Exhibit 10.29
THIRD AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT
THIS THIRD AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT dated as
of the 31st day of October, 2002, made by DIRECT GENERAL CORPORATION, a
Tennessee corporation (the "Pledgor"), in favor of FIRST TENNESSEE BANK NATIONAL
ASSOCIATION, Memphis, Tennessee, as agent for itself and for HIBERNIA NATIONAL
BANK, Baton Rouge, Louisiana ("Hibernia") (First Tennessee Bank National
Association in its agency capacity being herein referred to as "Agent," and in
its individual capacity as "FTBNA"; and FTBNA and Hibernia being herein
collectively referred to as the "Banks").
W I T N E S S E T H:
That for good and valuable considerations, the receipt and sufficiency
of which are hereby acknowledged, the Pledgor hereby agrees with the Agent as
follows:
1. Pledge and Grant of Security Interest. As collateral security for
all of the Obligations (as defined in Section 2 hereof), the Pledgor hereby
pledges and assigns to the Agent, and grants to the Agent a continuing security
interest in, the following (the "Pledged Collateral"):
(a) all of Pledgor's shares of outstanding capital stock
(common and preferred of whatever class) of the Subsidiaries (as
hereinafter defined) (the "Pledged Shares"), the certificates
representing the Pledged Shares, all options and other rights,
contractual or otherwise, with respect thereto and all dividends, cash,
instruments and other property (including, without limitation, any
stock dividends or stock splits) from time to time received, receivable
or otherwise distributed in respect of or in exchange for any or all of
the Pledged Shares;
(b) all additional shares of stock of the Subsidiaries (common
and preferred, of whatever class) from time to time acquired by the
Pledgor, the certificates representing such additional shares and all
dividends, cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in
exchange for any or all of such additional shares; and
(c) all proceeds of any and all of the foregoing;
in each case, whether now owned or hereafter acquired by the Pledgor and
howsoever Pledgor's interest therein may arise or appear (whether by ownership,
security interest, claim or otherwise). Notwithstanding any other term or
provision hereof, the Pledged Collateral covers all the foregoing, regardless of
whether it is deemed or determined to be a security or securities or to be a
general intangible. For purposes hereof, the term "Subsidiaries" shall mean the
following: (i) each of the corporations identified in EXHIBIT "A," attached
hereto and incorporated herein by reference; and (ii) any and all Agency
Subsidiaries and Affiliated Insurers (as defined in the Loan Agreement) now or
hereafter existing that are owned directly by Pledgor.
2. Security for Obligations. The security interest created hereby in
the Pledged Collateral constitutes continuing collateral security for all of the
following obligations, whether now existing or hereafter incurred (the
"Obligations"):
(a) The full and prompt payment, when due, of the indebtedness
(and interest thereon) evidenced and to be evidenced by those certain
Third Restated Notes (the "Notes"),
(i) of even date herewith, in the principal sum of
Three Million Seven Hundred Fifty Thousand Dollars
($3,750,000.00), executed by Pledgor and payable to the order
of FTBNA; and
(ii) of even date herewith, in the principal sum of
Three Million Seven Hundred Fifty Thousand Dollars
($3,750,000.00), executed by Pledgor and payable to the order
of Hibernia;
together with and any and all renewals, modifications, and extensions
of any of said notes, in whole or in part; and
(b) The due performance and observance by the Pledgor of all
of its covenants, agreements, representations, liabilities,
obligations, and undertakings as set forth herein, or in that certain
Third Amended and Restated Loan Agreement (the "Loan Agreement") of
even date herewith among Pledgor, the Agent, the Banks and certain
Guarantors therein named (as the same may be modified, renewed or
extended from time to time) or in any other instrument or document
which now or at any time hereafter evidences or secures, in whole or in
part, all or any part of the Obligations hereby secured.
3. Delivery of the Pledged Collateral. (a) All certificates
representing the Pledged Shares of Direct Insurance Company were delivered to
the Agent on December 2, 1994, pursuant to the Loan Agreement of same date among
Borrower, Pledgor, Agent, FTBNA, and others. All certificates representing the
Pledged Shares of all other Subsidiaries were delivered to Agent prior to the
date of execution and delivery of this Agreement. All other certificates and
instruments constituting Pledged Collateral from time to time shall be delivered
to the Agent promptly upon the receipt thereof by or on behalf of the Pledgor.
Until such delivery to Agent such certificates and instruments shall be held in
trust for the benefit of Agent. All such certificates and instruments shall be
held by or on behalf of the Agent pursuant hereto and shall be delivered in
suitable form for transfer by delivery or shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to the Agent.
(b) If the Pledgor shall receive, by virtue of Pledgor being or having
been an owner of any Pledged Collateral, any (i) stock certificate (including,
without limitation, any certificate representing a stock dividend or
distribution in connection with any increase or reduction of capital,
reclassification, merger, consolidation, sale of assets, combination of shares,
stock split, spinoff or split-off), promissory note or other instrument; (ii)
option or right, whether as an addition to, substitution for, or in exchange
for, any Pledged Collateral, or otherwise; (iii) dividends payable in cash
(except such dividends permitted to be retained by the Pledgor
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pursuant to Section 6 hereof) or in securities or other property; or (iv)
dividends or other distributions in connection with a partial or total
liquidation or dissolution or in connection with a reduction of capital, capital
surplus or paid-in surplus, the Pledgor shall receive such stock certificate,
promissory note, instrument, option, right, payment or distribution in trust for
the benefit of the Agent, shall segregate it from the Pledgor's other property
and shall deliver it forthwith to the Agent in the exact form received, with any
necessary endorsement and/or appropriate stock powers duly executed in blank, to
be held by the Agent as Pledged Collateral and as further collateral security
for the Obligations.
4. Representations and Warranties. The Pledgor represents and warrants
as follows:
(a) The Pledgor is the legal and beneficial owner of the Pledged
Collateral free and clear of any lien, security interest or other charge or
encumbrance except for the security interest created by this Agreement and
except for the security interest in the Pledged Shares of Direct Insurance
Company pursuant to that certain Seventh Amended and Restated Pledge and
Security Agreement dated October 31, 2002, in favor of the Banks.
(b) Subject to the provisions of Chapters 10 and 11 of Title 56,
Tennessee Code Annotated, and similar statutes of the states of South Carolina,
Georgia, Louisiana and Mississippi, pertaining to notifications to and approvals
by the Tennessee Commissioner of Commerce and Insurance, and similar regulatory
officials in South Carolina, Georgia, Louisiana and Mississippi, required in the
case of mergers, acquisitions and changes of control of insurance companies,
held either directly or indirectly, and to prescribed waiting periods in
connection therewith, the exercise by the Agent of its rights and remedies
hereunder will not contravene any law or governmental regulation or any
contractual restriction binding on or affecting the Pledgor or any of Pledgor's
properties and will not result in or require the creation of any lien, security
interest or other charge or encumbrance upon or with respect to any of Pledgor's
properties.
(c) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required either
(i) for the pledge hereunder by the Pledgor of, or the grant by the Pledgor of
the security interest created hereby in, the Pledged Collateral or (ii) except
for the approval of the Tennessee Commissioner of Commerce and Insurance
provided in Tenn. Code ▇▇▇. ▇▇.▇▇. ▇▇-▇▇-▇▇▇ et seq.; and of similar officials
under applicable statutes of South Carolina, Georgia, Louisiana and Mississippi;
and except as may be required by laws affecting the offering and sale of
securities generally, for the exercise by the Agent of its rights and remedies
hereunder.
(d) This Agreement creates a valid security interest in favor of the
Agent, for the benefit of the Banks, in the Pledged Collateral. The taking
possession by the Agent of the certificates representing the Pledged Shares and
all other certificates, instruments and cash constituting Pledged Collateral
from time to time will perfect, and establish the first priority of, the Agent's
security interest hereunder in the Pledged Collateral securing the Obligations.
Except as set forth in this Section 4(d), no action is necessary or desirable to
perfect or otherwise protect such security interest.
(e) The Pledged Shares are identified in EXHIBIT "A" attached hereto
and incorporated herein by reference; all such shares have been duly authorized
and validly issued,
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are fully paid and non-assessable; and such shares constitute not less than one
hundred percent (100%) of the outstanding shares of common capital stock of each
of the Subsidiaries.
5. Covenants as to the Pledged Collateral. So long as any of the
Obligations shall remain outstanding, the Pledgor will, unless the Agent shall
otherwise consent in writing:
(a) permit the Agent, its agents or representatives, at any
reasonable time and from time to time to examine and make copies of and
abstracts from Pledgor's records concerning the Pledged Collateral;
(b) upon Agent's request, at Pledgor's expense, promptly
deliver to the Agent a copy of each notice or other communication
received by it in respect of the Pledged Collateral;
(c) at Pledgor's expense, defend the Agent's right, title and
security interest in and to the Pledged Collateral against the claims
of any person or entity;
(d) at Pledgor's expense, at any time and from time to time,
promptly execute and deliver all further instruments and documents and
take all further action that may be necessary or desirable or that the
Agent may request in order to (i) perfect and protect the security
interest created or purported to be created hereby; (ii) enable the
Agent to exercise and enforce its rights and remedies hereunder in
respect of the Pledged Collateral; or (iii) otherwise effect the
purposes of this Pledge Agreement;
(e) not sell, assign, exchange or otherwise dispose of any
Pledged Collateral or any interest therein; provided, however, that,
subject to the requirements of Section 12(j) hereof, Pledgor may
contribute the outstanding capital stock of any directly-owned
Subsidiary to the capital of any other of Pledgor's directly-owned
Subsidiaries, at which time the stock of such contributed Subsidiary
(the "Contributed Subsidiary") shall no longer be deemed Pledged
Shares; provided, further, Pledgor, acting through its directly-owned
Subsidiaries, will prevent the pledge of any Contributed Subsidiary's
stock to any lender other than to secure the Loan;
(f) not create or suffer to exist any lien, security interest
or other charge or encumbrance upon or with respect to any Pledged
Collateral except for the security interests referred to in Section
4(a) hereof;
(g) not make or consent to any amendment or other modification
or waiver with respect to any Pledged Collateral or enter into any
agreement or permit to exist any restriction with respect to any
Pledged Collateral;
(h) not take or fail to take any action which would in any
manner impair the value or enforceability of the Agent's security
interest in any Pledged Collateral;
(i) not permit the issuance by any Subsidiary of (i) any
additional shares of any class of capital stock, (ii) any debentures,
bonds or other securities of any nature, whether or not convertible
into or exchangeable for shares of capital stock, or (iii) any
warrants, options, contracts or other commitments entitling any person
or entity to purchase or otherwise acquire any such shares of capital
stock.
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6. Additional Provisions Concerning the Pledged Collateral. (a) The
Pledgor hereby agrees to take any action and to execute any instruments which
may be necessary or advisable to accomplish the purposes of this Agreement.
(b) The Pledgor hereby irrevocably appoints the Agent the
Pledgor's attorney-in-fact and proxy, with full authority in the place
and stead of the Pledgor and in the name of the Pledgor or otherwise,
after the occurrence of an Event of Default and in the Agent's
discretion, to take any action and to execute any instrument which the
Agent may deem necessary or advisable to accomplish the purposes of
this Agreement subject to the rights of the Pledgor under Section 6(e)
hereof, including, without limitation, to receive, endorse and collect
all instruments made payable to the Pledgor representing any dividend
or other distribution in respect of the Pledged Collateral or any part
thereof and to give full discharge for the same.
(c) If the Pledgor fails to perform any material agreement or
obligation contained herein, the Agent itself may perform, or cause
performance of, such agreement or obligation, and the expenses of the
Agent incurred in connection therewith shall be payable by the Pledgor
pursuant to Section 9 hereof.
(d) The Agent shall be deemed to have exercised reasonable
care in the custody and preservation of the Pledged Collateral in its
possession if the Pledged Collateral is accorded treatment
substantially equal to that which the Agent accords its own property,
it being understood that the Agent shall not have responsibility for
(i) ascertaining or taking action with respect to calls, options,
conversions, exchanges, maturities, tenders or other matters relating
to any Pledged Collateral, whether or not the Agent has or is deemed to
have knowledge of such matters, or (ii) taking any necessary steps to
preserve rights against any parties with respect to any Pledged
Collateral.
(e) Prior to the occurrence of an Event of Default (as defined
in Section 7 hereof):
(i) the Pledgor may exercise any and all voting and
other consensual rights and all options pertaining to the
Pledged Collateral or any part thereof for any purpose not
inconsistent with the terms of this Agreement;
(ii) the Pledgor may receive and retain any and all
dividends paid in respect of the Pledged Collateral; provided,
however, that any and all (A) dividends paid or payable other
than in cash in respect of, and instruments or other property
received, receivable or otherwise distributed in respect of or
in exchange for, any Pledged Collateral, (B) dividends or
other distributions paid or payable in cash in respect of any
Pledged Collateral in connection with a partial or total
liquidation or dissolution or in connection with a reduction
of capital, capital surplus or paid-in surplus, excluding,
however, subject to the requirements of Section 12(j) hereof,
any dividend (cash or in kind) paid to the Pledgor by an
insurance company Subsidiary of the Pledgor, followed by the
capital contribution (cash or in kind) by the Pledgor of an
amount equal to such dividend to another insurance Subsidiary
of the Pledgor, such that there is no net reduction in the
aggregate amount of the capital and surplus among all of the
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insurance Subsidiaries of the Pledgor on a consolidated
statutory accounting basis; and (C) cash paid, payable or
otherwise distributed in redemption of, or in exchange for,
any Pledged Collateral, shall be Pledged Collateral and shall,
if received by the Pledgor, be received in trust for the
benefit of the Agent, shall be segregated from the other
property or funds of the Pledgor, and shall be forthwith
delivered to the Agent in the exact form received with any
necessary endorsement and/or appropriate stock powers duly
executed in blank, to be held by the Agent as Pledged
Collateral and as security for the Obligations.
(f) Upon the occurrence of an Event of Default (as defined in
Section 7 hereof):
(i) all rights of the Pledgor to exercise the voting,
option and other consensual rights which it would otherwise be
entitled to exercise and to receive dividends which it would
otherwise be authorized to receive and retain pursuant to
subsection (e) of this Section 6 shall, at Agent's option,
cease, and all such rights shall thereupon become vested in
the Agent which shall have the sole right to exercise such
voting, option and other consensual rights and to receive and
retain such dividends (and Pledgor covenants and agrees
thereupon, if requested by Agent, to deliver to Agent
irrevocable proxies with respect to the Pledged Collateral in
confirmation of Agent's rights hereunder);
(ii) without limiting the generality of the
foregoing, (A) any or all of the Pledged Collateral held by
the Agent hereunder, at the option of the Agent, may be
registered in the name of the Agent or its nominee, and (B)
the Agent at its option may exercise any and all rights of
conversion, exchange, subscription or any other rights,
privileges or options pertaining to any of the Pledged
Collateral as if it were the absolute owner thereof,
including, without limitation, the right to exchange, in its
discretion, any and all of the Pledged Collateral upon the
merger, consolidation, reorganization, recapitalization or
other adjustment of any of the Subsidiaries, or upon the
exercise by Pledgor or any of the Subsidiaries of any right,
privilege or option pertaining to any Pledged Collateral, and,
in connection therewith, to deposit and deliver any and all of
the Pledged Collateral with any committee, depository,
transfer agent, registrar or other designated agent upon such
terms and conditions as it may determine; and
(iii) all dividends which are received by the Pledgor
contrary to the provisions of this Section 6(f) shall be
received in trust for the benefit of the Agent, shall be
segregated from other funds of the Pledgor, and shall be
forthwith paid over to the Agent in the exact form received.
7. Events of Default. An Event of Default shall be deemed to have
occurred hereunder upon the occurrence of a failure or default in the full,
faithful and prompt payment or performance of any one or more of the
Obligations, after any applicable notice and cure period, and shall include, but
shall not be limited to:
(a) Any default in the full or prompt payment when due of all
or any part of any indebtedness constituting part of the Obligations
hereunder; or
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(b) The occurrence of an Event of Default as defined in the
Loan Agreement;
(c) Any default by Pledgor in the full, faithful and prompt
payment or performance of any covenant, agreement, liability,
obligation, condition or undertaking on Pledgor's part to be paid, met,
kept, observed or performed pursuant to the provisions hereof, or of
any other instrument or document now or hereafter constituting or
securing all or any part of the Obligations; or
(d) Any default in the payment or performance of any other
indebtedness, obligation or undertaking of the Pledgor to the Agent; or
(e) Any representation or warranty by Pledgor set out herein
or in any other instrument or document executed by Pledgor in
connection herewith shall prove to be false or misleading in any
material respect as of the time made.
8. Remedies Upon Default. Upon the occurrence of an Event of Default:
(a) The Agent may (i) exercise in respect of the Pledged
Collateral, in addition to other rights and remedies provided for
herein or otherwise available to it, all of the rights and remedies of
a secured party on default under the Uniform Commercial Code in effect
in the State of Tennessee (the "Code"); and (ii) without limiting the
generality of the foregoing and without notice except as specified
below, sell the Pledged Collateral or any part thereof in one or more
parcels at public or private sale, at any exchange or broker's board or
elsewhere, at such price or prices and on such other terms as the Agent
may deem commercially reasonable, for cash or on credit or for future
delivery. The Pledgor agrees that at least ten (10) days' notice to the
Pledgor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable
notification. The Agent shall not be obligated to make any sale of
Pledged Collateral regardless of notice of sale having been given. The
Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was
so adjourned. Notwithstanding anything herein to the contrary, the
Pledgor recognizes that the Agent may deem it impracticable to effect a
public sale of all or any part of the Pledged Shares or any other
securities constituting Pledged Collateral and that the Agent may,
therefore, determine to make one or more private sales of any such
securities to a restricted group of purchasers who will be obligated to
agree, among other things, to acquire such securities for their own
account, for investment and not with a view to the distribution or
resale thereof. The Pledgor acknowledges that any such private sale may
be at prices and on terms less favorable to the seller than the prices
and other terms which might have been obtained at a public sale and,
notwithstanding the foregoing, agrees that the Agent shall have no
obligation to delay sale of any such securities for the period of time
necessary to permit the issuer of such securities to register such
securities for public sale under the Securities Act of 1933, as amended
(the "Securities Act"). A sale so conducted shall not be deemed to be
commercially unreasonable, within the meaning of the Code, by virtue of
the failure to register such securities or to offer them publicly in
the manner permitted only with respect to registered securities. The
Pledgor further acknowledges and agrees that any offer to sell
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such securities which has been (i) publicly advertised on a bona fide
basis in a newspaper or other publication of general circulation in
Memphis, Tennessee, and in the regional edition of The Wall Street
Journal distributed in Memphis, Tennessee (to the extent that such an
offer may be so advertised without prior registration under the
Securities Act), or (ii) made privately in the manner described above
to not less than six (6) bona fide offerees shall be deemed to involve
a "public sale" for the purposes of Section 47-9-610 of the Code (or
any successor or similar applicable statutory provision) as then in
effect, notwithstanding that such sale may not constitute a "public
offering" under the Securities Act, and that the Agent may, in such
event, bid for the purchase of such securities.
(b) Any cash held by the Agent as Pledged Collateral and all
cash proceeds received by the Agent in respect of any sale of,
collection from, or other realization upon, all or any part of the
Pledged Collateral may, in the discretion of the Agent, be held by the
Agent as collateral for, and/or then or at any time thereafter applied
(after payment of any amounts payable to the Agent pursuant to Section
9 hereof) in whole or in part by the Agent against, all or any part of
the Obligations in such order as the Agent shall elect. Any surplus of
such cash or cash proceeds held by the Agent and remaining after
payment in full of all of the Obligations shall be paid over to the
Pledgor or to whomsoever may be lawfully entitled to receive such
surplus.
(c) In the event that the proceeds of any such sale,
collection or realization are insufficient to pay all amounts to which
the Banks are legally entitled, the Pledgor shall be liable for the
deficiency, together with interest thereon at the highest rate
specified in the Notes for interest on overdue principal thereof,
together with the costs of collection and the reasonable fees of any
attorneys employed by the Agent to collect such deficiency.
9. Indemnity and Expenses. (a) The Pledgor agrees to indemnify the
Agent from and against any and all claims, losses and liabilities growing out of
or resulting from this Agreement (including, without limitation, enforcement of
this Agreement), except claims, losses or liabilities resulting from the Agent's
negligence or willful misconduct.
(b) The Pledgor will upon demand and after notice pay to the Agent the
amount of any and all reasonable expenses, including the reasonable fees and
disbursements of the Agent's counsel and of any experts and agents, which the
Agent may incur in connection with (i) the preparation and administration of
this Agreement, the Notes and the other instruments and documents executed in
connection therewith; (ii) the custody, preservation, use or operation of, or
the sale of, collection from, or other realization upon, any Pledged Collateral;
(iii) the failure by the Pledgor to perform or observe any of the provisions
hereof, except expenses resulting from the Agent's gross negligence or willful
misconduct or (iv) the exercise or enforcement of any of the rights of the Agent
hereunder.
10. Notices, Etc. All notices and other communications provided for
hereunder shall be in writing and shall be mailed, certified mail, return
receipt requested, or delivered by nationally recognized express courier
service, marked for next-day delivery, if to the Pledgor, to Pledgor at ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Chief Financial
Officer; with a copy (if other than a routine informational communication) to
▇▇▇▇▇, ▇▇▇▇▇▇▇ &
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▇▇▇▇▇, LLP, ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention:
▇▇▇▇ ▇▇▇▇▇▇▇▇; if to the Agent, to it at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attention: Metropolitan Division, with a copy to Baker, Donelson, Bearman
& ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention:
Finance and Real Estate Group; or as to either such person at such other address
as shall be designated by such person in a written notice to such other person
complying as to delivery with the terms of this Section 10. All such notices and
other communications shall be effective (i) if mailed, when received or three
(3) business days after mailing, whichever is earlier; or (ii) if delivered by
express courier service, upon the date scheduled for delivery.
11. Security Interest Absolute. All rights of the Agent, all security
interests and all obligations of the Pledgor hereunder shall be absolute and
unconditional irrespective of:
(a) any lack of validity or enforceability of any of the Notes
or any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or
in any other term in respect of, all or any of the Obligations, or any
other amendment or waiver of or consent to any departure from this
Agreement, the Loan Agreement, the Notes, or any other agreement or
instrument relating thereto or to any of the Obligations;
(c) any increase in, addition to, or exchange, release or
non-perfection of, any other collateral, or any release or amendment or
waiver of or consent to departure from any guaranty, for all or any of
the Obligations;
(d) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Pledgor or any other party
liable, directly or indirectly, absolutely or contingently, with
respect to all or any part of the Obligations; or
(e) the absence of any action on the part of the Agent to
obtain payment or performance of the Obligations from any person or
entity.
12. Miscellaneous. (a) No amendment or waiver of any provision of this
Agreement, and no consent to any departure by the Pledgor therefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Agent and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
(b) No failure on the part of the Agent to exercise, and no delay in
exercising, any right hereunder or under the Notes or the Loan Agreement shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right preclude any other or further exercise thereof or the exercise of any
other right. The Agent's rights and remedies provided herein and in any other
instrument or document now or hereafter securing all or any part of the
Obligations are cumulative and are in addition to, and not exclusive of, any
rights or remedies provided by law.
(c) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or invalidity without invalidating the
remaining portions hereof or thereof or affecting the validity or enforceability
of such provision in any other jurisdiction.
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(d) This Agreement shall be binding on the Pledgor and Pledgor's
successors and permitted assigns and shall inure, together with all rights and
remedies of the Agent hereunder, to the benefit of the Agent and its successors,
transferees and assigns. Without limiting the generality of the foregoing, the
Agent may assign or otherwise transfer all or part of its rights to all or any
part of the Obligations to any other person or entity, and such other person or
entity shall thereupon become vested with all of the benefits in respect thereof
granted to the Agent herein or otherwise. None of the rights or obligations of
the Pledgor hereunder may be assigned or otherwise transferred without the prior
written consent of the Agent.
(e) Upon payment and satisfaction in full of the Obligations, this
Agreement and the security interest created hereby shall terminate and all
rights to the Pledged Collateral shall revert to the Pledgor. The Agent will
thereupon, at Pledgor's request and expense, (i) return to the Pledgor such of
the Pledged Collateral as shall not have been sold or otherwise disposed of or
applied pursuant to the terms hereof; and (ii) execute and deliver to the
Pledgor such documents as the Pledgor shall reasonably request to evidence such
termination.
(f) This Agreement shall be governed by and construed in accordance
with the laws of the State of Tennessee.
(g) The captions or headings of the Sections of this Agreement are
inserted merely for convenience of reference and shall not be deemed to limit or
modify the terms and provisions hereof.
(h) Any payment of principal and/or interest on any of the Obligations
shall toll any statute of limitations which would otherwise be applicable.
(i) If any provision hereof is in conflict with any provisions of the
Loan Agreement, the provisions of the Loan Agreement shall control.
(j) This Third Amended and Restated Pledge and Security Agreement
supersedes and replaces that certain Pledge and Security Agreement dated October
3, 1996, that certain First Amended and Restated Pledge and Security Agreement
dated as of July 31, 1998, and that certain Second Amended and Restated Pledge
and Security Agreement dated September 8, 1999.
(k) Pledgor agrees that, prior to (i) the contribution of capital stock
of one directly-owned Subsidiary to that of another as permitted by Section 5(e)
hereof and (ii) the exclusion of insurance subsidiary dividends paid to Pledgor
for contribution to another insurance subsidiary from the requirement set forth
in Section 6(e)(ii)(B) that certain dividends be held in trust for Agent prior
to occurrence of an Event of Default, Pledgor shall submit to Agent an Officer's
Certificate in the form attached hereto as EXHIBIT "B."
IN WITNESS WHEREOF, the Pledgor has caused this Agreement to be
executed and delivered by its officers thereunto duly authorized as of the date
first above written.
DIRECT GENERAL CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
Title: Senior Vice President
-----------------------------------
10
EXHIBIT "A"
Pledged Shares
1. Sixteen thousand seven hundred ninety-four and one-half (16,794.5)
shares of the common capital stock of DIRECT INSURANCE COMPANY, a Tennessee
corporation, registered on the stock records of such corporation in the name of
DIRECT GENERAL CORPORATION, represented by Certificate No. 87.
2. Six thousand (6,000) shares of the common capital stock of DIRECT
GENERAL INSURANCE AGENCY, INC., a Tennessee corporation, registered on the stock
records of such corporation in the name of DIRECT GENERAL CORPORATION,
represented by Certificate No. 15.
3. One thousand (1,000) shares of the common capital stock of DIRECT
GENERAL FINANCIAL SERVICES, INC., a Tennessee corporation, registered on the
stock records of such corporation in the name of DIRECT GENERAL CORPORATION,
represented by Certificate No. 1.
4. One hundred (100) shares of the common capital stock of DIRECT
GENERAL INSURANCE AGENCY, INC., an Arkansas corporation, registered on the stock
records of such corporation in the name of DIRECT GENERAL CORPORATION,
represented by Certificate No. 1.
5. One hundred (100) shares of the common capital stock of DIRECT
GENERAL INSURANCE AGENCY, INC., a Mississippi corporation, registered on the
stock records of such corporation in the name of DIRECT GENERAL CORPORATION,
represented by Certificate No. 1.
6. One hundred (100) shares of the common capital stock of DIRECT
GENERAL INSURANCE AGENCY OF LOUISIANA, INC., a Louisiana corporation, registered
on the stock records of such corporation in the name of DIRECT GENERAL
CORPORATION, represented by Certificate No. 3.
7. One thousand (1,000) shares of the common capital stock of DIRECT
GENERAL AGENCY OF KENTUCKY, INC., a Kentucky corporation, registered on the
stock records of such corporation in the name of DIRECT GENERAL CORPORATION,
represented by Certificate No. 1.
8. One thousand (1,000) shares of the common capital stock of DIRECT
ADJUSTING COMPANY, INC., a Tennessee corporation, registered on the stock
records of such corporation in the name of DIRECT GENERAL CORPORATION,
represented by Certificate No. 1.
9. One thousand (1,000) shares of the common capital stock of DIRECT
ADMINISTRATION, INC., a Tennessee corporation, registered on the stock records
of such
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corporation in the name of DIRECT GENERAL CORPORATION, represented by
Certificate No. 1.
10. 180,000 shares of the common capital stock of DIRECT GENERAL
INSURANCE COMPANY, a South Carolina corporation (formerly a Tennessee
corporation), registered on the stock records of such corporation in the name of
DIRECT GENERAL CORPORATION, represented by Certificate No. 008.
11. 12,000 shares of the common capital stock of DIRECT GENERAL
INSURANCE COMPANY OF MISSISSIPPI, a Mississippi corporation, registered on the
stock records of such corporation in the name of DIRECT GENERAL CORPORATION,
represented by Certificate No. 2.
12. 10,000 shares of the common capital stock of DIRECT GENERAL
INSURANCE AGENCY, INC., a Texas corporation (f/k/a Bright General Agency, Inc.),
registered on the stock records of such corporation in the name of DIRECT
GENERAL CORPORATION, represented by Certificate No. 86.
13. One thousand (1,000) shares of the common capital stock of DIRECT
GENERAL CONSUMER PRODUCTS, INC., a Tennessee corporation, registered on the
stock records of such corporation in the name of DIRECT GENERAL CORPORATION,
represented by Certificate No. 1.
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FIRST AMENDMENT
TO
THIRD AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT
THIS AMENDMENT is made and entered into as of the 1st day of December,
2002, by and between DIRECT GENERAL CORPORATION, a Tennessee corporation, whose
address is ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Pledgor"),
and FIRST TENNESSEE BANK NATIONAL ASSOCIATION, whose address is ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Metropolitan Division (the
"Agent"), as agent for itself as lender (in such capacity, "FTBNA") and for
HIBERNIA NATIONAL BANK, Baton Rouge, Louisiana ("Hibernia") pursuant to the Loan
Agreement (hereinafter defined) (FTBNA and Hibernia may be referred to
hereinafter as the "Banks").
RECITALS OF FACT
Pursuant to the terms and provisions of that certain Third Amended and
Restated Loan Agreement dated as of October 31, 2002, among Direct General
Corporation ("DGC"), Grantor, Agent and Banks (the "Loan Agreement"), the Banks
committed to make loans to DGC as borrower thereunder (the "Loan"), in the
aggregate principal amount of Seven Million Five Hundred Thousand Dollars
($7,500,000.00). The Loan is secured by that Third Amended and Restated Pledge
and Security Agreement also dated as of October 31, 2002 (the "Pledge
Agreement").
Pursuant to the terms and provisions of that certain Loan Agreement of
even date herewith, among DGC, Grantor and FTBNA (the "New Loan Agreement"),
FTBNA committed to make loans to DGC as borrower thereunder (the "New Loan"), in
the principal amount of Two Million Seven Hundred Thousand Dollars
($2,700,000.00).
The parties have agreed that the New Loan shall also be secured on a
parity basis by the Pledge Agreement and desire to amend the Pledge Agreement as
set forth herein.
NOW, THEREFORE, for and in consideration of the premises, as set forth
in the Recitals of Fact, and other good and valuable considerations, the receipt
and sufficiency of which are hereby acknowledged, it is agreed by the parties as
follows:
AGREEMENTS
1. REPRESENTATIONS, WARRANTIES AND COVENANTS. To induce the Banks to
enter into this Amendment, the Grantor hereby absolutely and unconditionally,
jointly and severally, certifies, represents and warrants to the Banks, and
covenants and agrees with the Banks, that:
All representations and warranties made by the Grantor in the Pledge
Agreement, as amended hereby (as so amended, the "Pledge Agreement"), are true,
correct and complete in all material respects as of the date of this Amendment.
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 an Event of
Default under the Pledge Agreement.
2. AMENDMENTS TO THE SECURITY AGREEMENT. The parties hereto agree to
amend the Security Agreement as follows:
(a) Section 2 of the Pledge Agreement, Security for Obligations, is
deleted in its entirety and the following inserted in lieu thereof:
2. Security for Obligations. The security interest created
hereby in the Pledged Collateral constitutes continuing collateral
security for all of the following obligations, whether now existing or
hereafter incurred (the "Obligations"):
(a) The full and prompt payment, when due, of the indebtedness
(and interest thereon) evidenced and to be evidenced by:
(i) that certain Third Restated Note (the "FTBNA Note") dated
as of October 31, 2002, in the principal sum of Three Million Seven
Hundred Fifty Thousand Dollars ($3,750,000.00), executed by Pledgor and
payable to the order of FTBNA;
(ii) that certain Third Restated Note (the "Hibernia Note")
dated as of October 31, 2002, in the principal sum of Three Million
Seven Hundred Fifty Thousand Dollars ($3,750,000.00), executed by
Pledgor and payable to the order of Hibernia; and
(iii) that certain Promissory Note (the "New Note") dated as
of December 1, 2002, in the principal sum of Two Million Seven Hundred
Thousand Dollars ($2,700,000.00), executed by Pledgor and payable to
the order of FTBNA (the FTBNA Note, Hibernia Note and New Note being
collectively referred to herein as the "Notes");
together with and any and all renewals, modifications, and extensions
of any of said notes, in whole or in part; and
(b) The due performance and observance by the Pledgor of all
of its covenants, agreements, representations, liabilities,
obligations, and undertakings as set forth herein, or in that certain
Third Amended and Restated Loan Agreement (the "Third Loan Agreement")
dated as of October 31, 2002, among Pledgor, the Agent, the Banks and
certain Guarantors therein named (as the same may be modified, renewed
or extended from time to time), and in that certain Loan Agreement
dated as of December 1, 2002, among Pledgor, the Agent and certain
Guarantors therein named (as the same may be modified, renewed or
extended from time to time) (the "New Loan Agreement" and the Third
Loan Agreement and the New Loan Agreement being referred to
collectively as the "Loan Agreement") and in any other instrument or
document which now or at any time hereafter evidences or secures, in
whole or in part, all or any part of the Obligations hereby secured.
(b) Subsection b of Section 8, Remedies Upon Default, is deleted in its
entirety and the following inserted in lieu thereof:
(b) Any cash held by the Agent as Pledged Collateral and all
cash proceeds received by the Agent in respect of any sale of,
collection from, or other realization upon, all or any part of the
Pledged Collateral may, in the discretion of the Agent, be held by the
Agent as collateral for, and/or then or at any time thereafter applied
(after payment of any amounts payable to the Agent pursuant to Section
9 hereof) in whole or in part by the Agent against, all or any part of
the Obligations in a pro-rata manner, based upon the amounts owed under
the Notes, in such order as
2
the Agent shall elect. Any surplus of such cash or cash proceeds held
by the Agent and remaining after payment in full of all of the
Obligations shall be paid over to the Pledgor or to whomsoever may be
lawfully entitled to receive such surplus.
3. CHOICE OF LAW. This Amendment shall be governed and construed in
accordance with the laws of the State of Tennessee.
4. COUNTERPART EXECUTION. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same document. Signature pages may be
detached from the counterparts and attached to a single copy of this Amendment
to physically form one document.
[SEPARATE SIGNATURE PAGES FOLLOW]
3
SIGNATURE PAGE
TO
FIRST AMENDMENT TO THIRD AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT
================================================================================
IN WITNESS WHEREOF, Grantor has caused this Amendment to be executed by
its officer, duly authorized so to do, all as of the day and year first above
written.
PLEDGOR:
DIRECT GENERAL CORPORATION,
a Tennessee corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
Title: Senior Vice President
-----------------------------------
AGENT:
FIRST TENNESSEE BANK NATIONAL ASSOCIATION
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
Title: Senior Vice President
-----------------------------------
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