EXHIBIT 10.11
FIFTH AMENDMENT
TO
EIGHTH AMENDED AND RESTATED LOAN AGREEMENT
THIS FIFTH AMENDMENT TO EIGHTH AMENDED AND RESTATED LOAN AGREEMENT (the
"Amendment") made and entered into as of the 26th day of November, 2003, by and
between DIRECT GENERAL FINANCIAL SERVICES, INC., a Tennessee corporation whose
address is 0000 Xxxxxxxxxxxx Xxxx, Xxxxxxxxx, Xxxxxxxxx 00000 (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 000 Xxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxx 00000 (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 000
Xxxxx Xxxxxx, Xxxxx Xxxxx, Xxxxxxxxx 00000 ("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 000 0xx
Xxxxxx X., Xxxxxxxxx, Xxxxxxxxx 00000 ("U.S. Bank"), CAROLINA FIRST BANK, a
state bank formed under the laws of the State of South Carolina with offices
located at 000 X. Xxxx, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000 ("Carolina First"),
BANK ONE, NA (MAIN OFFICE - CHICAGO, ILLINOIS) a national banking association
with offices located at 000 Xxxxxxx Xxxxxx, Mail Code LA2-2714, Xxxxx Xxxxx,
Xxxxxxxxx 00000 ("Bank One"), REGIONS BANK, an Alabama state banking association
with offices located at 000 X. 00xx Xxxxxx, Xxxxxxxxxx, Xxxxxxx 00000
("Regions"), NATIONAL CITY BANK OF KENTUCKY, a national banking association with
offices located at 000 X. Xxxxx Xxxxxx, 00xx Xxxxx, Xxxxxxxxxx, Xxxxxxxx 00000
("National City Bank"), and FIFTH THIRD BANK, a state bank formed under the laws
of the State of Ohio with offices located at 000 Xxxxxxxx Xxxxxx Xxxxx, Xxxxx
000, Xxxxxxxx, Xxxxxxxxx 00000 ("Fifth Third") (FTBNA, Hibernia, U.S. Bank,
Carolina First, Bank One, and Regions collectively, the "Original Banks") (the
Original Banks, National City Bank, and Fifth Third collectively the "Banks,"
and each individually, a "Bank");
Recitals of Fact
Pursuant to that certain Eighth Amended and Restated Loan Agreement
dated as of October 31, 2002 (the "Original Loan Agreement") among the Original
Banks, the Borrower and the other parties named therein, the Original 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 Original Loan Agreement,
each with a termination date of June 30, 2004 (collectively, the "October 2002
Notes").
Pursuant to that certain First Amendment to Eighth Amended and Restated
Loan Agreement dated as of March 31, 2003 (the "First Amendment") among the
Original Banks, the Borrower and the other parties named therein, the Facility
Commitment for Regions was increased to a maximum principal amount of
Twenty-Five Million Dollars ($25,000,000.00), and the total Commitment of the
Original Banks was increased to a maximum aggregate principal amount of One
Hundred Twenty-Five Million Dollars ($125,000,000.00).
Pursuant to that certain Second Amendment to Eighth Amended and
Restated Loan Agreement dated as of May 28, 2003 (the "Second Amendment") among
the Original Banks, National City Bank, the Borrower and the other parties named
therein, the Facility Commitment for Carolina First was increased to a maximum
principal amount of Fifteen Million Dollars ($15,000,000.00); the Facility
Commitment for Bank One was increased to a
maximum principal amount of Thirty-Five Million Dollars ($35,000,000.00);
National City Bank was added as a Bank with a Facility Commitment of a maximum
principal amount of Fifteen Million Dollars ($15,000,000.00); and the total
Commitment of the Banks was increased to a maximum aggregate principal amount of
One Hundred Sixty Million Dollars ($160,000,000.00).
Pursuant to that certain Third Amendment to Eighth Amended and Restated
Loan Agreement dated as of June 30, 2003 (the "Third Amendment"") among the
Banks, the Borrower and the other parties named therein, the Facility Commitment
for Hibernia was increased to a maximum principal amount of Twenty Million
Dollars ($20,000,000.00); the Facility Commitment for U.S. Bank was increased to
a maximum principal amount of Thirty Million Dollars ($30,000,000.00); Fifth
Third was added as a Bank with a Facility Commitment of a maximum principal
amount of Ten Million Dollars ($10,000,000.00); and the total Commitment of the
Banks was increased to a maximum aggregate principal amount of One Hundred
Eighty Million Dollars ($180,000,000.00).
Pursuant to that certain Fourth Amendment to Eighth Amended and
Restated Loan Agreement, dated on or about July 17, 2003 (the "Fourth
Amendment"; and the Original Loan Agreement, the First Amendment, the Second
Amendment, the Third Amendment and the Fourth Amendment are hereby collectively
referred to as the "Loan Agreement") among the Banks, the Borrower and the other
parties named therein, the Loan Agreement was modified to allow DGC to pay
dividends after the closing of its initial public offering of stock.
The Borrower has now requested that FTBNA increase its Facility
Commitment from a maximum principal amount of Thirty Million Dollars
($30,000,000.00) to a maximum principal amount of Forty Million Dollars
($40,000,000.00) and that the total Commitment of the Banks be increased to a
maximum principal aggregate amount of One Hundred Ninety Million Dollars
($190,000,000.00), and to make other modifications to the Loan Agreement, and
the Banks have agreed to this request. In connection therewith, Borrower has
contemporaneously herewith executed restated individual revolving credit notes
to each of the Banks in the amount of current Facility Commitments
(collectively, the "New Notes").
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,
as thereafter amended from time to time, 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
New Notes, the Security Agreement, the Loan Agreement, or in any other
Loan Document executed by the Borrower, in connection with the Loan.
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(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.
3. The Facility Commitment for FTBNA is hereby increased from a
maximum principal amount of Thirty Million Dollars ($30,000,000.00) to a maximum
principal amount of Forty Million Dollars ($40,000,000.00), and the total
Commitment of the Banks is hereby increased to a maximum principal aggregate
amount of One Hundred Ninety Million Dollars ($190,000,000.00).
4. The following definitions shall be added to Section 1.1 of the
Loan Agreement and shall be inserted where appropriate in correct alphabetical
order:
"Applicable Rate" shall mean either the Adjusted LIBOR Rate or the Base
Rate as elected by Borrower.
"Adjusted LIBOR Rate" shall mean the LIBOR Rate plus (i) for so long as
the Average Funded Debt to EBITDA ratio for the immediately preceding
calendar quarter shall be greater than 2.0 to 1.0, two percent (2%),
and (ii) for so long as the Average Funded Debt to EBITDA ratio for the
immediately preceding calendar quarter is equal to or less than 2.0 to
1.0, one and one-half percent (1.5%).
"Average Funded Debt" shall mean the weighted daily average Loan
balance for the previous calendar quarter.
"Change in Law" shall mean the adoption of any law, rule, regulation,
policy, guideline or directive (whether or not having the force of law)
or any change therein or in the interpretation or application thereof,
in all cases by any Governmental Authority having jurisdiction over the
Bank, in each case after the date hereof.
"EBITDA" shall mean Borrower's net income plus interest plus taxes plus
depreciation plus amortization calculated on a rolling four-quarter
basis.
"Governmental Authority" shall mean any nation or government, any state
or other political subdivision thereof and any entity exercising
regulatory functions of or pertaining to government.
"Interest Period" means, relative to the Loan while bearing interest at
the Adjusted LIBOR Rate, the period beginning on (and including) the
date on which the election of Interest Period is effective and ending
on (but excluding) the day which numerically corresponds to such date
one (1) month, two (2) months, three (3) months or six (6) months
thereafter, as elected by Borrower, [or, if such month has no
numerically corresponding day, on the last Business Day (as defined in
the Loan Agreement) of such month]; provided, however, that
(a) if such Interest Period would otherwise end on a day which is not a
Business Day, such Interest Period shall end on the next following
Business Day (unless such next following Business Day is the first
Business Day of a calendar month, in which case such Interest Period
shall end on the Business Day next preceding such numerically
corresponding day); and
(b) no Interest Period may end later than the stated maturity date of
the indebtedness evidenced by the Note.
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"LIBOR Rate" shall be determined by the Agent and shall mean the London
Interbank Offered Rate of Interest for an Interest Period elected by
the Borrower, provided by the Bloomberg LLC Computer Service on the
Business Day immediately following the date of election by Borrower;
provided, however, that, if the LIBOR Rate is not reported on the
Business Day immediately following the date of election by Borrower,
then the LIBOR Rate for such election shall be the LIBOR Rate reported
on the immediately preceding Business Day (unless failure of the LIBOR
Rate to be reported is due to a disruption in the London interbank
market, in which case the provisions of Section 2.2(a) hereof shall
apply as to the determination of an alternative method of establishing
the LIBOR Rate).
5. The definition of "Eleventh Amended and Restated Guaranty
Agreement," in Section 1.1 of the Loan Agreement, as set forth in the Third
Amendment, is hereby deleted in its entirety and the following is inserted in
lieu thereof:
"Twelfth Amended and Restated Guaranty Agreement" shall mean
the guaranty agreement executed by each of the Guarantors, dated as of
November 26, 2003, guaranteeing the payment of indebtednesses of
Borrower to the Banks not to exceed One Hundred Ninety Million Dollars
($190,000,000.00), plus interest and costs of collection.
All references in the Loan Agreement to any prior Amended and Restated Guaranty
Agreement shall, except as the context may otherwise require, be deemed to
constitute references to the Twelfth Amended and Restated Guaranty Agreement
6. The definition of "Seventh Amended and Restated Pledge and
Security Agreement," in Section 1.1 of the Loan Agreement, as set forth in the
Third Amendment, 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 dated
October 31, 2002, as amended by that First Amendment to Seventh Amended
and Restated Pledge and Security Agreement dated as of March 31, 2003,
as amended by that Second Amendment to Seventh Amended and Restated
Pledge and Security Agreement dated as of May 28, 2003, as amended by
that Third Amendment to Seventh Amended and Restated Pledge and
Security Agreement dated as of June 30, 2003, as amended by that Fourth
Amendment to Seventh Amended and Restated Pledge and Security Agreement
dated as of November 26, 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 Twelfth Amended and Restated Guaranty Agreement.
7. The definition of "Seventh Amended and Restated Security
Agreement," in Section 1.1 of the Loan Agreement, as set forth in the Third
Amendment, 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 dated October 31, 2002, as
amended by that First Amendment to Seventh Amended and Restated
Security Agreement dated as of March 31, 2003, as amended by that
Second Amendment to Seventh Amended and Restated Security Agreement
dated as of May 28, 2003, as amended by that Third Amendment to Seventh
Amended and Restated Security Agreement dated as of June 30, 2003, as
amended by that Fourth Amendment to Seventh Amended and Restated
Security Agreement, dated as of November 26, 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.
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8. The definition of "Capital Adequacy Ratio," in Section 1.2 of
the Loan Agreement, is hereby deleted in its entirety and the following is
inserted in lieu thereof:
"Capital Adequacy Ratio" means the ratio of net written premiums
(excluding inter-company reinsurance of the Affiliated P&C Insurers) to
policyholder surplus.
9. The first paragraph of Section 2.1 of the Loan Agreement, as
set forth in the Third Amendment, is hereby deleted in its entirety and the
following is inserted in lieu thereof:
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 Ninety Million Dollars ($190,000,000.00) 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.
10. Section 2.2(a) of the Loan Agreement, as set forth in the
Original Loan Agreement, is hereby deleted in its entirety and the following is
inserted in lieu thereof:
(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, the day of
the requested Advance, and (ii) in the case of an Advance bearing
interest at the Adjusted LIBOR Rate, 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 for such Advance. It is agreed that only three
(3) Adjusted LIBOR Rates and three (3) Interest Periods 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 Bloomberg LLC, 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.
11. Section 2.3 of the Loan Agreement, as set forth in the
Original Loan Agreement, is hereby deleted in its entirety and the following is
inserted in lieu thereof:
2.3 THE NOTES AND INTEREST. (a) The Loan shall be evidenced by the
Notes. The Loan shall bear interest at the rate or rates set forth
hereinafter. The entire principal amount of the Loan shall be due and
payable on the Loan Termination Date. The unpaid principal balances of
the Loan shall bear interest from the Effective Date on disbursed and
unpaid principal balances (calculated on the basis of a 360-day year
for actual days elapsed) at a rate per annum which shall, from day to
day, be equal to the lesser of (i) the Maximum Rate, or (ii) a rate
equal to the Applicable Rate.
(b) Said interest, computed on the unpaid principal balances from
time to time outstanding, shall be payable (i) on the last day of each
and every July, October, January, and April, as to any portion of the
Loan to which the Base Rate applies, and (ii) on the final day of the
applicable Interest Period [and, in the case of any Interest Period of
over three (3) months in duration, on the date which is three (3)
months after the commencement of such Interest Period], as to any
portion of the Loan to which the Adjusted LIBOR Rate applies.
(c) Borrower's election(s) shall be in writing, signed by the
Borrower and delivered to the Agent as provided in Section 2.2 hereof.
An election by Borrower shall be in effect until (i) if the effective
Applicable Rate is the Base Rate, a change in the election of the
Applicable Rate by
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Borrower in accordance with the terms hereof or (ii) if the effective
Applicable Rate is the Adjusted LIBOR Rate, the expiration of the
Interest Period elected by Borrower. Upon the expiration of each
Interest Period, the Borrower shall have the right to specify a new
Interest Period for the portion of the Loan that will bear interest at
the Adjusted LIBOR Rate by giving written notice of such requested
Interest Period to the Agent (which shall promptly notify the Banks) no
later than 10:00 a.m., Memphis time, on the third Business Day
preceding the last day of such expiring Interest Period.
Notwithstanding any other term or provision hereof, Borrower shall be
required to elect the same Applicable Rate (i.e., same Base Rate and
same Adjusted LIBOR Rate) to be applicable to all of the Notes.
(d) If no election is made by Borrower, on or prior to 10:00 a.m.,
Memphis time on the third (3rd) Business Day prior to the expiration of
an Interest Period, to change the Applicable Rate or to continue to
have the Loan bear interest at the Adjusted LIBOR Rate for a designated
Interest Period, the Applicable Rate shall be the Base Rate upon the
expiration of such Interest Period. If Borrower does not elect an
Applicable Rate at any time, then the Applicable Rate shall
automatically be the Base Rate. When the Applicable Rate is the Base
Rate, each change in the Base Rate shall be effective without notice to
the undersigned on the effective date of each change in the Maximum
Rate or the Base Rate, as the case may be.
(e) If the Agent shall have determined that the Bloomberg LLC
Computer Service does not continue to report the LIBOR Rate, then upon
notice from the Agent to the Borrower, the obligations of the Banks to
make any portion of the Loan as a loan bearing interest at the Adjusted
LIBOR Rate shall forthwith be suspended unless and until an alternative
method for determining the LIBOR Rate is agreed to in accordance with
Section 2.2(a) hereof, and until such alternative method is agreed to,
all amounts owing under the Notes shall accrue interest at the Base
Rate.
(f) In the event that the foregoing provisions should be construed
by a court of competent jurisdiction not to constitute a valid,
enforceable designation of a rate of interest or method of determining
same, the Loan shall bear interest at the maximum effective variable
contract rate which may be charged by the Banks under applicable law
from time to time in effect.
(g) Borrower hereby indemnifies the respective Banks and holds
each Bank harmless from any loss or expense which any such Bank may
sustain or incur as a consequence of any Change in Law that results in
the imposition on any Bank of reserve requirements in connection with
LIBOR Rate loans made by such Bank. Borrower will make any payments
under this indemnity to the respective Banks, upon demand. Borrower
further agrees to enter into a modification of the Loan Agreement, at
the request of the Agent, to bring the Loan Agreement into compliance
with any Change in Law. This paragraph shall only apply to losses or
expenses incurred by any Bank in connection with LIBOR Rate loans made
to Borrower after notice by such Bank to Agent and Borrower that there
has been a Change in Law that will result in such losses or expenses.
(h) If any Bank shall determine (which determination shall, upon
notice thereof to the Borrower and the Agent, be conclusive and binding
on the Borrower) that the introduction of or any change in, or in the
interpretation of, any law makes it unlawful, or any central bank or
other governmental authority asserts that it is unlawful, for such Bank
to continue or maintain any portion of the Loan as a loan bearing
interest at the Adjusted LIBOR Rate, the obligation of such Bank to
continue or maintain the indebtedness evidenced by such Bank's Note on
such basis shall, upon such determination, forthwith be suspended until
such Bank shall notify the Borrower that the circumstances causing such
suspension no longer exist, and the entire indebtedness evidenced by
such Bank's Note shall automatically bear interest at the Base Rate at
the end of the then current Interest Period or sooner, if required by
such law or assertion.
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12. Section 2.5 of the Loan Agreement, as set forth in the
Original Loan Agreement, is hereby deleted in its entirety and the following is
inserted in lieu thereof:
2.5 PREPAYMENTS OR TERMINATION OF THE LOAN. (a) Subject to the
terms and conditions hereof, 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 prepayment while the amount
being prepaid is bearing interest at an Adjusted LIBOR Rate, Borrower
shall pay any prepayment premium owed pursuant to the provisions of
subsection (c) below. 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).
(b) With respect to any portion of the Loan which bears interest
at the Base Rate, the Borrower may prepay said portion, in whole or in part,
prior to the Loan Termination Date, without premium or penalty.
(c) In the event of (i) the payment of any principal of any
Advance bearing interest at an Adjusted LIBOR Rate (hereafter a "LIBOR Loan")
other than on the last day of an Interest Period applicable thereto (including
as a result of an Event of Default), (ii) the conversion of any LIBOR Loan other
than on the last day of the Interest Period applicable thereto, (iii) the
failure to borrow, convert, continue or prepay any LIBOR Loan on the date
specified in any notice delivered pursuant hereto or (iv) the assignment of any
LIBOR Loan other than on the last day of the Interest Period applicable thereto
as a result of a request by the Borrower, then, in any such event, the Borrower
shall compensate Bank for the loss, cost and expense attributable to such event.
Such loss, cost or expense to Bank shall be deemed to include an amount
determined by Bank (the "Prepayment Penalty") to be the excess, if any, of (i)
the amount of interest which would have accrued on the principal amount of such
LIBOR Loan had such event not occurred, at the Adjusted LIBOR Rate that would
have been applicable to such LIBOR Loan, for the period from the date of such
event to the last day of the then current Interest Period therefore (or, in the
case of a failure to borrow, convert or continue, for the period that would have
been the Interest Period for such LIBOR Loan), over (ii) the amount of interest
which would accrue on such principal amount for such period at the interest rate
which Bank would bid were it to bid, at the commencement of such period, for
dollar deposits of a comparable amount and period from other banks in the LIBOR
market. For example, assume a $1,000,000 30 day LIBOR tranche priced at 2.75% is
prepaid 15 days into the Interest Period. On the prepayment date, due to a
decline in the LIBOR rate market, the bid rate is now 2.40%. The calculations
are:
Original interest: $1,000,000.00 x .0275 x 15/360 = $1,145.83
Bid interest: $1,000,000.00 x .0240 x 15/360 = $1,000.00
Thus, Borrower's Prepayment Penalty would be $145.83. A certificate of
Bank setting forth any amount or amounts that Bank is entitled to
receive pursuant to this paragraph shall be delivered to the Borrower
and shall be conclusive absent demonstrable error. The Borrower shall
pay Bank the amount shown as due on any such certificate within 10 days
after receipt thereof. Except for the foregoing, Borrower may pay all
or a portion of the amount owed earlier than it is due.
13. Section 6.12 of the Loan Agreement, as set forth in the
Original Loan Agreement, is hereby deleted in its entirety and the following is
inserted in lieu thereof:
6.12 LOAN AMOUNT TO NET WORTH. Maintain as to DGC at all times a
ratio of (i) the sum of the total disbursed and unpaid principal
balances of the Loan outstanding from time to time, to (ii) Tangible
Net Worth (as defined in Section 1) of less than 1.75 to 1.00.
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14. Section 6.13 of the Loan Agreement, as set forth in the
Original Loan Agreement, is hereby deleted in its entirety and the following is
inserted in lieu thereof:
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, One Hundred Forty Four
Million Dollars ($140,000,000.00), and provided further that, with
respect to DGC only, such Tangible Net Worth calculation shall be (x)
decreased by one hundred percent (100%) of the goodwill purchase price
associated with DGC's contemplated purchases of Cash Register, Inc.,
New York Life and Health Insurance Company, and the agency assets in
the state of Texas from All American General Agency, Inc. and
Guaranteed Insurance Agency, Inc., and (y) commencing with the fiscal
year beginning January 1, 2004, increased by twenty-five percent (25%)
of all future net income after taxes, measured at the end of each
fiscal quarter.
15. Section 6.18 of the Loan Agreement, as set forth in the
Original Loan Agreement, is hereby deleted in its entirety.
16. There shall be added a new Section 8.4 to the Loan Agreement,
as follows:
8.4 CAPITAL ADEQUACY RATIO. If the Capital Adequacy Ratio of the
Affiliated Insurers shall at any time hereafter, commencing December
31, 2003, be greater than or equal to 4.00 to 1.00.
17. There shall be added a new Section 8.6 to the Loan Agreement,
as follows:
18. 8.6 MINIMUM CAPITAL SURPLUS OF AFFILIATED INSURERS. If
the Affiliated Insurers shall, at any time, have a minimum capital surplus
(including surplus notes) of less than One Hundred Million Dollars
($100,000,000.00) on a combined GAAP basis.
19. Exhibit "B" to the Loan Agreement, as set forth in the Third
Amendment, is hereby deleted in its entirety and the schedule attached hereto
marked REVISED EXHIBIT "B" shall be inserted in lieu thereof.
20. Exhibit "C" to the Loan Agreement, as set forth in the
Original Loan Agreement, is hereby deleted in its entirety, and the schedule
attached hereto marked REVISED EXHIBIT "C" shall be inserted in lieu thereof.
21. Exhibit "E" to the Loan Agreement, as set forth in the Third
Amendment, is hereby deleted in its entirety and the schedule attached hereto
marked REVISED EXHIBIT "E" shall be inserted in lieu thereof.
22. Exhibit "H" to the Loan Agreement, as set forth in the
Original Loan Amendment, is hereby deleted in its entirety and the schedule
attached hereto marked REVISED EXHIBIT "H" shall be inserted in lieu thereof.
23. 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.
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24. All references in all Loan Documents (including, but not
limited to, the New 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. All
references in the Loan Documents (including, but not limited to, the Security
Agreement and the Loan Agreement) to the "Notes" shall, except as the context
may otherwise require, be deemed to constitute references to the New Notes of
even date herewith.
[SEPARATE SIGNATURE PAGES FOLLOW]
9
SIGNATURE PAGE
TO
FIFTH 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/ Xxxxx X. Xxxxx
-----------------------------------------
Title: President
--------------------------------------
GUARANTORS:
DIRECT GENERAL CORPORATION,
a Tennessee corporation
By: /s/ Xxxxx X. Xxxxxx
-----------------------------------------
Title: VP & CFO
--------------------------------------
DIRECT GENERAL INSURANCE AGENCY, INC.,
a Tennessee corporation
By: /s/ Xxxxx X. Xxxxxx
-----------------------------------------
Title: VP & CFO
--------------------------------------
DIRECT GENERAL INSURANCE AGENCY, INC.,
an Arkansas corporation
By: /s/ Xxxxx X. Xxxxxx
-----------------------------------------
Title: VP & CFO
--------------------------------------
DIRECT GENERAL INSURANCE AGENCY, INC.,
a Mississippi corporation
By: /s/ Xxxxx X. Xxxxxx
-----------------------------------------
Title: VP & CFO
--------------------------------------
[SIGNATURE PAGE CONTINUED]
DIRECT GENERAL INSURANCE AGENCY OF
LOUISIANA, INC., a Louisiana corporation
By: /s/ Xxxxx X. Xxxxxx
-----------------------------------------
Title: VP & CFO
--------------------------------------
DIRECT GENERAL AGENCY OF KENTUCKY, INC.,
a Kentucky corporation
By: /s/ Xxxxx X. Xxxxxx
-----------------------------------------
Title: VP & CFO
--------------------------------------
DIRECT ADJUSTING COMPANY, INC.,
a Tennessee corporation
By: /s/ J. Xxxx Xxxxxx
-----------------------------------------
Title: Treasurer
--------------------------------------
DIRECT ADMINISTRATION, INC.,
a Tennessee corporation
By: /s/ J. Xxxx Xxxxxx
-----------------------------------------
Title: Treasurer
--------------------------------------
DIRECT GENERAL INSURANCE AGENCY, INC.,
a Texas corporation
By: /s/ Xxxxx X. Xxxxxx
-----------------------------------------
Title: VP & CFO
--------------------------------------
DIRECT GENERAL CONSUMER PRODUCTS, INC.,
a Tennessee corporation
By: /s/ J. Xxxx Xxxxxx
-----------------------------------------
Title: Treasurer
--------------------------------------
[SIGNATURE PAGE CONTINUED]
BANKS:
FIRST TENNESSEE BANK NATIONAL ASSOCIATION
By: /s/ Xxx Xxxxxxx
-----------------------------------------
Title: SVP
--------------------------------------
HIBERNIA NATIONAL BANK
By: /s/ Xxxxx Xxxxx Rack
-----------------------------------------
Title: Senior Vice President
--------------------------------------
U.S. BANK NATIONAL ASSOCIATION
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------------------------
Title: Vice President
--------------------------------------
CAROLINA FIRST BANK
By: /s/ Xxxxxxx Xxxxxxxxxx
-----------------------------------------
Title: Executive Vice President
--------------------------------------
XXXX XXX, XX
(XXXX XXXXXX - XXXXXXX, XXXXXXXX)
By: /s/ Xxxxxx X. Xxxx
-----------------------------------------
Title: First Vice President
--------------------------------------
REGIONS BANK
By: /s/ Xxx Xxxxxxxxx
-----------------------------------------
Title: Assistant Vice President
--------------------------------------
NATIONAL CITY BANK OF KENTUCKY
By: /s/ Xxxxx X. Xxxxxxxx
-----------------------------------------
Title: SVP
--------------------------------------
FIFTH THIRD BANK
By: /s/ Xxxxx Xxxxx
-----------------------------------------
Title: VP
--------------------------------------
[SIGNATURE PAGE CONTINUED]
AGENT:
FIRST TENNESSEE BANK NATIONAL ASSOCIATION
By: /s/ Xxx Xxxxxxx
-----------------------------------------
Title: SVP
--------------------------------------
