EIGHTH AMENDMENT TO SEVENTH AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT
Exhibit
10.3
EIGHTH
AMENDMENT
TO
SEVENTH
AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT
THIS
EIGHTH AMENDMENT TO SEVENTH AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT
(the "Amendment") made and entered into as of the 22 day of November, 2006,
but
with an Effective Date as defined hereinafter, 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, 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
has most recently entered into a Fifteenth Amended and Restated Guaranty
Agreement dated as of June 30, 2006 (the "Fifteenth Guaranty"). The obligations
guarantied by Pledgor and the other Guarantors in the Fifteenth Guaranty are
described therein and include the obligations of Direct General Financial
Services, Inc., a Tennessee corporation and Direct General Premium Finance
Company, a Tennessee corporation (collectively, the “Borrowers”) pursuant to
that certain Eighth Amended and Restated Loan Agreement dated as of October
31,
2002, as amended (the “Loan Agreement”).
The
Pledgor anticipates entering into the Bear Xxxxxxx Facilities (as defined below)
as borrower, pursuant to which Pledgor will grant a first priority 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 lenders making such loans.
2
Pledgor
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 Pledgor has requested, and the Banks have agreed,
to
modify certain terms of the Pledge Agreement as hereinafter set forth,
provided
that this Amendment shall only become effective on the Effective Date (as
defined in Section 3 below).
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 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. As
used
herein, the following terms shall have the following meanings:
3
(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, modification 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.
Section
3
of the Pledge Agreement, is hereby amended by adding thereto the following
new
subsection (c):
“(c) For
so
long as the Intercreditor Agreement shall be in effect, to the extent the
Pledgor is required hereunder to deliver Pledged Collateral to the Agent for
purposes of possession and control, and is unable to do so as a result of having
previously delivered such Pledged Collateral to the collateral agent for the
Bear Xxxxxxx Facilities (the “Bear Xxxxxxx Agent”) in accordance with the terms
of the loan documents governing the Bear Xxxxxxx Facilities, the Pledgor’s
obligations hereunder with respect to such delivery shall be deemed satisfied
by
the delivery to the Bear Xxxxxxx Agent, acting as a bailee of the Agent pursuant
to the terms of the Intercreditor Agreement.”
4. Section
4(a) and (d) of the Pledge Agreement shall be deleted and the following inserted
in lieu thereof:
“(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
(a) the prior, first priority lien granted to the collateral agent for the
Bear
Xxxxxxx Facilities, and (b) the security interest created by this
Agreement.”
“(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 the Agent's security interest hereunder in the Pledged
Collateral securing the Obligations. Except as set forth in this
Section 4(d) and Section 3(c) of this Agreement, no action is necessary or
desirable to perfect or otherwise protect such security interest.”
4
5. Section
5(c) and (g) shall be deleted and the following inserted in lieu
thereof:
“(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 other
than
the Bear Xxxxxxx Agent or Agent;”
“(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, other than those governing
the Bear Xxxxxxx Facilities and the Loan Documents (including this
Agreement);”
6. There
shall be added to the Pledge 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.”
7. 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.
8. 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]
5
SIGNATURE
PAGE
TO
EIGHTH
AMENDMENT TO
SEVENTH
AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT
IN
WITNESS WHEREOF, the Pledgor, 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.
PLEDGOR:
DIRECT
GENERAL CORPORATION,
a
Tennessee corporation
By: /s/
Xxxxxxx X. Xxxxxx
Xxxxxxx
X. Xxxxxx, Senior
Vice-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
S-1
[SIGNATURE
PAGE
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
