EIGHTH AMENDMENT TO SEVENTH AMENDED AND RESTATED SECURITY AGREEMENT
Exhibit
10.2
EIGHTH
AMENDMENT
TO
SEVENTH
AMENDED AND RESTATED SECURITY AGREEMENT
THIS
EIGHTH AMENDMENT TO SEVENTH AMENDED AND RESTATED SECURITY AGREEMENT (the
"Amendment") made and entered into as of the 22 day of November, 2006, by and
among DIRECT
GENERAL FINANCIAL SERVICES, INC., a
Tennessee corporation whose address is 0000 Xxxxxxxxxxxx Xxxx, Xxxxxxxxx,
Xxxxxxxxx 00000 (f/k/a Direct Financial Services, Inc.) ("DGFS"), DIRECT
GENERAL PREMIUM FINANCE COMPANY,
a
Tennessee corporation whose address is 0000 Xxxxxxxxxxxx Xxxx, Xxxxxxxxx,
Xxxxxxxxx 00000 ("DGPFC"; and collectively with DGFS, the "Grantor"), 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, 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, NA (Main Office Chicago)) ("JPMorgan"), Baton
Rouge, Louisiana ("Bank One"), 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, National City Bank, Fifth Third, JPMorgan and MidFirst
collectively, the "Banks," and each individually, a "Bank"), pursuant to the
Eighth Amended and Restated Loan Agreement dated as of October 31, 2002, as
amended (the "Loan Agreement"), among Grantor, Banks and the other parties
named
therein.
Recitals
of Fact
Pursuant
to that certain Seventh Amended and Restated Security Agreement dated as of
October 31, 2002, as amended by that certain First Amendment to Seventh Amended
and Restated Security Agreement dated as of March 31, 2003, as amended by that
certain Second Amendment to Seventh Amended and Restated Security Agreement
dated as of May 28, 2003, as amended by that certain Third Amendment to the
Seventh Amended and Restated Security Agreement dated as of June 30, 2003,
as
amended by that certain Fourth Amendment to Seventh Amended and Restated
Security Agreement dated as of November 26, 2003, as amended by that certain
Fifth Amendment to Seventh Amended and Restated Security Agreement dated as
of
June 30, 2004, as amended by that certain Sixth Amendment to Seventh Amended
and
Restated Security Agreement dated as of December 3, 2004, and as amended by
that certain Seventh Amendment to Seventh Amended and Restated Security
Agreement dated as of June 30, 2006 (as amended, the "Security Agreement"),
between DGFS and/or DGPFC and the Banks, DGFS and DGPFC assigned and pledged
Receivables (as defined in the Loan Agreement) and other contractual rights
to
the Agent for the benefit of the Banks as collateral security for all of the
Obligations (as defined in the Security Agreement) of Grantor to the
Banks.
Direct
General Corporation, the parent company of the Grantor (“DGC”), anticipates
entering into the Bear Xxxxxxx Facilities (as defined below) as borrower,
pursuant to which Grantor will grant a second priority security interest in
the
Collateral (as defined below) to
the
lenders making such loans.
Grantor
has asked the Banks to enter into a further amendment of the Loan Agreement
of
even date herewith (the “Ninth Amendment”) in order to permit the Bear Xxxxxxx
Facilities and to effect certain other amendments. In
connection therewith, the Grantor has requested, and the Banks have agreed,
to
modify certain terms of the Security Agreement as hereinafter set forth,
provided
that this Amendment shall only become effective on the Effective Date (as
defined below). The Grantor and the Banks now desire to modify certain terms
of
the Security 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:
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 Grantor does hereby absolutely
and
unconditionally, certify, represent and warrant to the Banks, and covenants
and
agrees with the Banks, the following:
(a) It
is the
intention of DGFS and DGPFC to, and DGFS and DGPFC do hereby, pledge and assign
a continuing security interest in the Collateral described in the Security
Agreement to Agent as agent for itself and the Banks. References to "Grantor"
in
the Security Agreement shall be deemed to refer collectively to DGFS and
DGPFC.
(b) All
representations and warranties made by the Grantor in the Loan 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.
(c) 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.
(d) There
are
no existing offsets, defenses or counterclaims to the obligations of the
Grantor, as set forth in the Notes, the Security Agreement, the Loan Agreement,
as amended, or in any other Loan Document executed by the Grantor, in connection
with the Loan.
(e) The
Grantor 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
Grantor has or may have any such existing claim (whether known or unknown),
the
Grantor does hereby forever release and discharge, in all respects, the Banks
with respect to such claim.
2
(f) 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. As
used
herein, the following terms shall have the following meanings:
(a)
“Bear
Xxxxxxx Facilities” means, collectively, (i) the term loan facility in an
aggregate original principal amount equal to $75,000,000, (ii) the revolving
credit facility in an amount of $20,000,000, and (iii) any additional
“incremental facility” borrowings up to $20,000,000, which facilities, in the
case of clauses (i) and (ii) above, contemplated to be entered into
substantially simultaneously with the Merger Transaction, among DGC and a group
of lenders led by Bear Xxxxxxx Corporate Lending Inc. as Agent, in each case
as
amended, restated or otherwise modified or refinanced from time to time (such
amendment, restatement, mofidication or refinancing to be made in compliance
with the terms of the Intercreditor Agreement as hereinafter defined).
(b) “Merger
Transaction” means the merger of Elara Merger Corporation, a wholly owned
subsidiary of Elara Holdings, Inc., into Direct General Corporation, which
is
expected to occur substantially simultaneously with the closing of the Bear
Xxxxxxx Facilities.
(c) "Effective
Date" means the Effective Date of that certain Ninth Amendment to Eighth Amended
and Restated Loan Agreement dated as of November 22, 2006.
(d) “Intercreditor
Agreement” means the Intercreditor Agreement, dated as of the Effective Date,
between the Agent and the collateral agent in respect of the Bear Xxxxxxx
Facilities, as amended, restated, supplemented or otherwise modified from time
to time.
4. Section
3
of the Security Agreement is amended by deleting subsection (b) in its entirety
and substituting in lieu thereof the following:
“(b) (i)
The
Grantor owns the Collateral free and clear of any lien, security interest or
other charge or encumbrance except for the security interest created by this
Agreement and the junior lien pledged to the collateral agent for the Bear
Xxxxxxx Facilities (the “Bear Xxxxxxx Agent”), in connection with loans to
Direct General Corporation.
(ii)
Except
for the financing statements filed in favor of Agent relating to this Agreement
and those filed in connection with the Bear Xxxxxxx Facilities, no other
financing statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any recording office.”
5. Section
3
of the Security Agreement is further amended by deleting the next to last
sentence of subsection (e) and inserting in lieu thereof the
following:
3
“The
filing of financing statements with the Tennessee Secretary of State and, with
regard to unearned premiums on cancelled or terminated policies of insurance,
the giving of notice to the insurer (and related state guaranty fund, a list
of
which is attached as Exhibit "A"
hereto,
which Grantor warrants is a complete list of such funds to its best knowledge)
of assignment of such premiums, will perfect and establish the priority of
the
security interest of the Agent hereunder in the Collateral for the benefit
of
the Banks, subject to no other liens and encumbrances other than the junior
lien
in such collateral granted for the benefit of the Bear Xxxxxxx Agent.”
6. Section
3
of othe Security Agreement is further amended by deleting subsection (f) and
inserting in lieu thereof the following:
“(f) No
financing statement or other instrument similar in effect, other than such
as
may be for the benefit of the Agent and the Bear Xxxxxxx Agent, is on file
in
any recording office in any state in connection with any Premium Finance
Agreement.”
7. Section
4
of the Security Agreement is amended by deleting subsection (d) and inserting
in
lieu thereof the following:
“(d) Transfers
and Other Liens.
Without
the prior consent of Agent, the Grantor will not (i) sell, assign (by
operation of law or otherwise), exchange, or otherwise dispose of any of the
Collateral (other than the conversion of Accounts Receivable to cash in the
ordinary course of Grantor's business); or (ii) create or suffer to exist
any lien, security interest or other charge or encumbrance upon or with respect
to any of the Collateral except for the security interest created by this
Agreement and the second priority security interest given for the benefit of
the
Bear Xxxxxxx Agent.
8. There
shall be added to the Security Agreement the following new Section
12:
“12. Intercreditor
Agreement. Notwithstanding
anything herein to the contrary, the liens and security interest granted to
the
Agent pursuant to this Agreement, and the exercise of any right or remedy by
the
Agent hereunder, are subject in all respects to the provisions of the
Intercreditor Agreement.”
9. All
terms
and provisions of the Security 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 Security
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.
10. All
references in all Loan Documents (including, but not limited to, the Notes,
the
Security Agreement, and the Loan Agreement) to the “Security Agreement” shall,
except as the context may otherwise require, be deemed to constitute references
to the Security Agreement as amended hereby.
[SEPARATE
SIGNATURE PAGES FOLLOW]
4
SIGNATURE
PAGE
TO
EIGHTH
AMENDMENT TO SEVENTH AMENDED AND RESTATED SECURITY AGREEMENT
IN
WITNESS WHEREOF, the Grantor, the Banks and the Agent have caused this Amendment
to be executed by their duly authorized officers, all as of the day and year
first above written.
GRANTOR:
DIRECT
GENERAL FINANCIAL SERVICES,
INC.,
a
Tennessee corporation
By:
/s/ Brain X. Xxxxx
Xxxxx
X.
Xxxxx, President
DIRECT
GENERAL PREMIUM FINANCE
COMPANY,
a
Tennessee corporation
By:
/s/ Brain X. Xxxxx
Xxxxx
X.
Xxxxx, President
BANKS:
FIRST
TENNESSEE BANK NATIONAL
ASSOCIATION
By:
/s/ Xxx Xxxxxxx
Title:
Senior Vice President
CAPITAL
ONE, N.A.
By:
/s/ Xxxxx Rack
Title:
Senior Vice President
U.S. BANK
NATIONAL ASSOCIATION
By: /s/
Xxxxx Xxxxxxxxx
Title:
Vice President
CAROLINA
FIRST BANK
By:
/s/ Xxxxxxx Xxxxxxxxxxx
Title:
Executive Vice President
[SIGNATURE
PAGE CONTINUED]
S-1
BANKS
(continued):
JPMORGAN
CHASE BANK, N.A.
By:
/s/ Xxxxxx Xxxx
Title:
Senior Vice President
REGIONS
BANK
By:
/s/ Xxxxxx Xxxxxx
Title:
Senior Vice President
NATIONAL
CITY BANK OF KENTUCKY
By:
/s/ Xxxxx Xxxxxxxx
Title:
Senior Vice President
FIFTH
THIRD BANK, N.A. (Tennessee)
By:
/s/ Xxxxxx Xxxxxxxxx
Title:
Officer
MIDFIRST
BANK
By:
/s/ Xxxxx Xxxxxx
Title:
Vice President
AGENT:
FIRST
TENNESSEE BANK NATIONAL
ASSOCIATION
By:
/s/ Xxx Xxxxxxx
Title:
Executive Vice President
S-2
