This STOCK PLEDGE AGREEMENT (this
“Agreement”) is made as of October 27, 2010 by
Bancinsurance Corporation, an Ohio corporation (the
“Pledgor”), in favor of Fifth Third Bank, an Ohio
banking corporation (the “Bank”).
A. The Pledgor is the owner of 100% of the
issued and outstanding shares of common stock of Ohio Indemnity
Company, an Ohio domiciled stock, property and casualty insurance
company (the “Issuer”).
B. The Bank and the Pledgor are entering
into a certain Credit Agreement of even date herewith (the
“Credit Agreement”) pursuant to which the Bank has
agreed to extend the following credit facilities to the Pledgor:
(1) a term loan in the original principal amount of
$10,000,000 (“Term Loan”); and (2) a revolving
line of credit with a maximum aggregate principal amount of
$5,000,000 (the “Line of Credit”, and collectively with
the Term Loan, the “Loans”).
C. The execution of this Agreement and the
delivery of the Pledged Stock (as hereinafter defined) to the Bank
are conditions precedent to the Bank’s obligation to extend
the Loans.
D. To induce the Bank to extend the Loans
and in order to secure the payment and performance of the
Obligations (as hereinafter defined), Pledgor has agreed to pledge
to Bank all of the Collateral (as hereinafter defined) now or
hereafter owned or acquired by Pledgor as security for the
Obligations, subject to the terms of this Agreement.
E. The Pledgor is a member of a holding
Company system as defined in Ohio Revised Code Section 3901.32;
accordingly, Pledgor is not pledging any property which would not
be permitted under the Insurance Laws of the State of
Ohio.
NOW, THEREFORE, in consideration of the premises
and in order to induce the Bank to extend the Loans, the Pledgor
hereby agrees with the Bank as follows:
Section 1.
Defined Terms .
Unless otherwise defined herein, terms defined
in the Credit Agreement shall have such defined meanings when used
herein.
“ Collateral ” shall
mean all property at any time pledged or required to be pledged to
the Bank hereunder, including the Pledged Stock, and all payments
to be made by the Issuer pursuant thereto, income therefrom and
proceeds thereof.
“ Obligations ” means
all unpaid principal of and accrued and unpaid interest on the Term
Loan, all accrued and unpaid fees and all expenses, reimbursements,
indemnities and any other obligations of the Pledgor to the Bank or
to any indemnified party related to the Term Loan.
“ Pledged Stock ”
shall mean all of the shares of common stock of the Issuer owned by
the Pledgor evidenced by share certificate number(s) 87 and 88,
together with all shares, certificates, options, rights or other
distributions issued as an addition to, in substitution or in
exchange for, or on account of, any such shares, and all proceeds
of all the foregoing, now or hereafter owned or acquired by the
Pledgor.
(a) The Pledgor hereby pledges, assigns,
hypothecates, transfers and delivers to the Bank all Collateral
including the Pledged Stock and agrees to pledge all additional
shares of capital stock of the Issuer that the Pledgor may
hereafter acquire with respect thereto, and grants to the Bank a
first and best lien on and security interest in (i) the
Pledged Stock; (ii) all certificates, shares, notes,
obligations, distributions, securities and other property issued or
delivered from time to time in lieu of or in substitution for or
with respect to the Pledged Stock; (iii) all present and
future security and collateral for any of the foregoing; and
(iv) all payments or other proceeds under or with respect to
any of the foregoing, as collateral security for the due and
punctual performance by the Pledgor of all its obligations under
this Agreement and the due and punctual payment and performance by
the Pledgor of all Obligations.
(b) The Pledgor shall deliver to the Bank
the certificate(s) for the Pledged Stock and a stock transfer
power(s) in the form of the Stock Transfer Power attached hereto as
Exhibit A duly endorsed in blank simultaneously
herewith.
(c) At any time the Bank, at its option,
may have any part or all of the Pledged Stock registered in its
name or that of its nominee, and the Pledgor hereby covenants that,
upon the Bank’s request, the Pledgor will cause the Issuer,
the transfer agent or registrar of the Pledged Stock to effect such
registration, subject to compliance with Insurance Laws which
require notices and consents, including but not limited to the
approval of a Form A by the Ohio Department of Insurance and
any other applicable state insurance department. If that shall be
done prior to an Event of Default (as defined in Section 5),
the Pledgor shall nevertheless retain all voting rights with
respect to the Pledged Stock, and, for that purpose, the Bank shall
execute and deliver to the Pledgor all necessary proxies (which
proxies shall in any event expire automatically upon the occurrence
of an Event of Default and the Bank’s compliance with all
Insurance Laws and its receipt of all required approvals
thereunder). Subject to the Bank’s compliance with Insurance
Laws and the receipt of all required approvals, immediately and
without further notice, upon the occurrence of an Event of Default,
whether or not the Pledged Stock shall have been registered in the
name of the Bank or its nominee, the Bank or its nominee shall
have, with respect to the Pledged Stock, the right to exercise all
voting rights as to the Pledged Stock, all other corporate rights
and all conversion, exchange, subscription or other rights,
privileges or options pertaining thereto as if it were the absolute
owner thereof, including, without limitation, the right to exchange
any or all of the Pledged Stock upon the merger,
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consolidation,
reorganization, recapitalization or other readjustment of the
issuer thereof, or upon the exercise by such issuer of any right,
privilege or option pertaining to any of the Pledged Stock, and, in
connection therewith, to deliver any of the Pledged Stock to any
committee, depository, transfer agent, registrar or other
designated agency upon such terms and conditions as it may
determine, all without liability except to account for property
actually received by it; provided, however, that (i) the Bank
shall have no duty to exercise any of the aforesaid rights,
privileges or options and shall not be responsible for any failure
to do so or delay in so doing; and (ii) the Bank may by
written notice to the Pledgor relinquish, either partially or
completely in accordance with any terms or conditions the Bank may
set forth in such notice, any or all voting rights the Bank may
acquire pursuant to this Section 2(c). The Bank acknowledges
that its enforcement rights are limited by Insurance Laws, and more
specifically, that prior approval of state insurance regulators may
be required prior to any action associated with the Pledged
Stock.
(d) So long as no Event of Default shall
have occurred, the Pledgor shall have the right to receive and
retain all cash dividends and other cash payments with respect to
the Pledged Stock as permitted by the Credit Agreement. Upon the
occurrence of an Event of Default, the right of the Pledgor to
receive any such cash dividends and other cash payments shall
terminate immediately.
Section 3.
Notice to the Issuer and Registrar .
Immediately upon the execution of this
Agreement, the Pledgor shall give notice of the pledge of the
Pledged Stock pursuant to the terms hereof, in the form of the
Notice of Pledge attached hereto as Exhibit B , to the
Issuer and the Issuer’s stock registrar/transfer agent, if
any.
Section 4.
Distributions, etc .
If the Pledgor shall become entitled to receive
or shall receive, in connection with any of the Pledged Stock, any
Collateral, including, without limitation:
(a) stock certificates, including, but
without limitation, any certificates representing a stock dividend
issued in connection with any increase or reduction of capital,
reclassification, merger, consolidation, sale of assets,
combination of shares, stock split, spin-off or
split-off;
(b) options, warrants or rights, whether as
an addition to, or in substitution or in exchange for, any of the
Pledged Stock, or otherwise; or
(c) dividends or distributions payable in
money (subject to the right of the Pledgor to receive and retain
such dividends and distributions in accordance with Section 2(d)
hereof) or other property, including securities issued by any
entity other than the Issuer,
then the
Pledgor shall accept the same as the Bank’s agent and hold
the same in trust on behalf of and for the benefit of the Bank,
segregated from the other assets of the Pledgor and deliver the
same forthwith to the Bank, in the exact form received, with the
endorsement of the Pledgor when necessary and/or appropriate
undated powers, duly executed in blank, to be held by
the
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Bank, subject
to the terms hereof, as additional collateral security for the
Obligations. Any sums paid upon or in respect of the Pledged Stock
or other Collateral upon the liquidation or dissolution of the
Pledgor or the Issuer shall be paid over to the Bank, to be held by
it in trust as additional collateral security for the Obligations.
All sums of money and property so paid or distributed in respect of
the Pledged Stock or other Collateral which are received by the
Pledgor shall, until paid or delivered to the Bank, be held by the
Pledgor in trust, segregated from the other assets of the Pledgor,
as additional collateral security for the Obligations.
Section 5.
Events of Default .
(a) The
occurrence of any of the following events shall constitute an
“Event of Default”:
(i) the Pledgor shall default in the
observance or performance of any term, covenant or agreement
contained herein;
(ii) the Pledgor shall default in the
observance or performance of any term, covenant or agreement
contained in the Credit Agreement or any other Loan Document which
is not cured within any applicable cure period; or
(iii) any Default as such terms are defined
in the Credit Agreement shall occur and be continuing or a
“default” or “event of default” in any
other Loan Document as such terms are defined therein shall occur
and be continuing.
(b) Upon the occurrence and during the
continuance of any Event of Default, the Bank, without demand of
performance or other demand, advertisement or notice of any kind
(except the notice specified below regarding public or private
sale) to or upon the Pledgor or any other person (all and each of
which demands, advertisements and/or notices are hereby expressly
waived), may forthwith collect, receive, appropriate and realize
upon the Collateral, or any part thereof, and/or may forthwith
sell, assign, give option or options to purchase, contract to sell
or otherwise dispose of and deliver said Collateral, or any part
thereof, in one or more parcels at public or private sale or sales,
at any exchange, broker’s board or at the Bank’s
offices or elsewhere upon such terms and conditions as it may deem
advisable and at such prices as it may deem best, for cash or on
credit or for future delivery without assumption of any credit
risk, with the right to the Bank upon any such sale or sales,
public or private, to purchase the whole or any part of said
Collateral so sold, free of any right or equity of redemption in
the Pledgor, which right or equity is hereby expressly waived or
released. The Bank shall apply the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale,
after deducting all reasonable costs and expenses of every kind
incurred therein or incidental to the care, safekeeping or
otherwise of any and all of the Collateral, including reasonable
attorneys’ fees and legal expenses, to the payment in whole
or in part of the Obligations in such order as the Bank may elect,
and only after so paying over such net proceeds and after the
payment by the Bank of any other amount required by any provision
of law, need the Bank account for the surplus, if any, to the
Pledgor. The Pledgor agrees that, to the extent permitted by law,
the Bank need not give more than 10 days’ notice of the
time and place of any public sale or of the time after which
a
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private sale or
other intended disposition is to take place and that such notice is
reasonable notification of such matters. No notification need be
given to the Pledgor if the Pledgor has signed after default a
statement renouncing or modifying any right to notification of sale
or other intended disposition. In addition to the rights and
remedies granted to it in this Agreement and in any other
instrument or agreement securing, evidencing or relating to any of
the Obligations, the Bank shall have all the rights and remedies of
a secured party under the Uniform Commercial Code as adopted in the
State of Ohio. All waivers by the Pledgor of rights (including
rights to notice) and all rights and remedies afforded the Pledgor
herein, and all other provisions of this Agreement, are expressly
made subject to any applicable mandatory provisions of law
limiting, or imposing conditions (including conditions as to
reasonableness) upon, such waivers or the effectiveness thereof or
any such rights and remedies. Any sale or other disposition of the
Collateral shall be in compliance with all provisions of applicable
law (including applicable Insurance Laws, securities laws and
applicable provisions of the Uniform Commercial Code of the State
of Ohio). The Bank may comply with any applicable state or federal
law requirements in connection with any disposition of the
Collateral and compliance will not be considered to adversely
affect the commercial reasonableness of any sale of the Collateral.
The Bank may disclaim any warranties that might arise in connection
with the sale or other disposition of the Collateral and has no
obligation to provide any warranties at such time.
Section 6.
The Bank’s Appointment as Attorney-in-Fact
.
(a) The Pledgor hereby irrevocably
constitutes and appoints the Bank and any officer or agent thereof,
with full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority in the
place and stead of Pledgor and in the name of the Pledgor or in its
own name, from time to time in the Bank’s discretion, for the
purpose of carrying out the actions and to execute any and all
documents and instruments which may be necessary or desirable to
accomplish the purposes of this Agreement and, without limiting the
generality of the foregoing, hereby gives the Bank the power and
right, on behalf of the Pledgor, without notice to or assent by the
Pledgor to do the following: (i) to ask, demand, collect,
receive and give acquittances and receipts for any and all moneys
due and to become due under the Collateral; (ii) in the name
of the Pledgor or its own name or otherwise, to take possession of
and endorse and collect any checks, drafts, notes, acceptances or
other instruments for the payments of moneys due under the
Collateral; (iii) to file any claim or to take any other
action or proceeding in any court of law or equity or otherwise
deemed appropriate by the Bank for the purpose of collecting any
and all such moneys due under the Collateral whenever pa
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