (250%) of the "authorized control level"
as defined under such standards.
8.9 [Intentionally Deleted.]
8.10 [Intentionally Deleted.]
8.11 [Intentionally Deleted.]
8.12 ALLOWABLE INVESTMENTS. If any Affiliated Insurer shall make any
loans to, investments in, or purchase any stock, securities or evidence of
indebtedness of, a Person other than Allowable Investments.
8.13 REINSURER RATING. If as to any nonaffiliated Reinsurer to which an
Affiliated Insurer cedes risk and policy liabilities by agreement, as of the
date when an Affiliated Insurer enters into any such agreement, such Reinsurer
shall fail to have an A.M. Best rating of:
(i) A- or better, or
(ii) B+ or better, provided that the aggregate risk to an
Affiliated Insurer on account of such Reinsurer does not exceed ten
percent (10%) of the pro rata share being reinsured. [EXAMPLE:
Reinsurer buys a 25% participation from Affiliated Insurer; Affiliated
Insurer's risk may not exceed 2.5% of Affiliated Insurer's total policy
value.]
Failure to comply with the above rating requirement shall not be an Event of
Default, however, if (a) such Reinsurer having a noncomplying rating shall have
furnished to an Affiliated Insurer an
26
irrevocable letter of credit that is issued by a bank that meets the eligibility
standards of the NAIC's Securities Valuation Office and that is in an amount,
updated quarterly, not less than the sum of (i) the unearned premiums of such
Reinsurer on policies ceded by an Affiliated Insurer, plus (ii) claims of
Affiliated Insurers for losses due from such Reinsurer; or (b) if an Affiliated
Insurer retains funds in a funds withheld account equal to or greater than such
sum.
8.14 [Intentionally Deleted.]
8.15 BANKRUPTCY, ETC. The Borrower, any Guarantor or any Affiliated
Insurer shall make an assignment for the benefit of creditors, file a petition
in bankruptcy, petition or apply to any tribunal for the appointment of a
custodian, receiver or any trustee for it or a substantial part of its assets,
or shall commence any proceeding under any bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction, whether now or hereafter in effect; or if there shall have
been filed any such petition or application, or any such proceeding shall have
been commenced against Borrower, any Guarantor or any Affiliated Insurer, in
which an order for relief is entered or which remains undismissed for a period
of sixty (60) days or more; or if the Commissioner shall initiate or take action
to place Borrower, any Agency Subsidiary or any Affiliated Insurer in
receivership, in rehabilitation or under the supervision of any court-appointed
trustee or administrator; or if the Commissioner shall place Borrower, any
Agency Subsidiary or any Affiliated Insurer under any cease and desist order or
other judicial or administrative decree which materially and adversely affects
its business or operations; or Borrower or any Guarantor by any act or omission
shall indicate its consent to, approval of or acquiescence in any such petition,
application or proceeding or order for relief or the appointment of a custodian,
receiver or any trustee for it or any substantial part of any of its properties,
or shall suffer any such custodianship, receivership or trusteeship to continue
undischarged for a period of sixty (60) days or more; or Borrower, any Guarantor
or any Affiliated Insurer shall generally not pay its debts as such debts become
due.
8.16 COMPLIANCE WITH LAWS. If an Affiliated Insurer shall at any time
fail in any material respect to comply with all insurance laws, rules and
regulations of the states in which it operates or does business.
8.17 CONCEALMENT OF PROPERTY, ETC. The Borrower or any Guarantor shall
have concealed, removed, or permitted to be concealed or removed, any part of
its property, with intent to hinder, delay or defraud its creditors or any of
them, or made or suffered a transfer of any of its property which may be
fraudulent under any bankruptcy, fraudulent conveyance or similar law; or shall
have made any transfer of its property to or for the benefit of a creditor at a
time when other creditors similarly situated have not been paid; or shall have
suffered or permitted, while insolvent, any creditor to obtain a lien upon any
of its property through legal proceedings or distraint which is not vacated
within ninety (90) days from the date thereof.
8.18 [Intentionally Deleted.]
8.19 [Intentionally Deleted.]
8.20 CHANGE IN OWNERSHIP. There shall occur any change in the ownership
of the capital stock of Borrower, Affiliated Insurers or DGC, except for (a)
changes in ownership of stock in DGC which, in the aggregate, for all such
changes, do not exceed forty-nine percent
27
(49%) of DGC's outstanding stock, (b) changes in ownership of stock in DGC
resulting from conversion of shares of preferred stock in DGC into common stock
of DGC or the transfer or assignment of such preferred stock, in the manner
contemplated by the Securities Purchase Agreement, (c) changes in ownership of
stock in DGC resulting from a public offering of the stock of DGC, or (d)
changes in ownership of stock in any Agency Subsidiary or Affiliated Insurer,
provided that the ultimate direct or indirect ownership remains with DGC.
8.21 LOAN DOCUMENTS TERMINATED OR VOID. This Loan Agreement, the Notes,
the Eighth Amended and Restated Guaranty Agreement or any instrument securing
this Loan Agreement, the Notes or the Eighth Amended and Restated Guaranty
Agreement shall, at any time after their respective execution and delivery and
for any reason, cease to be in full force and effect or shall be declared to be
null and void or the Borrower or any Guarantor shall deny that either of them
has any or further liability, or shall seek to discontinue or terminate its
obligations, under this Loan Agreement and the Notes, or under the Eighth
Amended and Restated Guaranty Agreement, respectively.
8.22 COVENANTS. The Borrower or any Guarantor defaults in the
performance or observance of any other covenant, agreement or undertaking on its
part to be performed or observed, contained herein, in the Seventh Amended and
Restated Security Agreement, the Seventh Amended and Restated Pledge Agreement,
the DGC Loan Agreement or in any other instrument or document which now or
hereafter evidences or secures all or any part of the Loan indebtedness or the
DGC Loan indebtedness, and such failure or default shall continue for thirty
(30) days after written notice by Agent to Borrower of such failure or default.
8.23 REMEDY. Upon the occurrence of any Event of Default, and after any
notice and cure period applicable thereto, which has not been waived pursuant to
Section 10.1 hereof, each Bank shall, at its option, be relieved of any
obligation to make further Advances under this Agreement; and the Agent, at the
direction of the Required Banks, shall declare the entire principal balance of
all of the Notes, all accrued interest thereon and all other amounts due to the
Banks under this Loan Agreement to be immediately due and payable for all
purposes. The Agent may, and at the direction of the Required Banks shall,
thereupon exercise all rights and remedies available to it under the Loan
Documents or available at law or in equity. Without limiting the generality of
the foregoing, upon the occurrence of an Event of Default, and after any notice
and cure period applicable thereto, regardless of whether the maturity of the
Loans shall have been accelerated, the Agent may, and at the direction of the
Required Banks shall, give notice to Policyholders to pay any installments
coming due under Premium Finance Agreements or Installment Arrangements to
Agent, may collect any and all such installments, may exercise any right or
power granted to Borrower or any Agency Subsidiary to cancel policies of
insurance (including, but not limited to the power granted in the Premium
Finance Agreements), may collect and file claims to collect unearned premiums
from insurers and/or Insurance Guaranty Funds, whether acting in the name and on
behalf of the Policyholders, Borrower, an Agency Subsidiary, Agent or the Banks.
Further, the Agent on behalf of the Banks shall have the right to the
appointment of a receiver to take possession of Borrower's premises, properties,
assets, books and records, without consideration of the value of the collateral
pledged as security for the Notes or the solvency of any person liable for the
payment of the amounts then owing, and all amounts collected by the receiver
shall, after expenses of the receivership, be applied to the payment of the
Notes, and interest thereon in the proportions described elsewhere
28
in this Loan Agreement; and the Agent shall have the right to do the same
without the appointment of a receiver. All such rights and remedies are
cumulative and nonexclusive, and may be exercised by the Agent concurrently or
sequentially, in such order as the Agent may choose or the Required Banks may
direct.
SECTION 9: THE AGENT
The Banks hereby agree among themselves (and the Borrower by its
execution hereof hereby acknowledges such agreement) as follows:
9.1 APPOINTMENT. Each Bank hereby appoints First Tennessee Bank
National Association as the Agent hereunder, and under the other Loan Documents,
and each agrees that the Agent is authorized to act as its agent hereunder, and
under the other Loan Documents. Agent agrees to act as the agent upon the
express conditions contained in this Section 9 and the other Loan Documents. The
provisions of this Section 9 are solely for the benefit of the Agent, and
neither the Borrower nor any Guarantor shall have any rights as a third party
beneficiary of any of the provisions hereof or thereof. In performing its
functions and duties hereunder and under the other Loan Documents, the Agent
shall act solely as the agent of the Banks and does not assume and shall not be
deemed to have assumed any obligation towards or relationship of agency or trust
with or for the Borrower or any Guarantor.
9.2 AGENT ENTITLED TO ACT AS A BANK. The agency created hereunder shall
in no way impair or affect any of the rights and powers of, or impose any duties
or obligations upon, First Tennessee Bank National Association in its capacity
as a lender pursuant to this Loan Agreement. With respect to its interests in
the Loan, said Bank shall have the same rights and powers hereunder as any other
Bank and may exercise the same as though it were not performing the duties and
functions delegated to it hereunder and the term "Bank" or "Banks" or any
similar term shall, unless the context clearly otherwise indicates, include
First Tennessee Bank National Association in its individual capacity. As long as
such arrangements do not otherwise violate this Loan Agreement, said Bank (and
each of its affiliates) may lend money to and generally engage in any kind of
business with the Borrower, DGC, any Affiliated Insurer and the Agency
Subsidiaries as if it were not the Agent.
9.3 EXCULPATORY PROVISIONS.
(a) Powers and General Immunity of the Agent.
(i) Each Bank irrevocably authorizes the Agent to take such
action on such Bank's behalf and to exercise such powers hereunder and
under the other Loan Documents as are specifically delegated to the
Agent by the terms hereof and thereof, together with such powers as are
reasonably incidental thereto. The Agent shall have only those duties
and responsibilities to such Bank which are expressly specified in this
Loan Agreement and the other Loan Documents and it may perform such
duties by or through its agents or employees. The duties of the Agent
shall be mechanical and administrative in nature; the Agent shall not
have by reason of this Loan Agreement a fiduciary relationship in
respect of any of the Banks, and nothing in this Loan Agreement,
express or implied, is intended to or shall be so construed as to
impose upon the Agent
29
any obligations in respect of this Loan Agreement or the other Loan
Documents except as expressly set forth herein or therein.
(ii) In performing its functions and duties hereunder on
behalf of the Banks, the Agent shall exercise the same care which it
would in dealing with loans for its own account, but the Agent shall
not be responsible to any Bank for the execution, effectiveness,
genuineness, validity, enforceability, collectibility or sufficiency of
this Loan Agreement, the other Loan Documents or any notes or for any
representations, warranties, recitals or statements made herein or
therein or made in any written or oral statement or in any financial or
other statements, instruments, reports, certificates or any other
documents in connection herewith or therewith furnished by the Agent to
the Banks or by or on behalf of the Borrower or any Guarantor to the
Agent or any Bank or be required to ascertain or inquire as to the
performance or observance of any of the terms, conditions, provisions,
covenants or agreements contained herein or therein or as to the use of
the proceeds of the Loans or the existence or possible existence of any
Event of Default.
(iii) Neither the Agent nor any of its officers, directors,
employees or agents shall be liable to the Banks for any action taken
or omitted under this Loan Agreement or the other Loan Documents or in
connection herewith or therewith, except to the extent such liability
has arisen from the Agent's willful misconduct or gross negligence.
Without prejudice to the generality of the foregoing, the Agent shall
be entitled to rely, and shall be fully protected in relying, on any
communication, instrument or document believed by it to be genuine and
correct and to have been signed or sent by the proper Person or
Persons, and shall be entitled to rely and shall be protected in
relying on opinions and judgments of attorneys (who may be attorneys
for the Borrower or any Guarantor), accountants, experts and other
professional advisors selected by it. Subject to the first sentence of
this clause (iii), no Bank shall have any right of action whatsoever
against the Agent as a result of the Agent acting or (where so
instructed) refraining from acting under this Loan Agreement or the
other Loan Documents in accordance with the instructions of the
Required Banks or all of the Banks, as applicable. The Agent shall be
entitled to refrain from exercising any power, discretion or authority
vested in it under this Loan Agreement or the other Loan Documents
unless and until it has obtained the instructions of the Required Banks
or the Banks, as applicable, and no Bank shall have any right of action
whatsoever against the Agent as a result of the Agent's failure to act
in the absence of instructions from the Required Banks or the Banks, as
applicable.
(b) Representations and Warranties; No Responsibility for Appraisal of
Creditworthiness.
(i) Each Bank represents and warrants to Agent that it has
made its own independent investigation of the financial condition and
affairs of the Borrower, DGC, Affiliated Insurers and the Agency
Subsidiaries in connection with the making of the Loan and has made and
shall continue to make its own appraisal of the creditworthiness of the
Borrower and its subsidiaries. Except as provided in this Agreement,
the Agent shall not have any duty or responsibility either initially or
on a continuing basis to make any such investigation or any such
appraisal on behalf of the Banks or to provide any Bank with any credit
or other information with respect thereto whether coming into its
30
possession before the initial borrowing hereunder or any time or times
thereafter and shall further have no responsibility with respect to the
accuracy of or the completeness of the information provided to the
Banks.
(ii) Each Bank hereby represents and warrants to Agent that:
(1) Such Bank has, independently and without reliance
upon Agent and based on the financial and other information of
the Borrower, DGC, Affiliated Insurers and the Agency
Subsidiaries heretofore delivered to such Bank and on such
other documents and information as such Bank has deemed
appropriate, made its own credit analysis and decision to make
its Loan, and shall continue to do so without reliance on
Agent; and such Bank acknowledges that Agent has not made and
does not make any representations or warranties or assume any
responsibility with respect to the validity, genuineness,
enforceability (as against any Person other than Agent) or
collectibility of the Loan, this Loan Agreement or the other
Loan Documents; and
(2) Such Bank is making its Loan in the ordinary
course of its lending business for its own account and not
with a view to or for sale in connection with any distribution
thereof provided that the disposition of such Bank's property
shall at all times be and remain within such Bank's control.
(c) RIGHT TO INDEMNITY. Each Bank will reimburse and indemnify the
Agent, ratably according to the respective principal amounts of the Notes then
held by each of them, for and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by, or asserted against the Agent, acting pursuant hereto, in any way relating
to or arising out of any of the Loan Documents or any action taken or omitted by
the Agent under any of the Loan Documents in proportion to each Bank's
respective pro rata share of the Loan; provided, however, that no Bank shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the Agent's gross negligence or willful misconduct. The obligations of the
Banks under this Paragraph (c) shall survive the payment in full of the Loan and
the termination of this Loan Agreement and the resignation of the Agent.
(d) BANKS TREATED AS OWNERS. The Agent may deem and treat each Bank as
the owner of its respective interests in the Loan as reflected herein for all
purposes hereof unless and until a written notice of the assignment or transfer
thereof shall have been filed with the Agent. Any request, authority or consent
of any Person or entity who, at the time of making such request or giving such
authority or consent, is the owner of interests in the Loan shall be conclusive
and binding on any subsequent holder, transferee or assignee of such interests.
(e) AUTHORIZATION OF LOAN DOCUMENTS; EXERCISE OF REMEDIES. Each Bank
hereby authorizes the Agent to enter into, and approves and ratifies the
execution by the Agent of, this Loan Agreement and the other Loan Documents and
authorizes the Agent to take all action contemplated thereby. Each Bank agrees
that no Bank shall have any right to seek to enforce its Note, to exercise any
rights under the Eighth Amended and Restated Guaranty Agreement or to realize
upon the security granted by this Loan Agreement or any of the other Loan
Documents, it
31
being understood and agreed that such rights and remedies may be exercised by
the Agent for the benefit of itself and the other Banks upon the respective
terms set forth herein and therein. At the direction of the Required Banks, the
Agent may proceed to protect and enforce all or any of the rights, remedies,
powers and privileges under this Loan Agreement and the other Loan Documents,
notwithstanding that such Agent is not a holder of all of the Notes. The Agent
may proceed by action at law, suit in equity or other appropriate proceedings
whether for specific performance of any covenant contained in this Loan
Agreement or the other Loan Documents or in aid of the exercise of any power
granted to the Banks or the Agent herein or therein; provided, however, that no
Bank shall be entitled to realize upon the collateral for the Loan or exercise
remedies hereunder or under the other Loan Documents with respect to such
collateral, but that all such actions shall be taken by the Agent, on behalf of
the Banks, at the direction of the Required Banks.
9.4 DOCUMENTS AND INFORMATION. Following the Effective Date, Agent will
cause a copy of each of the executed Loan Documents to be mailed to each of the
Banks at their addresses specified in the first paragraph of this Loan
Agreement. Agent and each of the Banks (the "Disclosing Bank") agrees to use
reasonable good faith efforts to disclose to each of the other Banks, as soon as
practicable after discovery, any information or communication (a) which the
Disclosing Bank has reason to believe is not known by the other Banks and (b)
which the Disclosing Bank has reason to believe may have a material and adverse
effect upon the business or operations of the Borrower, DGC and/or Affiliated
Insurers and/or upon the collateral security for the Loan, and as a result, may
impair the repayment of the Loan as and when due; provided, however, that
neither the Agent nor the other Banks shall have any liability as a result of
its or their failure to disclose any information pursuant to this section, nor
shall any Bank assert any such failure by another Bank as a defense to any claim
asserted against a Bank under the provisions of this Agreement.
9.5 RESIGNATION. The Agent may resign at anytime by giving thirty (30)
days' prior written notice thereof to each Bank and the Borrower; provided that
prior to relinquishing its duties, the Agent will make reasonable efforts to
find a successor agent acceptable to the Required Banks. Upon any such
resignation, the Required Banks shall have the right, upon five days notice to
the Borrower, to appoint a successor Agent. Upon acceptance of appointment, the
successor Agent shall succeed to and become vested with all rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations under this Loan Agreement. Except in
the case of the Agent's gross negligence or willful misconduct, First Tennessee
Bank cannot be removed as Agent hereunder unless First Tennessee Bank shall
consent to such removal.
9.6 ASSIGNMENTS AND PARTICIPATIONS. Without the prior written consent
of each other Bank, no Bank shall be permitted to sell, assign or transfer its
Note or its share of the Loan indebtedness. Notwithstanding the foregoing, (i)
any Bank shall be permitted to sell, assign or transfer its Note and its shares
of the Loan indebtedness to an affiliate of such Bank without obtaining such
consent, and (ii) any Bank shall be permitted to sell a participation or
participations in its Facility Commitment and of its share of the Loan
indebtedness, provided that such Bank (including its affiliates) shall at all
times retain for its own account not less than fifty percent (50%) of its Note
and of its Facility Commitment.
32
SECTION 10: MISCELLANEOUS
10.1 ENTIRE AGREEMENT/AMENDMENTS. As of the Effective Date, this Loan
Agreement supersedes and replaces any and all prior agreements and
understandings relating to the subject matter hereof, including without
limitation, the Original Loan Agreement, the Second Loan Agreement, the Third
Loan Agreement, the Fourth Loan Agreement, the Fifth Loan Agreement, the Sixth
Loan Agreement, and the Seventh Loan Agreement. The provisions of this Loan
Agreement, the Notes or any other Loan Documents may be amended, modified or
waived only by an instrument in writing signed by the Required Banks; provided
that without the unanimous written consent or approval of all of the Banks
neither the Agent nor any other Bank may amend the Loan Documents (a) to
increase the amount of any Bank's Facility Commitment, the aggregate amount
committed pursuant to this Loan Agreement or the relative proportions of the
Banks' Facility Commitments; (b) to change the rate of interest on any Note; (c)
to reduce the amount of any fee due or to become due pursuant to the Loan
Documents; (d) to modify the Borrowing Base; (e) to extend or modify the Loan
Termination Date; (f) to postpone the due date of any payment due under any
Note; (g) to release any Guarantor; (h) to modify the Seventh Amended and
Restated Security Agreement, or Seventh Amended and Restated Pledge and Security
Agreement in such manner as to change the description of the collateral for the
Loan; (i) to change the ratable distribution of payments to the Banks; (j) to
change the definition of "Required Banks"; (k) to release or subordinate any
portion of or collateral for the Loan; or (l) to amend this Section 10.1 and
Section 10.16 hereof.
10.2 NOTICES. All notices and other communications provided for
hereunder shall be in writing and shall be mailed, certified mail, return
receipt requested, or delivered in person, or sent by nationally recognized
overnight courier service, marked for next-day delivery, if to the Borrower, DGC
or the Agency Subsidiaries, to it at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇; if to the Agent, to it at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Metropolitan Division; if to the other Banks, to
them at their addresses specified in the initial paragraph of this Loan
Agreement; or as to any such person at such other address as shall be designated
by such person in a written notice to the other parties hereto complying as to
delivery with the terms of this Section 10.2. 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, upon
delivery; or (iii) if sent by overnight courier service, on the day scheduled
for delivery.
10.3 [Intentionally Deleted.]
10.4 NO WAIVER, CUMULATIVE REMEDIES. No failure to exercise and no
delay in exercising, on the part of the Agent or the Banks, any right, power or
privilege hereunder, shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege. Waiver of any right, power, or privilege hereunder or under any
instrument or document now or hereafter securing the indebtedness evidenced
hereby or under any guaranty at any time given with respect thereto is a waiver
only as to the specified item. The rights and remedies herein provided are
cumulative and not exclusive of any rights or remedies provided by law.
33
10.5 INDEMNIFICATION. Borrower agrees to indemnify Agent and Banks from
and against any and all claims, losses and liabilities, including, without
limitation, reasonable attorneys' fees, growing out of or resulting from this
Agreement (including, without limitation, enforcement of this Agreement), except
claims, losses or liabilities resulting solely and directly from Agent's or
Banks' negligence or misconduct and except for claims asserted by Borrower
and/or the Guarantors against Agent and/or the Banks. The indemnification
provided for in this Section shall survive the payment in full of the Loan.
10.6 SURVIVAL OF AGREEMENTS. All agreements, representations and
warranties made herein shall survive the delivery of the Notes. This Loan
Agreement shall be binding upon, and inure to the benefit of, the parties hereto
and their respective successors and assigns, except that the Borrower shall not
have the right to assign its rights hereunder or any interest therein.
10.7 LIENS; SETOFF BY AGENT OR BANKS. Borrower hereby grants to the
Agent and the Banks a continuing lien, as security for the Notes and all other
indebtednesses of the Borrower to the Agent and the Banks, upon any and all of
its moneys, securities and other property and the proceeds thereof, now or
hereafter held or received by or in transit to, the Agent and the Banks from or
for Borrower, and also upon any and all deposits (general or special, matured or
unmatured) and credits of the Borrower against the Agent or the Banks, at any
time existing. Upon the occurrence of any Event of Default as specified above,
and after any notice and cure period applicable thereto, the Agent and the Banks
are hereby authorized at any time and from time to time, without prior notice to
Borrower to set off, appropriate, and apply any and all items hereinabove
referred to against any or all indebtednesses of the Borrower (but with prompt
post set-off notice) to the Banks. Any amount recovered by any Bank, whether as
a result of the exercise of the right of setoff or otherwise, shall be
distributed among the Banks pro rata in accordance with the provisions of
Section 2.6 hereof.
10.8 GOVERNING LAW. This Loan Agreement shall be governed and construed
in accordance with the laws of the State of Tennessee; except (a) that the
provisions hereof which relate to the payment of interest shall be governed by
(i) the laws of the United States or, (ii) the laws of the State of Tennessee,
whichever permits the Banks to charge the higher rate, as more particularly set
out in the Notes, and (b) to the extent that the Liens in favor of the Agent and
the Banks, the perfection thereof, and the rights and remedies of the Agent and
the Banks with respect thereto, shall, under mandatory provisions of law, be
governed by the laws of a state other than Tennessee.
10.9 EXECUTION IN COUNTERPARTS; TELECOPIES. This Loan Agreement may be
executed in any number of counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument. Telecopies of executed documents will be deemed
originals for the purpose of closing the Loan; provided that originals are
promptly forwarded following the closing.
10.10 TERMINOLOGY; SECTION HEADINGS. All personal pronouns used in this
Loan Agreement whether used in the masculine, feminine, or neuter gender, shall
include all other genders; the singular shall include the plural, and vice
versa. Section headings are for convenience only and neither limit nor amplify
the provisions of this Loan Agreement.
34
10.11 ENFORCEABILITY OF AGREEMENT. Should any one or more of the
provisions of this Loan Agreement be determined to be illegal or unenforceable,
all other provisions, nevertheless, shall remain effective and binding on the
parties hereto.
10.12 INTEREST LIMITATIONS.
(a) The Loan and the Notes evidencing the Loan, including any renewals
or extensions thereof, may provide for the payment of any interest rate (i)
permissible at the time the contract to make the Loan is executed, (ii)
permissible at the time the Loan is made or any advance thereunder is made, or
(iii) permissible at the time of any renewal or extension of the Loan or the
Notes.
(b) It is the intention of the Agent, the Banks and the Borrower to
comply strictly with applicable usury laws; and, accordingly, in no event and
upon no contingency shall the Agent or the Banks ever be entitled to receive,
collect, or apply as interest any interest, fees, charges or other payments
equivalent to interest, in excess of the maximum rate which the Banks may
lawfully charge under applicable statutes and laws from time to time in effect;
and in the event that the holder of a Note ever receives, collects, or applies
as interest any such excess, such amount which, but for this provision, would be
excessive interest, shall be applied to the reduction of the principal amount of
the indebtedness thereby evidenced; and if the principal amount of the
indebtedness evidenced thereby, and all lawful interest thereon, is paid in
full, any remaining excess shall forthwith be paid to the Borrower, or other
party lawfully entitled thereto. In determining whether or not the interest paid
or payable, under any specific contingency, exceeds the highest rate which the
Banks may lawfully charge under applicable law from time to time in effect, the
Borrower, the Agent and the Banks shall, to the maximum extent permitted under
applicable law, characterize any non-principal payment as a reasonable loan
charge, rather than as interest. Any provision hereof, or of any other agreement
among the Agent and the Banks and the Borrower, that operates to bind, obligate,
or compel the Borrower to pay interest in excess of such maximum rate shall be
construed to require the payment of the maximum rate only. The provisions of
this paragraph shall be given precedence over any other provision contained
herein or in any other agreement among the Agent, the Banks and the Borrower
that is in conflict with the provisions of this paragraph.
The Notes shall be governed and construed according to the statutes and
laws of the State of Tennessee from time to time in effect, except to the extent
that Section 85 of Title 12 of the United States Code (or other applicable
federal statue) may permit the charging of a higher rate of interest than
applicable state law, in which event such applicable federal statute, as amended
and supplemented from time to time shall govern and control the maximum rate of
interest permitted to be charged hereunder; it being intended that, as to the
maximum rate of interest which may be charged, received, and collected
hereunder, those applicable statutes and laws, whether state or federal, from
time to time in effect, which permit the charging of a higher rate of interest,
shall govern and control; provided, always, however, that in no event and under
no circumstances shall the Borrower be liable for the payment of interest in
excess of the maximum rate permitted by such applicable law, from time to time
in effect.
10.13 NON-CONTROL. In no event shall the existence of Agent's or the
Banks' rights hereunder be deemed to indicate that the Agent or the Banks are in
control of the business,
35
management or properties of the Borrower or has power over the daily management
functions and operating decisions made by the Borrower.
10.14 FEES AND EXPENSES. The Borrower agrees to pay, or reimburse the
Agent for, the actual out-of-pocket expenses, including reasonable counsel fees
and fees of any accountants, auditors, inspectors or other similar experts, as
deemed necessary by the Agent, incurred by the Agent in connection with the
development, preparation, execution, amendment, recording, administration
(excluding the salary of Agent's employees and Agent's normal and usual overhead
expenses) or enforcement of, or the preservation of any rights under this Loan
Agreement, the Notes, and any other Loan Document, including, but not limited
to, the fees and expenses of the auditors referred to in Section 6.7 hereof;
provided, however, that Borrower shall not be responsible for paying the costs
of such audits more than once per year unless an Event of Default shall have
occurred.
10.15 TIME OF ESSENCE. Time is of the essence of this Loan Agreement,
the Notes, and the other instruments and documents executed and delivered in
connection herewith.
10.16 COMPROMISES, RELEASES, ETC. Borrower and Guarantors hereby
authorize the Banks from time to time, without notice to anyone, to make any
sales, pledges, surrenders, compromises, settlements, releases, indulgences,
alterations, substitutions, exchanges, changes in, modifications, or other
dispositions including, without limitation, cancellations, of all or any part of
the Loan indebtedness, or of any contract or instrument evidencing any thereof,
or of any security or collateral therefor, and/or to take any security for or
other guaranties upon any of said indebtedness; and the liability of the
Guarantors shall not be in any manner affected, diminished, or impaired thereby,
or by any lack of diligence, failure, neglect, or omission on the part of Agent
or the other Banks to make any demand or protest, or give any notice of dishonor
or default, or to realize upon or protect any of said indebtedness or any
collateral or security therefor. The Banks shall have the exclusive right to
determine how, when, and what application of payments and credits, if any, shall
be made on the Loan and extensions of credit or any part thereof, and shall be
under no obligation, at any time, to first resort to, make demand on, file a
claim against, or exhaust its remedies against the Borrower, or its property or
estate, or to resort to or exhaust its remedies against any collateral,
security, property, liens, or other rights whatsoever. It is expressly agreed
that Agent, acting at the direction of the Required Banks, may at any time make
demand for payment on, or bring suit against, the Guarantors, jointly or
severally, and/or the Borrower (without the necessity of joining all such
parties), and, with the unanimous consent of the Banks, may compound with any
one or more of the Guarantors for such sums or on such terms as it may see fit,
and without notice or consent, the same being hereby expressly waived, release
such of Guarantors from all further liability to it, without thereby impairing
its rights in any respect to demand, ▇▇▇ for, and collect the balance of the
indebtedness from any of the Guarantors not so released. The Banks agree that
any action pursuant to this Section 10.16 shall be only by unanimous consent of
the Banks.
10.17 JOINDER OF GUARANTORS. The Guarantors join herein for the purpose
of acknowledging and consenting to the terms and provisions hereof (and
especially the provisions of Section 10.16), and do further absolutely and
unconditionally guarantee the payment and performance of each and every
obligation and undertaking of the Borrower hereunder.
36
10.18 VENUE OF ACTIONS.
(a) As an integral part of the consideration for the making of the
Loan, it is expressly understood and agreed that no suit or action shall be
commenced by the Borrower, by any Guarantor, or by any successor, personal
representative or assignee of any of them, with respect to the Loan contemplated
hereby, or with respect to this Loan Agreement or any other Loan Document, other
than in a state court of competent jurisdiction in and for Shelby County,
Tennessee, Davidson County, Tennessee, or in the United States District Court
for the Western District or Middle District of Tennessee, and not elsewhere,
and, to the extent permitted by applicable law, Borrower and Guarantors hereby
agree and consent that any action or proceeding may be brought by Agent or any
of the Banks in such courts and waive any objections that they may now or
hereafter have to the venue of any such action or proceeding in any such court
or that such action or proceeding was brought in an inconvenient court and agree
not to plead or claim the same. Further, Borrower and Guarantors agree that
service of process in any action or proceeding described in this Section 10.18
or otherwise brought in connection with the Loan may be effected by mailing a
copy thereof by registered or certified mail (or any substantially similar form
of mail), postage prepaid, to the Borrower at its address set forth in Section
10.2 hereof or at such other address of which the Agent shall have been notified
pursuant thereto and to ▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, LLP, ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇. Borrower and
Guarantors also agree that nothing herein shall affect the right to effect
service of process in any other manner permitted by law. Nothing in this
paragraph contained shall prohibit Agent or Banks from instituting suit in any
court of competent jurisdiction (where Borrower and/or any Guarantor is doing
business or is qualified to do business) for the enforcement of their rights
hereunder or in any other Loan Document.
(b) To the maximum extent not prohibited by law, each party to this
Agreement hereby waives any right which it may have to claim or recover
consequential damages in any legal action or proceeding with respect to, or in
any way arising out of, the Loan or this Loan Agreement, or any other legal
action or proceeding referred to in this Section 10.18.
10.19 WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY TO THIS AGREEMENT
HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION
OR CAUSE OF ACTION (a) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (b) IN
ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES
HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE
TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR
A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
37
10.20 CONFLICT. In the event of any conflict between the provisions
hereof and the provisions of the Seventh Amended and Restated Security Agreement
or the Seventh Amended and Restated Pledge and Security Agreement, during the
continuance of this Agreement the provisions of this Agreement shall control.
10.21 ACKNOWLEDGMENTS. The Borrower and each Guarantor hereby
acknowledge that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Loan Agreement and the other Loan
Documents;
(b) neither the Agent nor any Bank has any fiduciary
relationship with, or fiduciary duty to, the Borrower or any Guarantor
arising out of or in connection with the Loan, this Loan Agreement or
any of the other Loan Documents, and the relationship between the Agent
and the Banks, on the one hand, and the Borrower and the Guarantors, on
the other hand, in connection herewith or therewith is solely that of
debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Banks or among the Borrower and the
Guarantors and the Banks or among the Borrower and the Guarantors and
the Agent.
10.22 MODIFICATION OF LOAN DOCUMENTS TO REFLECT JUNIOR FACILITY. Banks
will in good faith facilitate the modification of the Loan Documents to evidence
the terms of the Junior Facility.
10.23 POST-CLOSING REQUIREMENTS. Within twenty (20) business days from
the date of this Loan Agreement, Borrower will satisfy the post closing issues
set forth in the Post-Closing Letter to Borrower from Agent of even date
herewith. In the event that the Borrower fails to comply with the provisions of
this Section 10.23, said failure shall constitute an Event of Default under this
Loan Agreement.
SECTION 11: ELIGIBLE STATES
11.1 ADDITIONS OF ELIGIBLE STATES. Borrower may at any time request
that a state, in addition to those listed in EXHIBIT "A," be included in the
listing of Eligible States. In connection with such request, Borrower shall
furnish to the Banks and their respective counsel such evidence and information
as they may request (including the opinion of local counsel satisfactory to the
Required Banks) to establish (a) that Borrower, Affiliated Insurers or Agency
Subsidiaries, as applicable, are qualified to do business and duly licensed
under the insurance laws of such state, (b) that the Premium Finance Agreement
or Installment Arrangement, as applicable, complies with the laws of such state,
(c) that Agent, for the benefit of the Banks, has a perfected security interest
in all installment payments coming due thereunder, and (d) subject to the
limited waiver set out in Section 11.2 below, that the Agent has a duly
perfected first security interest in unearned premiums due to Policyholders from
insurers and from the Insurance Guaranty Fund of such state. In the event that
the Required Banks are satisfied with the evidence so provided, the Agent, the
Required Banks and the Borrower (without the
38
necessity of joinder of any other parties to this Loan Agreement) may amend
EXHIBIT "A" hereto to add such state as an Eligible State.
11.2 [Intentionally Deleted.]
11.3 DELETION OF ELIGIBLE STATES. In the event that a Commissioner of
any state or the agency or administrator of any state charged with
responsibility for regulating insurance companies, insurance agents and/or
premium finance companies shall (a) revoke the license of Borrower or any
Related Person to sell insurance products or finance insurance premiums in that
state or (b) initiate administrative or judicial proceedings which seek to
revoke such license or to bar Borrower or any Related Person from selling
insurance products or financing insurance premiums in that state, then such
state shall immediately cease to be an Eligible State and the Receivables
theretofore or thereafter generated therein shall cease to be Eligible
Receivables.
[SEPARATE SIGNATURE PAGE FOLLOWS]
39
SIGNATURE PAGE
TO
EIGHTH AMENDED AND RESTATED LOAN AGREEMENT
================================================================================
IN WITNESS WHEREOF, the Borrower, the Guarantors, 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.
BORROWER:
DIRECT GENERAL FINANCIAL SERVICES, INC.,
a Tennessee corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Title: Senior Vice President & Chief
Financial Officer
----------------------------------
GUARANTORS:
DIRECT GENERAL CORPORATION, a Tennessee
corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Title: Senior Vice President & Chief
Financial Officer
----------------------------------
DIRECT GENERAL INSURANCE AGENCY, INC.,
a Tennessee corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Title: Senior Vice President & Chief
Financial Officer
----------------------------------
DIRECT GENERAL INSURANCE AGENCY, INC.,
an Arkansas corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Title: Senior Vice President & Chief
Financial Officer
----------------------------------
DIRECT GENERAL INSURANCE AGENCY, INC.,
a Mississippi corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Title: Senior Vice President & Chief
Financial Officer
----------------------------------
[SIGNATURE PAGE CONTINUED]
S-1
DIRECT GENERAL INSURANCE AGENCY OF
LOUISIANA, INC., a Louisiana corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Title: Senior Vice President & Chief
Financial Officer
----------------------------------
DIRECT GENERAL AGENCY OF KENTUCKY, INC.,
a Kentucky corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Title: Senior Vice President & Chief
Financial Officer
----------------------------------
DIRECT ADJUSTING COMPANY, INC.,
a Tennessee corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Title: Senior Vice President & Chief
Financial Officer
----------------------------------
DIRECT ADMINISTRATION, INC., a Tennessee
corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Title: Senior Vice President & Chief
Financial Officer
----------------------------------
DIRECT GENERAL INSURANCE AGENCY, INC.,
a Texas corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Title: Senior Vice President & Chief
Financial Officer
----------------------------------
DIRECT GENERAL CONSUMER PRODUCTS, INC.,
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:
-------------------------------------
Title:
----------------------------------
[SIGNATURE PAGE CONTINUED]
S-2
U.S. BANK NATIONAL ASSOCIATION
By:
----------------------------------------------
Title:
-------------------------------------------
REGIONS BANK
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇▇▇
----------------------------------------------
Title: Assistant Vice President
-------------------------------------------
CAROLINA FIRST BANK
By:
----------------------------------------------
Title:
-------------------------------------------
▇▇▇▇ ▇▇▇, ▇▇ (▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇)
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
----------------------------------------------
Title: Vice President
-------------------------------------------
AGENT:
FIRST TENNESSEE BANK NATIONAL ASSOCIATION
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇
----------------------------------------------
Title: Senior Vice President
-------------------------------------------
S-3
FIRST AMENDMENT
TO
EIGHTH AMENDED AND RESTATED LOAN AGREEMENT
THIS FIRST AMENDMENT TO EIGHTH AMENDED AND RESTATED LOAN AGREEMENT (the
"Amendment") made and entered into as of the 31st day of March, 2003, by and
between DIRECT GENERAL FINANCIAL SERVICES, INC., a Tennessee corporation whose
address is ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (f/k/a Direct
Financial Services, Inc.) ("Borrower"), DIRECT GENERAL CORPORATION, a Tennessee
corporation (formerly known as Direct Corporation) ("DGC"), DIRECT GENERAL
INSURANCE AGENCY, INC., a Tennessee corporation, DIRECT GENERAL INSURANCE
AGENCY, INC., an Arkansas corporation, DIRECT GENERAL INSURANCE AGENCY, INC., a
Mississippi corporation, DIRECT GENERAL INSURANCE AGENCY OF LOUISIANA, INC., a
Louisiana corporation, DIRECT GENERAL AGENCY OF KENTUCKY, INC., a Kentucky
corporation, DIRECT ADJUSTING COMPANY, INC., a Tennessee corporation, DIRECT
ADMINISTRATION, INC., a Tennessee corporation, DIRECT GENERAL INSURANCE AGENCY,
INC., a Texas corporation, DIRECT GENERAL CONSUMER PRODUCTS, INC., a Tennessee
corporation, FIRST TENNESSEE BANK NATIONAL ASSOCIATION, a national banking
association organized and existing under the statutes of the United States of
America, with offices at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (in its
agency capacity being herein referred to as "Agent," and in its individual
capacity as "FTBNA"), for itself and as agent for the other Banks hereinafter
named, HIBERNIA NATIONAL BANK, a national banking association organized and
existing under the laws of the United States of America, with offices at ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Hibernia"), U.S. BANK NATIONAL
ASSOCIATION, a national banking association (f/k/a U.S. Bank , N. A., which was
f/k/a Mercantile Bank National Association) with offices located at ▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇., ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("U.S. Bank"), CAROLINA FIRST BANK, a
state bank formed under the laws of the State of South Carolina with offices
located at ▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Carolina First"),
BANK ONE, NA (MAIN OFFICE - CHICAGO, ILLINOIS) a national banking association
with offices located at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Mail Code LA2-2714, ▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Bank One") and REGIONS BANK, an Alabama state banking
association with offices located at ▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇ ("Regions") (FTBNA, Hibernia, U.S. Bank, Carolina First, Bank One and
Regions collectively, the "Banks," and individually, a "Bank");
Recitals of Fact
Pursuant to that certain Eighth Amended and Restated Loan Agreement
dated as of October 31, 2002 (the "Loan Agreement") among the Banks, the
Borrower and the other parties named therein, the Banks agreed to make loans and
advances to Borrower on a revolving credit basis in an aggregate amount not to
exceed One Hundred Fifteen Million Dollars ($115,000,000.00), evidenced by
individual revolving credit notes to each Bank for the respective Facility
Commitments set out in the Loan Agreement, each with a termination date of June
30, 2004.
The Borrower has now requested that Regions increase its Facility
Commitment from a maximum principal amount of Fifteen Million Dollars
($15,000,000.00) to a maximum principal amount of Twenty-Five Million Dollars
($25,000,000.00) and that the total Commitment of the Banks be increased from a
maximum aggregate principal amount of One Hundred Fifteen Million Dollars
($115,000,000.00) to a maximum aggregate principal amount of One Hundred
Twenty-Five Million Dollars ($125,000,000.00), and the Banks have agreed to
these increases.
The Borrower and the Banks now desire to modify certain terms of the
Loan 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 Borrower 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 Borrower in
the Loan Agreement, as amended hereby, in the Seventh Amended and
Restated Security Agreement dated as of October 31, 2002, between
Borrower and Agent (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 Borrower, as set forth in the Notes, the
Security Agreement, the Loan Agreement, or in any other Loan Document
executed by the Borrower, in connection with the Loan.
(d) The Borrower 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.
2
3. The definition of "DGC Loan Agreement," as set forth in Section 1.1
of the Loan Agreement, is hereby deleted in its entirety and the following is
inserted in lieu thereof:
"DGC Loan Agreement" means that certain Third Amended and
Restated Loan Agreement dated as of October 31, 2002, among the DGC
Banks, DGC and the Borrower, as previously amended and as the same may
be amended, modified, extended and/or restated from time to time.
4. The definition of "Eighth Amended and Restated Guaranty Agreement,"
as set forth in Section 1.1 of the Loan Agreement, is hereby deleted in its
entirety and the following is inserted in lieu thereof:
"Ninth Amended and Restated Guaranty Agreement" shall mean the
guaranty agreement executed by each of the Guarantors, dated as of
March 31, 2003, guaranteeing the payment of indebtednesses of Borrower
to the Banks not to exceed One Hundred Twenty-Five Million Dollars
($125,000,000.00), plus interest and costs of collection.
All references in the Loan Agreement to the Eighth Amended and Restated Guaranty
Agreement shall, except as the context may otherwise require, be deemed to
constitute references to the Ninth Amended and Restated Guaranty Agreement.
5. The definition of "Seventh Amended and Restated Pledge and Security
Agreement," as set forth in Section 1.1 of the Loan Agreement, is hereby deleted
in its entirety and the following is inserted in lieu thereof:
"Seventh Amended and Restated Pledge and Security Agreement"
means the Seventh Amended and Restated Pledge and Security Agreement of
even date herewith, as amended by that First Amendment to Seventh
Amended and Restated Pledge and Security Agreement dated as of March
31, 2003, and as the same may be further modified or amended, pursuant
to which DGC has granted to Agent for the benefit of the Banks a second
lien security interest in all of the stock in the Agency Subsidiaries
and Affiliated Insurers, as security for its obligations under the
Ninth Amended and Restated Guaranty Agreement.
6. The definition of "Seventh Amended and Restated Security Agreement,"
as set forth in Section 1.1 of the Loan Agreement, is hereby deleted in its
entirety and the following is inserted in lieu thereof:
"Seventh Amended and Restated Security Agreement" means the
Seventh Amended and Restated Security Agreement of even date herewith,
as amended by that First Amendment to Seventh Amended and Restated
Security Agreement dated as of March 31, 2003, and as the same may be
further modified or amended, pursuant to which Borrower has assigned
and pledged Receivables and other contractual rights to the Agent for
the benefit of the Banks.
7. The first paragraph of Section 2.1 of the Loan Agreement, is hereby
deleted in its entirety and the following is inserted in lieu thereof:
3
2.1 THE COMMITMENT. Subject to the terms and conditions
herein set out, the Banks severally agree and commit to make loan
Advances to the Borrower from time to time, from the Effective Date
until the Loan Termination Date, ratably in proportion to their
respective Facility Commitments and in such amount that, the aggregate
principal amount of the Loan at any one time outstanding shall not
exceed the lesser of (i) One Hundred Twenty-Five Million Dollars
($125,000,000.00) or (ii) the Borrowing Base. On the Effective Date the
Banks will make adjustments among themselves so that the outstanding
principal balances of the Loan indebtedness shall be held by them in
proportion to their respective Facility Commitments.
8. The references to the Sixth Amended and Restated Security Agreement
and the Sixth Amended and Restated Pledge and Security Agreement contained in
Section 2.5 of the Loan Agreement shall be deemed to constitute references to
the Seventh Amended and Restated Security Agreement and the Seventh Amended and
Restated Pledge and Security Agreement, respectively.
9. The Facility Commitment of Regions shown on Exhibit "B" to the Loan
Agreement is hereby changed to $25,000,000.00, and the Total is hereby changed
to $125,000,000.
10. The line that reads "LESS LOAN OUTSTANDING (not to exceed
$115,000,000.00)" on the Borrowing Base Certificate attached as Exhibit "E" to
the Loan Agreement is hereby changed to read "LESS LOAN OUTSTANDING (not to
exceed $125,000,000.00)."
11. All terms and provisions of the Loan 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
Loan 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.
12. All references in all Loan Documents (including, but not limited
to, the Notes, the Security Agreement, and the Loan Agreement) to the "Loan
Agreement" shall, except as the context may otherwise require, be deemed to
constitute references to the Loan Agreement as amended hereby.
[SEPARATE SIGNATURE PAGES FOLLOW]
4
SIGNATURE PAGE
TO
FIRST AMENDMENT TO EIGHTH AMENDED AND RESTATED LOAN AGREEMENT
================================================================================
IN WITNESS WHEREOF, the Borrower, the Guarantors, 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.
BORROWER:
DIRECT GENERAL FINANCIAL SERVICES,
INC., a Tennessee corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Title: Senior Vice President & Chief
Financial Officer
----------------------------------
GUARANTORS:
DIRECT GENERAL CORPORATION, a
Tennessee corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Title: Senior Vice President & Chief
Financial Officer
----------------------------------
DIRECT GENERAL INSURANCE AGENCY, INC.,
a Tennessee corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Title: Senior Vice President & Chief
Financial Officer
----------------------------------
DIRECT GENERAL INSURANCE AGENCY, INC.,
an Arkansas corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Title: Senior Vice President & Chief
Financial Officer
----------------------------------
DIRECT GENERAL INSURANCE AGENCY, INC.,
a Mississippi corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Title: Senior Vice President & Chief
Financial Officer
----------------------------------
[SIGNATURE PAGE CONTINUED]
S-1
DIRECT GENERAL INSURANCE AGENCY OF
LOUISIANA, INC., a Louisiana corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Title: Senior Vice President & Chief
Financial Officer
----------------------------------
DIRECT GENERAL AGENCY OF KENTUCKY, INC.,
a Kentucky corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Title: Senior Vice President & Chief
Financial Officer
----------------------------------
DIRECT ADJUSTING COMPANY, INC., a
Tennessee corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Title: Senior Vice President & Chief
Financial Officer
----------------------------------
DIRECT ADMINISTRATION, INC., a
Tennessee corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Title: Senior Vice President & Chief
Financial Officer
----------------------------------
DIRECT GENERAL INSURANCE AGENCY, INC.,
a Texas corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Title: Senior Vice President & Chief
Financial Officer
----------------------------------
DIRECT GENERAL CONSUMER PRODUCTS, INC.,
a Tennessee corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Title: Senior Vice President & Chief
Financial Officer
----------------------------------
[SIGNATURE PAGE CONTINUED]
S-2
BANKS:
FIRST TENNESSEE BANK NATIONAL ASSOCIATION
By:
-------------------------------------
Title:
----------------------------------
HIBERNIA NATIONAL BANK
By:
-------------------------------------
Title:
----------------------------------
U.S. BANK NATIONAL ASSOCIATION
By:
-------------------------------------
Title:
----------------------------------
CAROLINA FIRST BANK
By:
-------------------------------------
Title:
----------------------------------
▇▇▇▇ ▇▇▇, ▇▇
(▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇)
By:
-------------------------------------
Title:
----------------------------------
REGIONS BANK
By:
-------------------------------------
Title:
----------------------------------
AGENT:
FIRST TENNESSEE BANK NATIONAL ASSOCIATION
By:
-------------------------------------
Title:
----------------------------------
S-3