STOCK PLEDGE AGREEMENT
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.
Section 2. Pledge .
(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,
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
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
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