Exhibit 7.2
SECURITIES ACCOUNT PLEDGE AGREEMENT
This SECURITIES ACCOUNT PLEDGE AGREEMENT ("Agreement") is dated as of
September 6, 2002, by and between XXXXXXX X. XXXXXXX, an individual residing at
00 Xxxxxxx Xxxx Xxxxx -- Xxxxxxxxxxx, XX 00000 (the "Pledgor"), and COMMERCE
BANK, N.A., a national banking association (the "Pledgee"). Terms initially
capitalized and used herein which are not otherwise defined herein shall have
the meanings given them in the Loan Agreement referred to below.
W I T N E S S E T H T H A T :
WHEREAS, pursuant to the Loan Agreement between Pledgor and Pledgee, dated
as of even date herewith (as such agreement may be amended, modified,
supplemented or restated from time to time, the "Loan Agreement"), the Pledgee
has required collateral to secure Pledgor's duties and obligations under the
Loan Agreement (the "Obligations");
WHEREAS, Pledgor is the owner of certain marketable securities of State
Auto Financial Corporation ("State Auto") in a securities account within the
meaning of Section 8-501 of the UCC (as hereinafter defined) (Account No.
62B068100) in the name of Pledgor, in the custody of COMMERCE TRUST COMPANY (the
"Account"), as a securities intermediary as defined in Section 8-102 of the UCC
(the "Custodian"). "UCC" as used herein means the Uniform Commercial Code as in
effect in the State of Illinois as of the date hereof, as the same may from time
to time be amended or modified;
WHEREAS, the Pledgee is willing to accept the pledge of the Account as
security for the Obligations.
NOW, THEREFORE, for and in consideration of the foregoing and of any
financial accommodations or extensions of credit heretofore, now or hereafter
made to or for the benefit of the Pledgor by the Pledgee and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Pledge. The Pledgor hereby pledges and assigns to the Pledgee and
grants the Pledgee a security interest in, a lien upon and a right of set-off as
to all of Pledgor's now owned and/or hereafter acquired or arising right, title
and interest in, to and under: (a) the Account and each custody account,
sub-custody account, investment account, safekeeping account or other account
(whether immediate or remote) representing or evidencing a renewal or
replacement of, or substitution for, the Account (each such custody,
sub-custody, investment, safekeeping or other account being a "Replacement
Account"), (b) any and all securities, securities entitlements, stocks, bonds,
options, warrants, commodity contracts, futures contracts, notes, instruments,
documents, general intangibles, commercial paper, money market funds and/or
accounts, treasury instruments, documents, general intangibles, commercial
paper, money market funds and/or accounts, treasury bills, notes and bonds,
certificates of deposit, mutual fund shares, cash, money, investment property
and financial assets (as defined in Section 8-102(a)(9) of the UCC) of any kind
or type, whether certificated or uncertificated, now or hereafter contained in
the
1
Account, including, but not limited to, the stock of State Auto, together with
all rights, income, revenues, proceeds and profits therefrom including, without
limitation, all dividends, distributions (cash or stock, extraordinary as well
as ordinary), interest and other payments, all additions thereto, substitutions
or replacements thereof and exchanges for or changes in any of the foregoing,
(c) any free credit balance or other money now or hereafter credited or owing
to Pledgor on or in respect of the Account, (d) all cash and non-cash proceeds
of any of the foregoing and (e) all rights incidental to the ownership of any
of the foregoing, such as participation interests, voting, conversion and
registration rights and rights of recovery for violations of applicable
securities laws (all of the types or items of property described in the
foregoing clauses (a), (b), (c), (d) and (e) being hereinafter collectively
referred to as the "Pledged Collateral").
2. Perfection of Security Interest. The Assignor authorizes the
Pledgee to file financing statements covering the Pledged Collateral and
containing such legends as Pledgee shall deem necessary or desirable to protect
Pledgee's interest in the Pledged Collateral under the terms of the UCC, and to
take such other steps as the Pledgee may request to perfect the Pledgee's
security interest in the Pledged Collateral under applicable law, including,
with respect to any portion of the Pledged Collateral which may constitute
"investment property": (as defined in Section 9-102(a)(49) of the UCC), causing
the Pledgee's security interest in such Pledged Collateral to be perfected by
"control" (as defined in the UCC).
3. Representations. The Pledgor warrants and represents as follows:
(a) Pledgor is the sole legal and beneficial owner of the
Pledged Collateral, free and clear of any lien, charge, security interest
or encumbrance, except for the security interest created by this Agreement;
(b) The Pledgor has full power and authority to enter into this
Agreement;
(c) There are no restrictions upon the transfer of any of the
Pledged Collateral;
(d) Pledgor has the right, subject to the provisions of this
Agreement, to pledge and grant a security interest in all or any part of
the Pledged Collateral free of any lien or other charge, encumbrance or
restriction;
(e) Pledgor has the right to otherwise transfer all or any part
of the Pledged Collateral free of any lien, security interest or other
charge, encumbrance or restriction;
(f) Other than that certain Control Agreement, executed as of
even date herewith, among Pledgor, Pledgee and the Custodian (the "Control
Agreement"), there are no other agreements entered into between the
Pledgor and Custodian or any third party with respect to the Pledged
Collateral; and
2
(g) Pledgor acknowledges that this Agreement is the "Agreement"
referenced in the Control Agreement.
4. Covenants. Until the Obligations are satisfied and extinguished in
full, the Pledgor:
(a) shall maintain and cause to be maintained in the Account, or the
Replacement Account, as the case may be, on a daily basis marketable securities
of State Auto traded on an active exchange with a fair market value (being the
quoted trading price of the securities at the conclusion of each trading day),
when taken together with the AUIC Account Balance, in the aggregate amount of
not less than 300% of the aggregate outstanding principal balance of the Loans
(the "Minimum Balance Requirement"). Pledgor agrees that the Pledgee may, and
is hereby authorized to access the information about the securities in the
Account, or the Replacement Account, as the case may be, from time to time to
verify compliance with the Minimum Balance Requirement;
(b) shall not, without the prior written consent of the Pledgee, (i)
create or permit the existence of any lien, security interest, pledge or other
charge or encumbrance, or any other type of preferential arrangement, upon or
with respect to any of the Pledged Collateral, other than pursuant to this
Agreement, (ii) cause, or seek to cause, or permit, any of the Pledged
Collateral which is currently held in book-entry (uncertificated) form to be
evidenced or otherwise embodied by physical certificates, (iii) withdraw, or
seek to withdraw, funds from the Account or any Replacement Account (except as
provided in and subject to such limitations as set forth in the Control
Agreement), (iv) demand possession of, receive or otherwise take delivery of,
any or all of the Pledged Collateral, (v) close, cancel or terminate, or seek
to close, cancel or terminate, the Account or any Replacement Account; (vi)
transfer any of the Pledged Collateral, into the name of any person other than
the Pledgee; (vii) attempt to modify or attempt to terminate the Control
Agreement or its customer agreement(s) with the Custodian under which the
Account was established;
(c) shall (i) promptly deliver any certificate or instrument
constituting or representing any of the Pledged Collateral which it may obtain
possession of from time to time to the Custodian for credit to the Account,
duly endorsed in blank without restriction, (ii) promptly deliver to the
Custodian any endorsements or instruments which may be necessary or convenient
to transfer any financial assets held by the Custodian, which are registered in
the name of, payable to the order of or specially endorsed to Pledgor, to the
Custodian or its securities intermediary or to one of their respective nominees;
(d) shall cause the Custodian to send to the Pledgee a true, correct
and complete copy of every statement, confirmation, notice or other
communication concerning the Account that the Custodian sends to Pledgor; and
(e) shall advise the Pledgee promptly, completely, accurately and in
writing and in reasonable detail, (i) of any lien or encumbrance upon; security
interest in or claim asserted against any of the Pledged Collateral and (ii) of
the occurrence of any event, other than changes in general market conditions
adequately reported in the general news media,
3
that would have a material adverse effect upon the aggregate value of
the Pledged Collateral or upon the security interest of the Pledgor.
5. Waivers. The Pledgor waives notice of acceptance hereof,
creation of any of the Obligations, or nonpayment or default by Pledgor under
any of the Obligations or any agreement now or hereafter existing between
Pledgor and Pledgee. The Pledgor hereby waives any requirement of diligence,
presentment, demand of payment, protest or notice with respect to the
Obligations, the benefit of any statutes of limitation, and all demands
whatsoever (and shall not require that the same be made on the Pledgor as a
condition precedent to the Pledgor's liabilities hereunder), and covenants that
the Pledgor will not be discharged of liabilities under this Agreement, except
as provided in paragraph 11. The Pledgor consents to and waives notice of all
changes of terms of the Obligations (including, without limitation, a change in
the interest rate applicable to the Obligations), the withdrawal or extension
of credit or time to pay, the release of the whole or any part of the
Obligations, renewal, indulgence, settlement, compromise or failure to exercise
due diligence in collection, the acceptance or release of security, extension
of the time to pay for any period or periods whether or not longer than the
original period, or any surrender, substitution or release of any other person
directly or indirectly liable for any of the Obligations or any collateral
security given by AUIC.
6. Default. The following events constitute a default under the
terms of this Agreement (each an "Event of Default," and collectively "Events
of Default"):
(a) any default under the Loan Agreement, including, but not limited
to, an Event of Default (as defined in the Loan Agreement);
(b) any default under this Pledge Agreement;
(c) this Pledge Agreement shall at any time for any reason cease to
be in full force and effect or shall be declared to be null and void by a
court of competent jurisdiction, or if the validity or enforceability of
this Pledge Agreement shall be contested or denied by Pledgor or if Pledgor
shall deny that it has any further liability or obligation under this
Pledge Agreement;
(d) any default under the Control Agreement; or
(e) the Control Agreement shall at any time for any reason cease
to be in full force and effect or shall be declared to be null and void
by a court of competent jurisdiction, or if the validity or enforceability
of the Control Agreement shall be contested or denied by Pledgor or the
Custodian, or if Pledgor or the Custodian shall deny that it has any
further liability or obligation under the Control Agreement or if Pledgor
of the Custodian shall fail to comply with or to observe any of the terms,
provisions or conditions contained in the Control Agreement.
7. Remedies of Pledgee Following an Event of Default. The Pledgee
may, at any time that an Event of Default exists, or at any time after the
Obligations have become due and payable in accordance with the Loan Agreement,
at its option, (i) transfer or register the Pledged
4
Collateral or any part thereof into its or its nominee's name with or without
any indication that such Pledged Collateral is subject to the security interest
hereunder. Pledgor hereby appoints the Pledgee as its attorney-in-fact to
arrange at the Pledgee's option for such transfer; (ii) without notice to or
demand upon Pledgor, liquidate the Pledged Collateral and apply the proceeds
thereof in payment of the Obligations; and (iii) without notice to or demand
upon the Pledgor, charge, set-off or otherwise apply all or any part of the
Pledged Collateral in payment of the Obligations. The Pledgee shall have, in
addition to the foregoing and any other rights given under this Agreement, the
Loan Agreement or by law, all of the rights and remedies with respect to the
Pledged Collateral of a secured party under the UCC. In addition, at any time
that an Event of Default exists, the Pledgee shall have such powers of sale and
other powers as may be conferred by applicable law. The Pledgor will pay to the
Pledgee all expenses (including, without limitation, court costs and reasonable
attorneys' fees and expenses), of, or incident to, (i) the custody or
preservation of, or the sale or collection of or other realization upon, any of
the Pledged Collateral, (ii) the exercise or enforcement of any of the rights of
the Pledgee hereunder, or (iii) the failure by the Pledgor to perform or observe
any provision hereof.
8. Voting Rights. During the term of this Pledge Agreement, and
except as provided below in this Section 8, the Pledgor shall be permitted to
exercise any voting or consensual rights that it may have as to any of the
Pledged Collateral for any purpose which is not inconsistent with this Pledge
Agreement or any applicable laws. If any Event of Default has occurred and is
continuing, (a) the Pledgee or the Pledgee's nominee may, at the Pledgee's or
such nominee's option and following written notice from the Pledgee to the
Pledgor, exercise all voting or consensual rights pertaining to the Pledged
Collateral, and (b) Pledgor shall deliver to the Pledgee all notices, proxy
statements, proxies and other information and instruments relating to the
exercise of such rights received by Pledgor from the issuers of any of the
Pledged Collateral promptly upon receipt thereof and shall at the request of the
Pledgee execute and deliver to the Pledgee any proxies or other instruments
which are, in the good faith judgment of the Pledgee, necessary for the Pledgee
to validly exercise such voting and consensual rights.
9. Dividends and Other Distributions. (a) So long as no Event of
Default shall have occurred and be continuing:
(i) The Pledgor shall be entitled to receive and retain any and all
dividends, interest, distributions, subscription warrants or any other rights
or options in respect of the Pledged Collateral, provided, however, that any
and all
(A) dividends, interests or distributions paid or payable other
than in cash with respect to, and instruments and other property
received, receivable or otherwise distributed with respect to, or in
exchange for, any of the Pledged Collateral;
(B) dividends and other distributions paid or payable in cash
with respect to any of the Pledged Collateral that constitute a
partial or total liquidation, distribution or dissolution or a
reduction of capital, capital surplus or paid-in surplus; and
5
(C) cash paid, payable or otherwise distributed in redemption
of, or in exchange for, any of the Pledged Collateral;
shall be Pledged Collateral, and shall be forthwith delivered to the
Custodian to hold, for the benefit of the Pledgee, in the Account or
Replacement Account, as applicable, and shall, if received by the Pledgor,
be received in trust for the Pledgee, for the benefit of the Pledgee, be
segregated from the other property or funds of the Pledgor, and be
delivered promptly to the Custodian as Pledged Collateral in the same form
as so received (with any necessary endorsement of the Pledgor); and
(ii) The Pledgee shall execute and deliver (or cause to be executed
and delivered) to the Pledgor all such proxies and other instruments as the
Pledgor may reasonably request for the purpose of enabling the Pledgor to
receive the dividends, interest payments or distributions which it is
authorized to receive and retain pursuant to clause (i) above.
(b) If any Event of Default has occurred and is continuing:
(i) All rights of the Pledgor to receive the dividends and interest
payments, if any, which it would otherwise be authorized to receive and
retain pursuant to Section 9(a)(i) hereof shall cease, and all such rights
shall thereupon become vested in the Pledgee, for the benefit of the
Pledgee, which shall thereupon have the sole right to receive and hold as
Pledged Collateral such dividends and interest payments;
(ii) All dividends and interest payments which are received by the
Pledgor contrary to the provisions of clause (i) of this Section 9(b) shall
be received in trust for the Pledgee, for the benefit of the Pledgee, shall
be segregated from other funds of the Pledgor and shall be paid over
promptly to the Pledgee as Pledged Collateral in the same form as so
received (with any necessary endorsements of the Pledgor); and
(iii) The Pledgor shall, upon the request of the Pledgee, at the
Pledgor's expense, do or cause to be done all such acts and things as may
be necessary to make a sale of the Pledged Collateral or any part thereof
valid and binding and in compliance with applicable law.
The Pledgor will reimburse the Pledgee for all reasonable expenses incurred by
the Pledgee, including without limitation, reasonable attorneys' fees and
accountants' fees and expenses in connection with the foregoing.
10. Security Interest Absolute. All rights of the Pledgee, the
pledge and security interests hereunder, and all obligations of the Pledgor
hereunder, shall be absolute and unconditional irrespective of:
(a) Any lack of validity or enforceability of either of the Loan
Agreement or any other agreement or instrument relating thereto;
6
(b) Any change in the time, manner or place of payment of, or in any
other term of, all or any part of the Obligations, or any other amendment
or waiver of or any consent to any departure from the Loan Agreement;
(c) Any 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 part of the Obligations; or
(d) Any other circumstance which might otherwise constitute a defense
available to, or a discharge of, the Pledgor in respect of the Obligations
or of this Agreement.
11. Term. This Agreement shall remain in full force and effect
until the Loan Agreement shall have been terminated and all of the Obligations
shall have been indefeasibly paid and satisfied in full. Upon the termination
of this Agreement as provided above (other than as a result of the sale of the
Pledged Collateral), the Pledgee will release the security interest created
hereunder and, if it then has possession of any evidence of ownership of the
Pledged Collateral; Pledgee will deliver the evidence of ownership to the
Pledgor and terminate the Control Agreement.
12. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the Pledgor and the Pledgee and their respective
successors and assigns. The Pledgor's successors and assigns shall include,
without limitation, a receiver, trustee or debtor-in-possession of or for the
Pledgor.
13. Applicable Law; Severability.
(a) This Agreement shall be governed by, and construed and enforced
in accordance with, the laws of the State of Illinois applicable to contracts
made and to be performed within such state, without giving effect to its
conflicts of laws principles or rules. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be held to be
prohibited or invalid under applicable law, such provision shall be ineffective
only to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
Regardless of any provision in any other agreement, for purposes of the UCC,
Illinois shall be deemed to be the Custodian's jurisdiction (within the meaning
of Section 8-110 of the UCC) and the Account or the Replacement Account, as the
case may be (as well as the securities entitlements related thereto) shall be
governed by the laws of the State of Illinois.
(b) Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is determined to be legally invalid, the
affected provision will be stricken from this Agreement, and the remaining terms
of this Agreement and its enforceability will remain unaffected thereby. The
parties further agree to replace any such provision with a valid and enforceable
provision which will achieve, to the fullest extent possible, the pledge
economic,
7
business and/or other purposes of the stricken provision.
14. Definitions. The singular shall include the plural and vice versa and
any gender shall include any other gender as the context may require.
15. Further Assurances. The Pledgor agrees to cooperate with the Pledgee
and to execute and deliver, or cause to be executed and delivered, all such
other instruments and documents and to take all such other actions as the
Pledgee may reasonably request from time to time in order to carry out the
provisions and purposes hereof.
16. Litigation. EACH OF THE PLEDGEE AND THE PLEDGOR HEREBY KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING
OF ANY KIND OR NATURE IN ANY COURT IN WHICH AN ACTION MAY BE COMMENCED BY OR
AGAINST THE PLEDGOR OR THE PLEDGEE ARISING OUT OF THIS AGREEMENT, THE PLEDGED
COLLATERAL OR ANY ASSIGNMENT THEREOF OR BY REASON OF ANY OTHER CAUSE OR DISPUTE
WHATSOEVER BETWEEN THE PLEDGOR AND THE PLEDGEE OF ANY KIND OR NATURE. THE
PLEDGOR AND THE PLEDGEE HEREBY AGREE THAT THE FEDERAL COURT OF THE CENTRAL
DISTRICT OF ILLINOIS, PEORIA DIVISION OR, AT THE OPTION OF THE PLEDGEE, ANY
COURT IN WHICH THE PLEDGEE SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND
WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY AND WHICH
SITS IN A JURISDICTION IN WHICH THE PLEDGOR TRANSACTS BUSINESS SHALL HAVE
NON-EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN
THE PLEDGOR AND THE PLEDGEE, PERTAINING DIRECTLY OR INDIRECTLY TO THIS AGREEMENT
OR THE CONTROL AGREEMENT OR TO ANY MATTER ARISING THEREFROM. THE PLEDGOR
EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR
PROCEEDING COMMENCED IN SUCH COURTS, HEREBY WAIVING PERSONAL SERVICE OF THE
SUMMONS AND COMPLAINT OR OTHER PROCESS OR PAPERS ISSUED THEREIN AND AGREEING
THAT SERVICE OF SUCH SUMMONS AND COMPLAINT OR OTHER PROCESS OR PAPERS MAY BE
MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE PLEDGOR AT THE ADDRESS SET
FORTH BELOW PLEDGOR'S SIGNATURE TO THIS AGREEMENT, WHICH SERVICE SHALL BE DEEMED
MADE UPON RECEIPT THEREOF. THE NON-EXCLUSIVE CHOICE OF FORUM SET FORTH IN THIS
SECTION SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY JUDGEMENT
OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO
ENFORCE THE SAME IN ANY APPROPRIATE JURISDICTION.
17. Pledgee Appointed Attorney-in-Fact. The Pledgor hereby appoints the
Pledgee as the Pledgor's attorney-in-fact, with full authority in the place and
stead of the Pledgor and in the name of the Pledgor or otherwise, from time to
time in the Pledgee's discretion to take any action and to execute any
instrument which the Pledgee may deem necessary or advisable to accomplish the
purposes of this Agreement, including, without limitation, to receive, endorse
and collect all instruments made payable to the Pledgor representing any
distribution, interest payment or other dividend distribution in respect of the
Pledged Collateral or any part thereof and to give
8
full discharge for the same. This power of attorney created under this paragraph
17, being coupled with an interest, shall be irrevocable for the term of this
Agreement.
18. Pledgee's Duty. The Pledgee shall not be liable for any acts,
omissions, errors of judgment or mistakes of fact or law including, without
limitation, acts, omissions, errors or mistakes with respect to the Pledged
Collateral, except for those arising out of or in connection with the Pledgee's
(i) willful misconduct, or (ii) failure to use reasonable care with respect to
the safe custody of any certificate evidencing any of the Pledged Collateral
which is in the physical possession of the Pledgee. Without limiting the
generality of the foregoing, the Pledgee shall be under no obligation to take
any steps necessary to preserve rights in the Pledged Collateral against any
other parties but may do so at its option, and all expenses incurred in
connection therewith shall be for the sole account of the Pledgor, and shall be
added to the Obligations secured hereby.
19. Notices. Any notice required or desired to be served, given or
delivered hereunder shall be as described in the Loan Agreement.
20. Counterparts. This Agreement may be executed in separate counterparts,
each of which shall be an original and all of which taken together shall
constitute one and the same instrument.
21. Section Headings; Recitals. The section headings herein are for
convenience of reference only, and shall not affect in any way the
interpretation of any of the provisions hereof. The recitals set forth
hereinabove are hereby incorporated into and form a part of this Agreement, the
truth and accuracy of which is evidenced by each party's execution hereof.
22. Amendments, Waivers and Consents. No amendment or waiver of any
provision of this Agreement nor consent to any departure by the Pledgor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Pledgee and the Pledgor, and then such amendment, waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
9
IN WITNESS WHEREOF, the Pledgor and the Pledgee have executed this
Agreement as of the day and year first above written.
PLEDGEE: PLEDGOR:
COMMERCE BANK, N.A.
By: /s/ Xxxxxxxx Xxxxxxx By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------- -----------------------------
Name: Xxxxxxxx Xxxxxxx Name: Xxxxxxx X. Xxxxxxx
Its: SENIOR VICE PRESIDENT
---------------------------
