SEVENTH AMENDMENT TO SEVENTH AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT
THIS SEVENTH AMENDMENT TO SEVENTH AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT (the
“Amendment”) made and entered into as of the 30th day of June, 2006, by and among DIRECT GENERAL
CORPORATION, a Tennessee corporation (the “Pledgor”), and FIRST TENNESSEE BANK NATIONAL
ASSOCIATION, whose address is 000 Xxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxx 00000, Attention:
Metropolitan Division (in its agency capacity being herein referred to as “Agent,” and in its
individual capacity as “FTBNA”), as agent for itself, and for CAPITAL ONE BANK, N.A. (successor by
merger to Hibernia National Bank), Baton Rouge, Louisiana (“Capital One”), and for U. S. BANK
NATIONAL ASSOCIATION, St. Louis, Missouri (“U. S. Bank”), and for REGIONS BANK, Birmingham, Alabama
(“Regions”), and for CAROLINA FIRST BANK, Greenville, South Carolina (“Carolina First”), and for
JPMORGAN CHASE BANK, N.A. [successor by merger to Bank One, N.A. (main office — Chicago,
Illinois)], Baton Rouge, Louisiana (“JPMorgan”), and for NATIONAL CITY BANK OF KENTUCKY,
Louisville, Kentucky (“National City Bank”), and for FIFTH THIRD BANK, N.A. (Tennessee), Franklin,
Tennessee (“Fifth Third”), and for MIDFIRST BANK, Oklahoma City, Oklahoma (“MidFirst”) (FTBNA,
Capital One, U. S. Bank, Regions, Carolina First and JPMorgan collectively, the “Original Banks”)
(the Original Banks, Fifth Third, National City Bank, and MidFirst collectively, the “Banks” and
individually, a “Bank”).
Recitals of Fact
Pursuant to that certain Seventh Amended and Restated Pledge and Security Agreement dated as
of October 31, 2002 (the “Original Pledge Agreement”), Pledgor pledged a second lien security
interest in all of the stock in the Agency Subsidiaries and Affiliated Insurers (as those terms are
defined in the Eighth Amended and Restated Loan Agreement dated as of October 31, 2002, as amended,
referred to hereafter as the “Loan Agreement”) to the Agent for the benefit of the Original Banks
as security for all of Pledgor’s obligations under the Eighth Amended and Restated Guaranty
Agreement dated October 31, 2002 (the “Eighth Guaranty”).
Pursuant to that certain First Amendment to Seventh Amended and Restated Pledge and Security
Agreement dated as of March 31, 2003 (the “First Amendment”), Pledgor pledged a second lien
security interest in all of the stock in the Agency Subsidiaries and Affiliated Insurers (as those
terms are defined in the Loan Agreement) to the Agent for the benefit of the Original Banks as
security for all of Pledgor’s obligations under the Ninth Amended and Restated Guaranty Agreement
dated March 31, 2003 (the “Ninth Guaranty”).
Pursuant to that certain Second Amendment to Seventh Amended and Restated Pledge and Security
Agreement dated as of May 28, 2003 (the “Second Amendment”), Pledgor pledged a second lien security
interest in all of the stock in the Agency Subsidiaries and Affiliated Insurers (as those terms are
defined in the Loan Agreement) to the Agent for the benefit of the
Original Banks and National City Bank as security for all of Pledgor’s obligations under the
Tenth Amended and Restated Guaranty Agreement dated May 28, 2003 (the “Tenth Guaranty”).
Pursuant to that certain Third Amendment to Seventh Amended and Restated Pledge and Security
Agreement dated as of June 30, 2003 (the “Third Amendment”), Pledgor pledged a second lien security
interest in all of the stock in the Agency Subsidiaries and Affiliated Insurers (as those terms are
defined in the Loan Agreement) to the Agent for the benefit of the Banks as security for all of
Pledgor’s obligations under the Eleventh Amended and Restated Guaranty Agreement dated June 30,
2003 (the “Eleventh Guaranty”).
Pursuant to that certain Fourth Amendment to Seventh Amended and Restated Pledge and Security
Agreement dated as of November 26, 2003 (the “Fourth Amendment”), Pledgor pledged a second lien
security interest in all of the stock of the Agency Subsidiaries and Affiliated Insurers (as those
terms are defined in the Loan Agreement) to the Agent for the benefit of the Banks as security for
all of Pledgor’s obligations under the Twelfth Amended and Restated Guaranty Agreement dated
November 26, 2003 (the “Twelfth Guaranty”).
Pursuant to that certain Fifth Amendment to Seventh Amended and Restated Pledge and Security
Agreement dated as of June 30, 2004 (the “Fifth Amendment”), Pledgor pledged a second lien security
interest in all of the stock in the Agency Subsidiaries and Affiliated Insurers (as those terms are
defined in the Loan Agreement) to the Agent for the benefit of the Banks as security for all of
Pledgor’s obligations under the Thirteenth Amended and Restated Guaranty Agreement dated June 30,
2004 (the “Thirteenth Guaranty”).
Pursuant to that certain Sixth Amendment to Seventh Amended and Restated Pledge and Security
Agreement dated as of December 3, 2004 (the “Sixth Amendment”; the Original Pledge Agreement, as
amended, the First Amendment, the Second Amendment, the Third Amendment, the Fourth Amendment, the
Fifth Amendment, and the Sixth Amendment being collectively referred to hereinafter as the “Pledge
Agreement”), Pledgor pledged a second lien security interest in all of the stock of the Agency
Subsidiaries and Affiliated Insurers (as those terms are defined in the Loan Agreement) to the
Agent for the benefit of the Banks as security for all of Pledgor’s obligations under the
Fourteenth Amended and Restated Guaranty Agreement dated December 3, 2004 (the “Fourteenth
Guaranty”).
Pledgor is entering into a Fifteenth Amended and Restated Guaranty Agreement of even date
herewith (the “Fifteenth Guaranty”), which Fifteenth Guaranty replaces the Fourteenth Guaranty.
The Pledgor and the Banks now desire to modify certain terms of the Pledge Agreement as
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises as set forth in the Recitals of Fact, the
mutual covenants and agreements hereinafter set out, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, it is agreed by the parties as follows:
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Agreements
1. All capitalized terms used and not defined herein shall have the meaning ascribed to them
in the Loan Agreement.
2. To induce the Banks to enter into this Amendment, the Pledgor does hereby absolutely and
unconditionally, certify, represent and warrant to the Banks, and covenants and agrees with the
Banks, that:
(a) All representations and warranties made by the Pledgor in the Loan Agreement, as
amended, in the Pledge Agreement, as amended, in the Security Agreement, as amended, and in
all other loan documents (all of which are herein sometimes called the “Loan Documents”),
are true, correct and complete in all material respects as of the date of this Amendment.
(b) As of the date hereof and with the execution of this Amendment, there are no
existing events, circumstances or conditions which constitute, or would, with the giving of
notice, lapse of time, or both, constitute Events of Default.
(c) There are no existing offsets, defenses or counterclaims to the obligations of the
Pledgor, as set forth in the Pledge Agreement, as amended, the Security Agreement, as
amended, the Loan Agreement, as amended, or in any other Loan Document executed by the
Borrower, in connection with the Loan.
(d) The Pledgor does not have any existing claim for damages against the Banks arising
out of or related to the Loan; and, if and to the extent (if any) that the Borrower has or
may have any such existing claim (whether known or unknown), the Borrower does hereby
forever release and discharge, in all respects, the Banks with respect to such claim.
(e) The Loan Documents, as amended by this Amendment, are valid, genuine, enforceable
in accordance with their respective terms, and in full force and effect.
3. Section 2(a) of the Pledge Agreement, is hereby deleted in its entirety and the following
is inserted in lieu thereof:
(a) the prompt payment by the Pledgor, as and when due and payable, of
all amounts from time to time owing under or pursuant to that certain Fifteenth
Amended and Restated Guaranty Agreement (the “Guaranty Agreement”) dated as of June
30, 2006, pursuant to which Pledgor has guaranteed the indebtednesses of Direct
General Financial Services, Inc., a Tennessee corporation and Direct General Premium
Finance Company, a Tennessee corporation (collectively, the “Borrower”), to FTBNA,
Capital One Bank, N.A. (“Capital One”), U.S. Bank, Regions, Carolina First, Fifth
Third, National City Bank, JPMorgan Chase Bank, N.A. (“JPMorgan”), and MidFirst
Bank, Oklahoma City, Oklahoma (“MidFirst”), which indebtednesses are evidenced by
(i) Borrower’s promissory note dated as of June 30, 2006, to FTBNA in the maximum
principal amount of Forty Million Dollars ($40,000,000.00); (ii) Borrower’s
promissory note dated as of June 30, 2006, to FTBNA in the maximum principal amount
of Thirty Million Dollars ($30,000,000.00) (evidencing a swing line loan which is a
portion of the $40,000,000.00 loan from FTBNA); (iii) Borrower’s promissory note
dated as of June 30, 2006, to Capital One in
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the maximum principal amount of Twenty-Five Million Dollars ($25,000,000.00);
(iv) Borrower’s promissory note dated as of June 30, 2006, to U.S. Bank in the
maximum principal amount of Thirty Million Dollars ($30,000,000.00); (v) Borrower’s
promissory note dated as of June 30, 2006, to Regions in the maximum principal
amount of Thirty Million Dollars ($30,000,000.00); (vi) Borrower’s promissory note
dated as of June 30, 2006, to Carolina First in the maximum principal amount of
Twenty Million Dollars ($20,000,000.00); (vii) Borrower’s promissory note dated as
of June 30, 2006, to National City Bank in the maximum principal amount of Twenty
Million Dollars ($20,000,000.00); (viii) Borrower’s promissory note dated as of June
30, 2006, to Fifth Third in the maximum principal amount of Fifteen Million Dollars
($15,000,000.00); (ix) Borrower’s promissory note dated as of June 30, 2006, to
JPMorgan in the maximum principal amount of Thirty-Five Million Dollars
($35,000,000.00); and (x) Borrower’s promissory note dated as of June 30, 2006, to
MidFirst Bank in the maximum principal amount of Ten Million Dollars
($10,000,000.00) [the ten (10) promissory notes herein described being collectively
referred to as the “Notes,” and FTBNA, Capital One, U.S. Bank, Regions, Carolina
First, National City Bank, Fifth Third, JPMorgan and MidFirst Bank being
collectively referred to as the “Banks” and
4. Section 2(b) of the Pledge Agreement, is hereby deleted in its entirety and the
following is inserted in lieu thereof:
(b) the due performance and observance by the Pledgor of all of the
Pledgor’s covenants, agreements, duties, representations and obligations from time
to time existing pursuant to this Agreement and that certain Eighth Amended and
Restated Loan Agreement dated October 21, 2002, as amended by that certain First
Amendment to Eighth Amended and Restated Loan Agreement dated as of March 31, 2003,
as amended by that certain Second Amendment to Eighth Amended and Restated Loan
Agreement dated as of May 28, 2003, as amended by that certain Third Amendment to
Eighth Amended and Restated Loan Agreement dated as of June 30, 2003, as amended by
that certain Fourth Amendment to Eighth Amended and Restated Loan Agreement dated on
or about July 17, 2003, as amended by that certain Fifth Amendment to Eighth Amended
and Restated Loan Agreement dated as of November 26, 2003, as amended by that
certain Sixth Amendment to Eighth Amended and Restated Loan Agreement dated as of
June 30, 2004, and as amended by that certain Seventh Amendment to Eighth Amended
and Restated Loan Agreement dated as of June 30, 2006 (as amended, the “Loan
Agreement”), among Pledgor, Borrower, Agent, the Banks and others; and in any other
instrument which now or hereafter secures the Guaranty Agreement.
5. All terms and provisions of the Pledge Agreement, as heretofore amended, which are
inconsistent with the provisions of this Amendment are hereby modified and amended to conform
hereto; and, as so modified and amended, the Pledge Agreement is hereby ratified, approved and
confirmed. Except as otherwise may be expressly provided herein, this Amendment shall become
effective as of the date set forth in the initial paragraph hereof.
6. All references in all Loan Documents (including, but not limited to, the Pledge Agreement,
the Security Agreement, and the Loan Agreement) to the “Pledge Agreement” shall, except as the
context may otherwise require, be deemed to constitute references to the Pledge Agreement as
amended hereby.
[SEPARATE SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the Pledgor, the Banks and the Agent have caused this Agreement to be
executed by their duly authorized officers, all as of the day and year first above written.
| PLEDGOR: DIRECT GENERAL CORPORATION, a Tennessee corporation |
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| By: | /s/ Xxxxxxx X. Xxxxxx | |||
| Xxxxxxx X. Xxxxxx, Senior Vice-President | ||||
| BANKS: FIRST TENNESSEE BANK NATIONAL ASSOCIATION |
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| By: | /s/ Xxx Xxxxxxx | |||
| Title: | Senior Vice President | |||
| CAPITAL ONE BANK, N.A. |
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| By: | /s/ Xxxxx X. Rack | |||
| Title: | Senior Vice President | |||
| U. S. BANK NATIONAL ASSOCIATION |
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| By: | /s/ Xxxx Xxxxxxxx | |||
| Title: | Assistant Vice President | |||
| CAROLINA FIRST BANK |
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| By: | /s/ Xxxxxxx X. Xxxxxxxxxxx | |||
| Title: | Executive Vice President | |||
[SIGNATURE PAGE CONTINUED]
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| JPMORGAN CHASE BANK, NA |
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| By: | /s/ /Xxxxxx X. Xxxx | |||
| Title: | Senior Vice President | |||
| REGIONS BANK |
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| By: | /s/ Xxxxxx Xxxxxx | |||
| Title: | Senior Vice President | |||
| NATIONAL CITY BANK OF KENTUCKY |
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| By: | /s/ Xxxxx X. Xxxxxxxx | |||
| Title: | Senior Vice President | |||
| FIFTH THIRD BANK, N.A. (Tennessee) |
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| By: | /s/ Xxxxxx X. Xxxxxxxx | |||
| Title: | Corporate Officer | |||
| MIDFIRST BANK |
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| By: | /s/ Xxxxx X. Xxxxxx | |||
| Title: | Vice President | |||
| AGENT: FIRST TENNESSEE BANK NATIONAL ASSOCIATION |
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| By: | /s/ Xxx Xxxxxxx | |||
| Title: | Senior Vice President | |||
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