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EXHIBIT 10.12
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT (the "Pledge Agreement"),
dated as of May 10, 2001 is made by MEDICAL ASSURANCE, INC., a corporation
organized under the laws of Delaware (the "Pledgor"), in favor of SOUTHTRUST
BANK, an Alabama banking corporation, as Administrative Agent (in such capacity,
the "Administrative Agent"), for the ratable benefit of itself and the financial
institutions (the "Lenders") as are, or may from time to time become, parties to
the Credit Agreement (as defined below).
RECITALS
Pursuant to a Credit Agreement, dated as of May 10, 2001
(together with all amendments and other modifications, if any, from time to time
hereafter made thereto, the "Credit Agreement"), by and among ProAssurance
Corporation (the "Borrower"), the Lenders, and the Administrative Agent, the
Lenders have agreed to extend Borrowings to the Borrower as more specifically
described in the Credit Agreement.
The Pledgor is a Subsidiary or other Affiliate of Borrower and
is the legal and beneficial owner of (a) the shares of Pledged Stock (as
hereinafter defined) issued by certain Subsidiaries as specified on SCHEDULE 1
attached hereto and incorporated herein by reference (collectively, the
"Issuers") and (b) the Partnership Interests (as hereinafter defined) in the
partnerships and limited liability companies listed on SCHEDULE 2 hereto
(collectively, the "Partnerships").
In connection with the transactions contemplated by the Credit
Agreement and as a condition precedent thereto, the Lenders have requested, and
the Pledgor has agreed to execute and deliver, this Pledge Agreement together
with all certificates representing the Pledged Stock and the Partnership
Interests to the Administrative Agent for the ratable benefit of itself and the
Lenders.
NOW, THEREFORE, in consideration of the premises and to induce
the Administrative Agent and the Lenders to enter into the Credit Agreement and
make available Borrowings thereunder, the Pledgor hereby agrees with the
Administrative Agent for the ratable benefit of itself and Lenders as follows:
1. DEFINED TERMS. Unless otherwise defined herein, terms
which are defined in the Credit Agreement and used herein are so used as so
defined, and the following terms shall have the following meanings:
"Code" means the Uniform Commercial Code from time to time in
effect in the State of Alabama.
"Collateral" means the Stock Collateral and the Partnership
Collateral.
"Partnership Collateral" means all of the Partnership
Interests of the Pledgor in the Partnerships and all Proceeds
therefrom.
"Partnership Interests" means the entire partnership or
membership interest of the Pledgor in each Partnership listed on
SCHEDULE 2 hereto, including without limitation, Pledgor's capital
account, its interest as a partner or member in the net cash flow, net
profit and net loss, and items of income, gain, loss, deduction and
credit of the Partnerships, its interest in all distributions made or
to be made by the Partnerships to the Pledgor and all of the other
economic rights, titles and interests of the Pledgor as a partner or
member of the Partnerships, whether set forth in the partnership
agreement or membership agreement of the Partnerships, by separate
agreement or otherwise.
"Pledge Agreement" means this Pledge and Security Agreement,
as amended or modified.
"Pledged Stock" means the shares of capital stock of each
Issuer listed on SCHEDULE 1 hereto, together with all stock
certificates, options or rights of any nature whatsoever that may be
issued or granted by such Issuer to the Pledgor while this Pledge
Agreement is in effect.
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"Proceeds" means all "proceeds" as such term is now or
hereafter defined in the Code and, in any event, shall include, without
limitation, all dividends or other income from the Pledged Stock,
collections thereon, proceeds of sale thereof or distributions with
respect thereto.
"Stock Collateral" means the Pledged Stock and all Proceeds
therefrom.
2. PLEDGE AND GRANT OF SECURITY INTEREST. For the
purpose of creating and perfecting a security interest in the Pledged Stock, the
Pledgor hereby delivers to the Administrative Agent, for the ratable benefit of
itself and the Lenders all the Pledged Stock and hereby grants to the
Administrative Agent, for the ratable benefit of itself and the Lenders, a first
priority security interest in the Pledged Stock and all other Collateral, as
collateral security for the prompt and complete payment and performance when due
(whether at the stated maturity, by acceleration or otherwise) of the
Obligation. The Administrative Agent hereby acknowledges receipt of the
certificates representing the Pledged Stock and agrees to hold the Pledged Stock
subject to the terms of this Pledge Agreement.
3. STOCK POWERS. Concurrently with the delivery to the
Administrative Agent of each certificate representing one or more shares of
Pledged Stock, the Pledgor shall deliver an undated stock power covering such
certificate, duly executed in blank by the Pledgor with, if the Administrative
Agent so requests, signature guaranteed.
4. PLEDGOR REMAINS LIABLE. Anything herein to the
contrary notwithstanding, (a) the Pledgor shall remain liable to perform all of
its duties and obligations as a partner or member of the Partnerships to the
same extent as if this Pledge Agreement had not been executed, (b) the exercise
by the Administrative Agent or any Lender of any of its rights hereunder shall
not release the Pledgor from any of its duties or obligations as a partner or
member of the Partnerships, and (c) neither the Administrative Agent nor any
Lender shall have any obligation or liability as a partner or member of the
Partnerships by reason of this Pledge Agreement.
5. REPRESENTATIONS AND WARRANTIES. To induce the
Administrative Agent and the Lenders to execute the Credit Agreement and fund
any Borrowings and to accept the security contemplated hereby, the Pledgor
hereby represents and warrants that:
(a) the Pledgor has the corporate or
partnership, as applicable, right, power and authority and has taken
all necessary corporate or partnership, as applicable, action to
authorize its execution, delivery and performance of, and grant of the
Lien on the Collateral pursuant to, this Pledge Agreement;
(b) this Pledge Agreement constitutes a legal,
valid and binding obligation of the Pledgor enforceable against the
Pledgor in accordance with its terms, except as such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or
similar state or federal debtor relief laws from time to time in effect
which affect the enforcement of creditors' rights generally and the
availability of equitable remedies;
(c) the execution, delivery and performance of
this Pledge Agreement will not (i) violate any applicable laws relating
to the Pledgor or any of its Subsidiaries; (ii) conflict with, result
in a breach of or constitute a default under any Material Agreement to
which Pledgor is a party or by which any of its properties may be bound
or (iii) result in the creation or imposition of any Lien upon or with
respect to any material property now owned or hereafter acquired by the
Pledgor other than Liens arising under the Loan Documents;
(d) except as contemplated in PARAGRAPH 12
hereof, no consent or authorization of, filing with, or other act by or
in respect of, any arbitrator, Insurance Regulator, or other
Governmental Authority and no consent of any other Person (including,
without limitation, any stockholder, other owner or creditor
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of the Pledgor or any Issuer or any general or limited partner, member
or manager of any Partnership), is required in connection with the
execution, delivery, performance, validity or enforceability against
the Pledgor of this Pledge Agreement, except (i) as may be required in
connection with the disposition of the Pledged Stock and the
Partnership Interests by Laws affecting the offering and sale of
securities generally, and (ii) filings under the Uniform Commercial
Code;
(e) no litigation, investigation or proceeding
of or before any arbitrator, Insurance Regulator, or other Governmental
Authority is pending or, to the knowledge of the Pledgor, threatened by
or against the Pledgor or against any of its properties or revenues
with respect to this Pledge Agreement or any of the transactions
contemplated hereby;
(f) the shares of Pledged Stock listed on
SCHEDULE 1 constitute all the issued and outstanding shares of all
classes of the capital stock of each of the Issuers;
(g) all the shares of the Pledged Stock have
been duly and validly issued and are fully paid and nonassessable;
(h) the Pledgor is the record and beneficial
owner of, and has good and marketable title to, the Pledged Stock and
Partnership Interests, free of any and all Liens or options in favor
of, or claims of, any other Person, except the Lien created by this
Pledge Agreement;
(i) none of the Partnership Interests are
represented by certificates;
(j) upon (A) delivery to the Administrative
Agent of the stock certificates evidencing the Pledged Stock, the Lien
granted pursuant to this Pledge Agreement will constitute a valid,
perfected first priority Lien on the Pledged Stock and (B) filing of
UCC-1 financing statements in the appropriate filing offices, the Lien
granted pursuant to this Pledge Agreement will constitute a valid,
perfected first priority Lien on the other Collateral, in each case
enforceable as such against all creditors of the Pledgor and any
Persons purporting to purchase any of the Collateral from the Pledgor;
and
(k) Pledgor has delivered to the Administrative
Agent true and complete copies of the partnership or membership
agreements for each of the Partnerships which partnership or membership
agreements are currently in full force and effect and have not been
amended or modified except as disclosed to the Administrative Agent in
writing.
6. CERTAIN COVENANTS AND AGREEMENTS. The Pledgor
covenants and agrees with the Administrative Agent for the ratable benefit of
itself and the Lenders that, from and after the date of this Pledge Agreement
until the Obligation is paid in full and the Commitments are terminated:
(a) On or before the date of execution of this
Pledge Agreement, the Pledgor shall cause each of the partners or
members of each of the Partnerships to execute a consent in the form
attached hereto evidencing the consent of the partners or members to
the pledge of the Partnership Interests pursuant to this Pledge
Agreement.
(b) The Pledgor agrees that as a partner or
member in the Partnerships it will abide by, perform and discharge each
and every material obligation, covenant and agreement to be abided by,
performed or discharged by Pledgor under the terms of the partnership
or membership agreements of the Partnerships, at no cost or expense to
the Administrative Agent or the Lenders.
(c) If the Pledgor shall, as a result of its
ownership of the Pledged Stock or any other Collateral, become entitled
to receive or shall receive any stock or other certificate (including,
without limitation, any certificate representing a stock dividend or a
distribution in connection with any reclassification,
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increase or reduction of capital or any certificate issued in
connection with any reorganization), option or rights, whether in
addition to, in substitution of, as a conversion of, or in exchange for
any shares of the Pledged Stock or other Collateral, or otherwise in
respect thereof, the Pledgor shall accept the same as the agent of the
Administrative Agent, hold the same in trust for the Administrative
Agent and deliver the same forthwith to the Administrative Agent in the
exact form received, duly indorsed by the Pledgor to the Administrative
Agent, if required, together with an undated stock power covering such
certificate duly executed in blank by the Pledgor and with, if the
Administrative Agent so requests, signature guaranteed, to be held by
the Administrative Agent, subject to the terms hereof, as additional
collateral security for the Obligation.
(d) Except as expressly permitted by the Credit
Agreement, without the prior written consent of the Administrative
Agent, the Pledgor will not (i) vote to enable, or take any other
action to permit, any Issuer to issue any stock or other equity
securities of any nature or to issue any other securities convertible
into or granting the right to purchase or exchange for any stock or
other equity securities of any nature of such Issuer, (ii) except as
expressly provided to the contrary herein, consent to any modification,
extension or alteration of the terms of any partnership or membership
agreement of the Partnerships, (iii) accept a surrender of any
partnership or membership agreement of any of the Partnerships or waive
any breach of or default under any partnership or membership agreement
of any of the Partnerships by any other party thereto, (iv) sell,
assign, transfer, exchange, or otherwise dispose of, or grant any
option with respect to, the Pledged Stock, or (v) create, incur or
permit to exist any Lien or option in favor of, or any claim of any
Person with respect to, any of the Collateral, or any interest therein,
except for the Lien provided for by this Pledge Agreement. The Pledgor
will defend the right, title and interest of the Administrative Agent
in and to the Collateral against the claims and demands of all Persons
whomsoever.
(e) At any time and from time to time, upon the
written request of the Administrative Agent, and at the sole expense of
the Pledgor, the Pledgor will promptly and duly execute and deliver
such further instruments and documents and take such further actions as
the Administrative Agent may reasonably request for the purposes of
obtaining or preserving the full benefits of this Pledge Agreement and
of the rights and powers herein granted. If any amount payable under or
in connection with any of the Collateral shall be or become evidenced
by any promissory note, other instrument or chattel paper, such note,
instrument or chattel paper shall be immediately delivered to the
Administrative Agent, duly endorsed in a manner satisfactory to the
Administrative Agent, to be held as Collateral pursuant to this Pledge
Agreement.
(f) The Pledgor agrees to pay, and to save the
Administrative Agent and the Lenders harmless from, any and all
liabilities with respect to, or resulting from any delay in paying, any
and all stamp, excise, sales or other similar taxes which may be
payable or determined to be payable with respect to any of the
Collateral or in connection with any of the transactions contemplated
by this Pledge Agreement.
(g) On or prior to the formation or acquisition
of any Subsidiary of the Pledgor that is or is expected to be a
Significant Subsidiary, other than MEEMIC and its Subsidiaries, the
Pledgor agrees at the request of the Administrative Agent, to execute
such amendments and supplements to this Pledge Agreement, including
without limitation the Pledge Agreement Supplement attached hereto, and
such other documents and instruments and to take any and all actions,
all as shall be necessary, in the reasonable judgment of the
Administrative Agent, to pledge the Pledgor's interest therein to the
Administrative Agent for the ratable benefit of itself and the Lenders.
7. CASH DIVIDENDS AND DISTRIBUTIONS; VOTING RIGHTS.
Unless an Event of Default shall have occurred and be continuing and the
Administrative Agent shall have given notice to the Pledgor of the
Administrative Agent's intent to exercise its rights pursuant to PARAGRAPH 8
below, the Pledgor shall be permitted to receive all cash dividends and
shareholder, partnership and membership distributions paid in accordance with
the terms of the Credit
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Agreement in respect of the Collateral and to exercise all voting and corporate,
partnership or membership rights, as applicable, with respect to the Collateral;
provided, that no vote shall be cast or corporate, partnership or membership
right exercised or other action taken which, in the Administrative Agent's
reasonable judgment, would impair the Collateral or which would result in any
violation of any provision of the Credit Agreement, the Notes, any other Loan
Documents or this Pledge Agreement.
8. RIGHTS OF THE ADMINISTRATIVE AGENT.
(a) If an Event of Default shall occur and be
continuing and the Administrative Agent shall give notice of its intent to
exercise such rights to the Pledgor, and subject to the receipt of any
applicable approvals from Insurance Regulators, and compliance by Administrative
Agent and Lenders with any applicable filing or other requirements of the
applicable Insurance Regulators, (i) the Administrative Agent shall have the
right to receive any and all cash dividends paid in respect of the Pledged Stock
and partnership and membership distributions in respect of the Partnership
Interests and make application thereof to the Obligation in the order set forth
in SECTION 11.8 of the Credit Agreement and (ii) all shares of the Pledged Stock
shall be registered in the name of the Administrative Agent or its nominee, and
the Administrative Agent or its nominee may thereafter exercise (A) all voting,
corporate and other rights pertaining to such shares of the Pledged Stock at any
meeting of shareholders of the applicable Issuer or otherwise and (B) any and
all rights of conversion, exchange, subscription, and any other rights,
privileges or options pertaining to such shares of the Pledged Stock as if it
were the absolute owner thereof (including, without limitation, the right to
exchange at its discretion any and all of the Pledged Stock upon the merger,
consolidation, reorganization, recapitalization or other fundamental change in
the corporate structure of the applicable Issuer, or upon the exercise by the
Pledgor or the Administrative Agent of any right, privilege or option pertaining
to such shares of the Pledged Stock, and in connection therewith, the right to
deposit and deliver any and all of the Pledged Stock with any committee,
depositary, transfer agent, registrar or other designated agency upon such terms
and conditions as it may determine), all without liability except to account for
property actually received by it, but the Administrative Agent shall have no
duty to the Pledgor to exercise any such right, privilege or option and shall
not be responsible for any failure to do so or delay in so doing.
(b) The rights of the Administrative Agent and
the Lenders hereunder shall not be conditioned or contingent upon the pursuit by
the Administrative Agent or any Lender of any right or remedy against the
Pledgor or against any other Person which may be or become liable in respect of
all or any part of the Obligation or against any collateral security therefor,
guarantee therefor or right of offset with respect thereto. Neither the
Administrative Agent nor any Lender shall be liable for any failure to demand,
collect or realize upon all or any part of the Collateral or for any delay in
doing so, nor shall the Administrative Agent be under any obligation to sell or
otherwise dispose of any Collateral upon the request of the Pledgor or any other
Person or to take any other action whatsoever with regard to the Collateral or
any part thereof.
(c) Pledgor agrees to cooperate with and assist
Administrative Agent and Lenders in connection with any filings to be with, or
approvals required from, any Insurance Regulators or other Governmental
Authorities.
9. REMEDIES. If an Event of Default shall occur and be
continuing, with the consent of the Required Lenders, and subject to the receipt
of any applicable approvals from Insurance Regulators, and compliance by
Administrative Agent and Lenders with any applicable filing or other
requirements of the applicable Insurance Regulators, the Administrative Agent
may, and upon the request of the Required Lenders, the Administrative Agent
shall, exercise on behalf of itself and the Lenders, all rights and remedies
granted in this Pledge Agreement and in any other instrument or agreement
securing, evidencing or relating to the Obligation, and in addition thereto, all
rights and remedies of a secured party under the Code. Without limiting the
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generality of the foregoing with regard to the scope of the Administrative
Agent's remedies, the Administrative Agent, without demand of performance or
other demand, presentment, protest, advertisement or notice of any kind (except
any notice required by law referred to below) to or upon the Pledgor, any
Issuer, any Partnership or any other Person (all and each of which demands,
defenses, advertisements and notices are hereby waived), may in such
circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, assign, give option
or options to purchase or otherwise dispose of and deliver the Collateral or any
part thereof (or contract to do any of the foregoing), in one or more parcels at
public or private sale or sales, in the over-the-counter market, at any
exchange, broker's board or office of the Administrative Agent or any Lender or
elsewhere upon such terms and conditions as it may deem advisable and at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk. The Administrative Agent or any Lender shall have
the right upon any such public sale or sales, and, to the extent permitted by
law, upon any such private sale or sales, to purchase the whole or any part of
the Collateral so sold, free of any right or equity of redemption in the
Pledgor, which right or equity is hereby waived or released. The Administrative
Agent shall apply any Proceeds from time to time held by it and the net proceeds
of any such collection, recovery, receipt, appropriation, realization or sale,
after deducting all reasonable costs and expenses of every kind incurred in
respect thereof or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights of the
Administrative Agent and the Lenders hereunder, including, without limitation,
reasonable attorneys' fees and disbursements of counsel thereto, to the payment
in whole or in part of the Obligation, in the order set forth in SECTION 11.8 of
the Credit Agreement, and only after such application and after the payment by
the Administrative Agent of any other amount required by any provision of law,
including, without limitation, Section 9-504(1)(c) of the Code (or any
successor provision), need the Administrative Agent account for the surplus, if
any, to the Pledgor. To the extent permitted by applicable law, the Pledgor
waives all claims, damages and demands it may acquire against the Administrative
Agent or any Lender arising out of the exercise by them of any rights hereunder.
If any notice of a proposed sale or other disposition of Collateral shall be
required by law, such notice shall be deemed reasonable and proper if given at
least 10 days before such sale or other disposition.
10. REGISTRATION RIGHTS; PRIVATE SALES.
(a) If the Administrative Agent shall determine
to exercise its right to sell any or all of the Collateral pursuant to PARAGRAPH
9 hereof, and if in the opinion of the Administrative Agent it is necessary or
advisable to have such Collateral, or that portion thereof to be sold,
registered under the provisions of the Security Act of 1933, as amended (the
"Securities Act"), the Pledgor will use its best efforts to cause the applicable
Issuer or Partnership to (i) execute and deliver, and use its best efforts to
cause the directors, officers and representatives of the applicable Issuer or
Partnership to execute and deliver, all such instruments and documents, and do
or cause to be done all such other acts as may be, in the opinion of the
Administrative Agent, necessary or advisable to register such Collateral, or
that portion thereof to be sold, under the provisions of the Securities Act,
(ii) to use its best efforts to cause the registration statement relating
thereto to become effective and to remain effective for a period of one year
from the date of the first public offering of such Collateral or that portion
thereof to be sold, and (iii) to make all amendments thereto and/or to the
related prospectus which, in the opinion of the Administrative Agent, are
necessary or advisable, all in conformity with the requirements of the
Securities Act and the rules and regulations of the Securities and Exchange
Commission applicable thereto. The Pledgor agrees to use its best efforts to
cause the applicable Issuer or Partnership to comply with the provisions of the
securities or "Blue Sky" laws of any and all jurisdictions which the
Administrative Agent shall designate and to make available to its security
holders, as soon as practicable, an earnings statement (which need not be
audited) which will satisfy the provisions of Section 11(a) of the Securities
Act. For the purposes of this SECTION 10.(A), "applicable Issuer or Partnership"
shall mean each Issuer or Partnership which is a direct or indirect wholly-owned
Subsidiary of the Pledgor.
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(b) The Pledgor recognizes that the
Administrative Agent may be unable to effect a public sale of any or all the
Collateral, by reason of certain prohibitions contained in the Securities Act
and applicable state securities laws or otherwise, and may be compelled to
resort to one or more private sales thereof to a restricted group of purchasers
which will be obliged to agree, among other things, to acquire such securities
for their own account for investment and not with a view to the distribution or
resale thereof. The Pledgor acknowledges and agrees that any such private sale
may result in prices and other terms less favorable than if such sale were a
public sale and, notwithstanding such circumstances, agrees that any such
private sale shall be deemed to have been made in a commercially reasonable
manner. The Administrative Agent shall be under no obligation to delay a sale of
any of the Collateral for the period of time necessary to permit the applicable
Issuer or Partnership to register such securities for public sale under the
Securities Act, or under applicable state securities laws, even if the
applicable Issuer or Partnership would agree to do so.
(c) The Pledgor further agrees to use its best
efforts to do or cause to be done all such other acts as may be necessary to
make such sale or sales of all or any portion of the Collateral pursuant to this
PARAGRAPH 10 valid and binding and in compliance with any and all other
applicable Laws and applicable requirements of the Insurance Regulators. The
Pledgor further agrees that a breach of any of the covenants contained in this
PARAGRAPH 10 will cause irreparable injury to the Administrative Agent and the
Lenders not compensable in damages, that the Administrative Agent and the
Lenders have no adequate remedy at law in respect of such breach and, as a
consequence, that each and every covenant contained in this PARAGRAPH 10 shall
be specifically enforceable against the Pledgor, and the Pledgor hereby waives
and agrees not to assert any defenses against an action for specific performance
of such covenants except for a defense that no Event of Default has occurred
under the Credit Agreement.
11. AMENDMENTS, ETC. WITH RESPECT TO THE OBLIGATION. The
Pledgor shall remain obligated hereunder, and the Collateral shall remain
subject to the Lien granted hereby, notwithstanding that, without any
reservation of rights against the Pledgor, and without notice to or further
assent by the Pledgor, any demand for payment of the Obligation made by the
Administrative Agent or any Lender may be rescinded by the Administrative Agent
or such Lender, and any of the Obligations continued, and the Obligation, or the
liability of the Pledgor or any other Person upon or for any part thereof, or
any collateral security or guarantee therefor or right of offset with respect
thereto, may, from time to time, in whole or in part, be renewed, extended,
amended, modified, accelerated, compromised, waived, surrendered, or released by
the Administrative Agent or any Lender, and the Credit Agreement, the Notes, any
other Loan Documents and any other documents executed and delivered in
connection therewith may be amended, modified, supplemented or terminated, in
whole or in part, as the Lenders (or the Required Lenders, as the case may be)
may deem advisable from time to time, and any guarantee, right of offset or
other collateral security at any time held by the Administrative Agent or any
Lender for the payment of the Obligation may be sold, exchanged, waived,
surrendered or released. Neither the Administrative Agent nor any Lender shall
have any obligation to protect, secure, perfect or insure any other Lien at any
time held by it as security for the Obligation or any property subject thereto.
The Pledgor waives any and all notice of the creation, renewal, extension or
accrual of the Obligation or any part thereof and notice of or proof of reliance
by the Administrative Agent or any Lender upon this Pledge Agreement; the
Obligation, and any part thereof, shall conclusively be deemed to have been
created, contracted or incurred in reliance upon this Pledge Agreement; and all
dealings between the Pledgor, on the one hand, and the Administrative Agent and
the Lenders, on the other, shall likewise be conclusively presumed to have been
had or consummated in reliance upon this Pledge Agreement. The Pledgor waives
diligence, presentment, protest, demand for payment and notice of default or
nonpayment to or upon the Pledgor with respect to the Obligation.
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12. REGULATORY APPROVAL. The Pledgor will, at its
expense, promptly execute and deliver, or cause the execution and delivery of,
all applications, certificates, instruments, registration statements, filings
and all other documents and papers the Administrative Agent may reasonably
request or as may be required by law in connection with the obtaining of any
consent, approval, registration, qualification or authorization of any Insurance
Regulator or other Governmental Authority or of any other Person necessary or
appropriate for the effective exercise of any rights under this Pledge
Agreement. Without limiting the generality of the foregoing, if an Event of
Default shall have occurred and be continuing, the Pledgor shall take any action
which the Administrative Agent may reasonably request in order to transfer and
assign to the Administrative Agent, or to such one or more third parties as the
Administrative Agent may designate, or to a combination of the foregoing, each
license and Authorization of any Insurance Regulator or other Governmental
Authority. To enforce the provisions of this PARAGRAPH 12, upon the occurrence
and during the continuance of an Event of Default, the Administrative Agent is
empowered to request the appointment of a receiver from any court of competent
jurisdiction. Such receiver shall be instructed to seek from the Insurance
Regulators and all other necessary Governmental Authorities an involuntary
transfer of control of the Pledged Stock or Partnership Interests and
Authorization from the applicable Insurance Regulators for the purpose of
seeking a bona fide purchaser to whom control of such property will ultimately
be transferred. The Pledgor hereby agrees to authorize such an involuntary
transfer of control upon the request of the receiver so appointed and, if the
Pledgor shall refuse to authorize the transfer, its approval may be required by
the court. Upon the occurrence and during the continuance of an Event of
Default, the Pledgor shall further use its best efforts to assist in obtaining
approval of any applicable Insurance Regulator, if required, for any action or
transactions contemplated by this Pledge Agreement including, without
limitation, the preparation, execution and filing with the applicable Insurance
Regulator of the assignor's or transferor's portion of any filings or
applications for consent to the assignment or transfer of control necessary or
appropriate under the rules and regulations of the applicable Insurance
Regulators for the approval of the transfer or assignment of any portion of the
Collateral, together with any other applicable Authorizations. The Pledgor
acknowledges that the assignment or transfer of such rights is integral to the
Administrative Agent's and the Lenders' realization of the value of the
Collateral, that there is no adequate remedy at law for failure by the Pledgor
to comply with the provisions of this PARAGRAPH 12 and that such failure would
cause irreparable injury not adequately compensable in damages, and therefore
agrees that each and every covenant contained in this PARAGRAPH 12 may be
specifically enforced, and the Pledgor hereby waives and agrees not to assert
any defenses against an action for specific performance of such covenants.
13. LIMITATION ON DUTIES REGARDING COLLATERAL. The
Administrative Agent's sole duty with respect to the custody, safekeeping and
physical preservation of the Collateral in its possession, under Section 9-207
of the Code or otherwise, shall be to deal with it in the same manner as the
Administrative Agent deals with similar securities and property for its own
account. Neither the Administrative Agent, any Lender nor any of their
respective directors, officers, employees or agents shall be liable for failure
to demand, collect or realize upon any of the Collateral or for any delay in
doing so or shall be under any obligation to sell or otherwise dispose of any
Collateral upon the request of the Pledgor or otherwise.
14. POWERS COUPLED WITH AN INTEREST. All authorizations
and agencies herein contained with respect to the Collateral constitute
irrevocable powers coupled with an interest.
15. SEVERABILITY. Any provision of this Pledge Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
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any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
16. PARAGRAPH HEADINGS. The paragraph headings used in
this Pledge Agreement are for convenience of reference only and are not to
affect the construction hereof or be take into consideration in the
interpretation hereof.
17. NO WAIVER; CUMULATIVE REMEDIES. Neither the
Administrative Agent nor any Lender shall by any act (except by a written
instrument pursuant to PARAGRAPH 18 hereof) be deemed to have waived any right
or remedy hereunder or to have acquiesced in any Default or Potential Default or
in any breach of any of the terms and conditions hereof. No failure to exercise,
nor any delay in exercising, on the part of the Administrative Agent or any
Lender, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Administrative Agent or
any Lender of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Administrative Agent or such
Lender would otherwise have on any future occasion. The rights and remedies
herein provided are cumulative, may be exercised singly or concurrently and are
not exclusive of any other rights or remedies provided by law.
18. WAIVER AND AMENDMENTS; SUCCESSORS AND ASSIGNS;
GOVERNING LAW. None of the terms or provisions of this Pledge Agreement may be
amended, supplemented or otherwise modified except by a written instrument
executed by the Pledgor and the Administrative Agent; provided that any consent
by the Administrative Agent to any waiver, amendment, supplement or modification
hereto shall be subject to approval thereof by the Lenders or Required Lenders,
as applicable, in accordance with SECTION 13.11 of the Credit Agreement. This
Pledge Agreement shall be binding upon the successors and assigns of the Pledgor
and shall inure to the benefit of the Administrative Agent and the Lenders and
their respective successors and assigns. This Pledge Agreement shall be governed
by, and construed and interpreted in accordance with, the laws of the State of
Alabama.
19. NOTICES. All notices and communications hereunder
shall be given to the addresses and otherwise in accordance with SECTION 13.3 of
the Credit Agreement, with notices to Pledgor being sent in care of Borrower.
20. IRREVOCABLE AUTHORIZATION AND INSTRUCTION TO ISSUERS
AND PARTNERSHIPS. The Pledgor hereby authorizes and instructs each Issuer and
Partnership to comply with any instruction received by it from the
Administrative Agent in writing that (a) states that an Event of Default has
occurred and is continuing and (b) is otherwise in accordance with the terms of
this Pledge Agreement, without any other or further instructions from the
Pledgor, and the Pledgor agrees that such Issuer and Partnership shall be fully
protected in so complying.
21. AUTHORITY OF ADMINISTRATIVE AGENT. The Pledgor
acknowledges that the rights and responsibilities of the Administrative Agent
under this Pledge Agreement with respect to any action taken by the
Administrative Agent or the exercise or non-exercise by the Administrative Agent
of any option, voting right, request, judgment or other right or remedy provided
for herein or resulting or arising out of this Pledge Agreement shall, as
between the Administrative Agent and the Lenders, be governed by the Credit
Agreement and by such other agreements with respect thereto as may exist from
time to time among them, but, as between the Administrative Agent and the
Pledgor, the Administrative Agent shall be conclusively presumed to be acting as
agent for itself and the Lenders with full and valid authority so to act or
refrain from acting, and neither the Pledgor nor any Issuer shall be under any
obligation, or entitlement, to make any inquiry respecting such authority.
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22. CONSENT TO JURISDICTION; INDEMNIFICATION. The Pledgor
hereby irrevocably consents to the personal jurisdiction of the state and
federal courts located in Jefferson County, Alabama, in any action, claim or
other proceeding arising out of or any dispute in connection with this Pledge
Agreement, any rights or obligations hereunder, or the performance of such
rights and obligations. The Pledgor hereby irrevocably consents to the service
of a summons and complaint and other process in any action, claim or proceeding
brought by the Administrative Agent or any Lender in connection with this Pledge
Agreement, any rights or obligations hereunder, or the performance of such
rights and obligations, on behalf of itself or its property, in the manner
provided in SECTION 13.10 of the Credit Agreement, and agrees to indemnify each
Agent, Lead Arranger, Co-Arranger and each Lender as, and to the extent,
provided in SECTION 11.12 of the Credit Agreement. Nothing in this PARAGRAPH 22
shall affect the right of the Administrative Agent or any Lender to serve legal
process in any other manner permitted by Applicable Law or affect the right of
the Administrative Agent or any Lender to bring any action or proceeding against
the Pledgor or its properties in the courts of any other jurisdictions.
23. CONTROL. Notwithstanding anything in this Pledge
Agreement to the contrary, unless and until an Event of Default shall occur and
the Administrative Agent exercises the rights and remedies granted in this
Pledge Agreement in accordance with Paragraph 9 hereof, (a) the execution and
delivery of this Pledge Agreement and the performance of Pledgor's obligations
hereunder (i) do not and will not constitute, create, or have the effect of
constituting or creating, directly or indirectly, actual or practical ownership
of the Issuers or Partnerships by Agents or Lenders, or control, affirmative or
negative, direct or indirect, by Agents or Lenders over the management or any
other aspect of the operation of the Issuers or Partnerships, which ownership or
control remains exclusively and at all times in the Issuers or Partnerships, as
applicable, and (ii) do not and will not constitute the transfer, assignment, or
disposition in any manner, voluntary or involuntary, directly or indirectly, of
any Authorization at any time issued by any Insurance Regulator to any Issuer or
Partnership; and (b) Administrative Agent shall not, without first obtaining
necessary approval of each applicable Insurance Regulator, take any action
pursuant to this Pledge Agreement that would constitute or result in any
assignment of any Authorization or any change of control of any Issuer or
Partnership, if such assignment or change of control would require, under then
existing Law (including the written rules and regulations promulgated by an
applicable Insurance Regulator), the prior approval of such Insurance Regulator.
24. WAIVER OF JURY TRIAL. NOTWITHSTANDING ANY OTHER
PROVISION CONTAINED HEREIN, IN THE EVENT ANY JUDICIAL PROCEEDING IS INSTITUTED
IN CONNECTION WITH THIS PLEDGE AGREEMENT, TO THE EXTENT PERMITTED BY LAW, THE
ADMINISTRATIVE AGENT AND EACH LENDER BY THEIR ACCEPTANCE OF THIS PLEDGE
AGREEMENT OR THE BENEFITS HEREOF AND THE PLEDGOR EACH HEREBY IRREVOCABLY WAIVES
ITS RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR OTHER
PROCEEDING ARISING OUT OF OR RELATING TO, OR ANY DISPUTE IN CONNECTION WITH,
THIS PLEDGE AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER, OR THE PERFORMANCE
OF SUCH RIGHTS AND OBLIGATIONS.
[Remainder of Page Intentionally Blank. Signature Pages Follow.]
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IN WITNESS WHEREOF, the undersigned by and through their duly
authorized officers have executed and delivered this Pledge Agreement as of the
date first above written
PLEDGOR:
[CORPORATE SEAL] MEDICAL ASSURANCE, INC.
By:
----------------------------------------
Name: A. Xxxxxxx Xxxxx
Title: President
ADMINISTRATIVE AGENT:
SOUTHTRUST BANK,
as Administrative Agent
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
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ACKNOWLEDGMENT AND CONSENT
OF ISSUERS
Each Issuer of Pledged Stock referred to in the foregoing
Pledge Agreement hereby acknowledges receipt of a copy thereof. Each Issuer
agrees to notify the Administrative Agent promptly in writing of the occurrence
of any of the events described in PARAGRAPH 6.(C) of the Pledge Agreement:
ISSUERS:
THE MEDICAL ASSURANCE COMPANY, INC.
By:
--------------------------------------
Name: A. Xxxxxxx Xxxxx
Title: President
12
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ACKNOWLEDGMENT AND CONSENT
OF PARTNERS OR MEMBERS
The undersigned partners or members of ______________________
(the "Partnership") (a) hereby acknowledge receipt of a copy of the foregoing
Pledge Agreement, (b) hereby acknowledge and consent to the pledge of the
Pledgor's interest in the Partnership pursuant thereto, and (c) agree that the
Administrative Agent may freely assign its interest thereunder without further
consent of the partners or members.
, ,
----------------------------------------- ---------------------------------
[PARTNER] [MEMBER] of [PARTNER] [MEMBER] of
--------------------- --------------
----------------------------------------- -----------------------------------
Not applicable as of May 10, 2001
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SCHEDULE 1
TO PLEDGE
AGREEMENT
----------
PLEDGOR: MEDICAL ASSURANCE, INC.
(F/K/A MAIC HOLDINGS, INC.)
DESCRIPTION OF PLEDGED STOCK
ISSUER CLASS OF STOCK CERTIFICATE NUMBER OF
------ -------------- ----------- ---------
NUMBER(S) SHARES
--------- ------
The Medical Assurance Company, Inc. Common 1 8,846,429
(f/k/a Mutual Assurance, Inc.)
14
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SCHEDULE 2
TO PLEDGE
AGREEMENT
---------
DESCRIPTION OF PARTNERSHIP INTERESTS
PARTNERSHIP PARTNERSHIP INTEREST
----------- --------------------
None as of May 10, 2001
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PLEDGE AGREEMENT SUPPLEMENT
PLEDGE AGREEMENT SUPPLEMENT, dated as of ____________________,
20___ (the "Supplement"), made by MEDICAL ASSURANCE, INC., a corporation
organized under the laws of Delaware (the "Pledgor"), in favor of SOUTHTRUST
BANK, an Alabama banking corporation, as Administrative Agent (in such capacity,
the "Administrative Agent"), under the Credit Agreement (as defined in the
Pledge Agreement referred to below) for the benefit of itself and the Lenders
(as so defined).
1. Reference is hereby made to that Pledge Agreement,
dated as of May 10, 2001, made by the Pledgor in favor of the Administrative
Agent (as amended, supplemented or otherwise modified as of the date hereof, the
"Pledge Agreement"). This Supplement supplements the Pledge Agreement, forms a
part thereof and is subject to the terms thereof. Terms defined in the Pledged
Agreement are used herein as therein defined.
[2. The Pledgor hereby confirms and reaffirms the
security interest in the Collateral granted to the Administrative Agent for the
ratable benefit of itself and the Lenders under the Pledge Agreement, and, as
additional collateral security for the prompt and complete payment when due
(whether at stated maturity, by acceleration or otherwise) of the Obligation and
in order to induce the Lenders to fund Borrowings under the Credit Agreement,
the Pledgor hereby delivers to the Administrative Agent, for the benefit of the
Lenders, all of the issued and outstanding share of capital stock of [INSERT
NAME OF NEW SUBSIDIARY] (the "New Issuer") listed below, together with all stock
certificates, options, or rights of any nature whatsoever which may be issued or
granted by the New Issuer in respect to such stock which the Pledge Agreement,
as supplemented hereby, is in force (the "Additional Pledged Stock"; as used in
the Pledge Agreement as supplemented by this Supplement, "Pledged Stock" shall
be deemed to include the Additional Pledged Stock) and hereby grants to the
Administrative Agent, for the ratable benefit of itself and the Lenders, a first
priority security interest in the Additional Pledged Stock and all Proceeds
thereof.]
or
[2. The Pledgor hereby confirms and reaffirms the
security interest in the Collateral granted to the Administrative Agent for the
ratable benefit of itself and the Lenders under the Pledge Agreement, and, as
additional collateral security for the prompt and complete payment when due
(whether at stated maturity, by acceleration or otherwise) of the Obligation and
in order to induce the Lenders to fund Borrowings under the Credit Agreement,
the Pledgor hereby grants to the Administrative Agent, for the ratable benefit
of itself and the Lenders, a first priority security interest in the entire
partnership or membership interest of Pledgor (the "Additional Partnership
Interest") in [INSERT NAME OF NEW SUBSIDIARY] (the "New Partnership") listed
below and all Proceeds thereof; as used in the Pledge Agreement as supplemented
by this Supplement, "Partnership Interests" shall be deemed to include the
Additional Partnership Interest).]
3. The Pledgor hereby represents and warrants that the
representations and warranties contained in PARAGRAPH 5 of the Pledge Agreement
are true and correct on the date of this Supplement with references therein to
the ["Pledged Stock" to include the Additional Pledged Stock] or ["Partnership
Interests" to include the Additional Partnership Interest], with references
therein to the ["Issuer" to include the New Issuer] or "Partnership" to include
the New Partnership], and with references to the "Pledge Agreement" to mean the
Pledge Agreement as supplemented by this Supplement.
4. The Pledgor shall deliver to the Administrative Agent
the Acknowledgment and Consent attached hereto duly executed by the [New Issuer]
or [New Partnership]. The Additional [Pledged Stock] [Partnership Interest] or
[Pledged Debt] pledged hereby is as follows which [Pledged Stock] [Partnership
Interest] or [Pledged Debt] shall be deemed part of SCHEDULE 1 thereto:
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DESCRIPTION OF PLEDGED STOCK
Issuer Class of Stock Certificate No. No. of Shares
------ -------------- --------------- -------------
New Issuer
DESCRIPTION OF PARTNERSHIP INTEREST
Partnership Partnership Interest
----------- --------------------
New Partnership
5. The Pledgor hereby agrees to deliver to the
Administrative Agent such certificates and other documents and take such other
action as shall be reasonably requested by the Administrative Agent in order to
effectuate the terms hereof and the Pledge Agreement.
IN WITNESS WHEREOF, the undersigned has caused this Supplement
to be duly executed under seal and delivered as of the date first above written.
PLEDGOR:
[CORPORATE SEAL] MEDICAL ASSURANCE, INC.
By:
--------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
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ACKNOWLEDGMENT AND CONSENT OF NEW ISSUER
The undersigned hereby acknowledges receipt of a copy of the
foregoing Supplement and the Pledge Agreement referred to therein (the "Pledge
Agreement"). The undersigned agrees for the benefit of the Administrative Agent
and the Lenders as follows:
1. The undersigned will notify the Administrative Agent
promptly in writing of the occurrence of any of the events described in
PARAGRAPH 6.(C) of the Pledge Agreement.
[NAME OF NEW ISSUER]
By:
-------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
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ACKNOWLEDGMENT AND CONSENT OF PARTNERS OR MEMBERS
OF NEW PARTNERSHIP
The undersigned partners or members of _______________________
(the "New Partnership") (a) hereby acknowledge receipt of a copy of the
foregoing Supplement and the Pledge Agreement referred to therein (the "Pledge
Agreement"), (b) hereby acknowledge and consent to the pledge of the Pledgor's
interest in the New Partnership pursuant thereto, and (c) agree that the
Administrative Agent may freely assign its interest thereunder without further
consent of the partners or members.
, ,
--------------------------------------- -----------------------------------
[PARTNER] [MEMBER] of [PARTNER] [MEMBER] of
------------------ --------------
---------------------------------------- -----------------------------------
19
