Direct Genreal 8-K 12/07/06
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
Date
of
report (Date of earliest event reported): November
22, 2006
DIRECT
GENERAL CORPORATION
(Exact
Name of Registrant as Specified in Charter)
|
Tennessee
|
000-50360
|
62-1564496
|
|
(State
or other jurisdiction
|
(Commission
|
(I.
R. S. Employer
|
|
of
incorporation)
|
File
Number)
|
Identification
No.)
|
1281
Murfreesboro Road Nashville, Tennessee 37217
(Address
of
Principal Executive Offices)
(Zip Code)
Registrant's
telephone number, including area code: (615)
399-4700
Not
Applicable
(Former
name or former address, if changed since last report)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
|
o
|
Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
|
|
o
|
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
|
o
|
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR
240.14d-2(b))
|
|
o
|
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR
240.13e-4(c))
|
Item
1.01 Entry
Into a Material Definitive Agreement.
Direct
General Corporation (the “Company”) maintains a revolving credit facility (the
“Credit Facility”) with a consortium of banks, of which First Tennessee Bank
National Association (“FTBNA”) serves as “Agent,” to fund the working capital of
the Company’s premium finance operations. On November 22, 2006, the Company
entered into (1) the Ninth Amendment to the Eighth Amended and Restated Loan
Agreement (the “Credit Agreement”) among Direct General Financial Services, Inc.
and Direct General Premium Finance Company, as borrowers (the “Borrowers”), the
Company and certain of its subsidiaries, and a consortium of banks of which
FTBNA serves as “Agent,” (2) the Eighth Amendment to the Seventh Amended and
Restated Security Agreement (the “Security Agreement”) by and among Direct
General Financial Services, Inc. and Direct General Premium Finance Company
as
Grantors and a consortium of banks of which FTBNA serves as “Agent,” and (3) the
Eighth Amendment to the Seventh Amended and Restated Pledge and Security
Agreement (the “Pledge Agreement”) by and among the Company as Pledgor and a
consortium of banks of which FTBNA serves as “Agent” (such agreements,
collectively, the “Amendments to the Credit Facility”). The Security Agreement
and Pledge Agreement secure the Company’s and the Borrowers’ obligations to the
banks under the Credit Agreement.
The
Company and certain of its subsidiaries have entered into the Amendments to
the
Credit Facility in connection with a proposed merger transaction in which Elara
Merger Corporation, a wholly owned subsidiary of Elara Holdings, Inc., would
merge with and into the Company in exchange for $21.25 per share of outstanding
common stock of the Company (the “Merger”). The proposed Merger was announced on
December 5, 2006. Consummation of the Merger is subject to various conditions,
including approval of the Merger by the company’s shareholders, expiration or
termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, receipt of all authorizations, consents, and approvals
required by any state insurance department or financing department, and other
customary closing conditions.
Under
the
terms of the Amendments to the Credit Facility, effective as of November 22,
2006, the Credit Facility commitment of the banks that are parties to the Credit
Agreement was reduced from $190,000,000 to $165,000,000, and effective as of
January 1, 2007, the commitment of the banks will increase to $185,000,000.
The
amendments as to the amount of the Credit Facility commitment are hereinafter
referred to as “Facility Commitment Amendments.”
In
addition, the Amendments to the Credit Facility will permit the Company to
enter
into a term loan facility in an aggregate original principal amount of
$75,000,000, a revolving credit facility in an amount of $20,000,000, and any
incremental facility borrowings up to $20,000,000 with a group of lenders led
by
Bear Stearns Corporate Lending Inc. as “Agent” (the “Bear Stearns Facility”).
The Company expects to enter into the Bear Stearns Facility simultaneously
with
the consummation of the Merger.
The
Amendments to the Credit Facility, excluding the Facility Commitment Amendments,
will not become effective unless and until various conditions are met, including
that the (i) the Merger is consummated, (ii) the Bear Stearns Facility is closed
in material compliance with the terms set forth in a term sheet received by
the
Company from Bear Stearns Corporate Lending Inc., dated November 22, 2006,
which
summarizes terms of the Bear Stearns Facility, (iii) FTBNA and the collateral
agent, in respect of the Bear Stearns Facility, enter into an intercreditor
agreement, and (iv) the banks that are parties to the Credit Agreement receive
payment of a transaction fee of 0.25% of the total amount of loans outstanding
upon the consummation of the Merger (the date as of which all such conditions
are met, the “Effective Date”).
In
addition, as of the Effective Date, the Amendments to the Credit Facility modify
certain terms of the existing Credit Facility that would otherwise be breached
if the Company were to consummate the Merger or enter into the Bear Stearns
Facility, including modification of the Credit Agreement, Security Agreement
and
Pledge Agreement terms, as appropriate, to permit the Merger as an exception
to
the prohibition on mergers and similar transactions in those agreements, and
to
permit the Company to enter into and incur indebtedness under the Bear Stearns
Facility, and cause certain of its subsidiaries to guarantee, obligations under
the Bear Stearns Facility.
Borrowings
under the Credit Facility are, and will remain after the Effective Date,
principally secured by a first priority lien in the finance receivables of
our
premium finance subsidiaries and a second lien security interest in the capital
stock of each of the Company’s directly owned subsidiaries. Under the terms of
the Amendments to the Credit Facility, as of the Effective Date, the Company’s
premium finance subsidiaries may grant a second lien in their finance
receivables to secure borrowings under the Bear Stearns Facility, and the
Company may pledge the common stock of its subsidiaries as a first priority
lien
to secure borrowings under the Bear Stearns Facility.
Item
9.01 Financial
Statements and Exhibits.
(d) Exhibits:
|
Exhibit
Number
|
|
Description
|
| |
|
|
|
10.1
|
|
Ninth
Amendment to Eighth Amended and Restated Loan Agreement
|
| |
|
|
|
10.2
|
|
Eighth
Amendment to Seventh Amended and Restated Security
Agreement
|
| |
|
|
|
10.3
|
|
Eighth
Amendment to Seventh Amended and Restated Pledge and Security
Agreement
|
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
Date:
December 13, 2006
|
DIRECT
GENERAL CORPORATION
(Registrant)
|
| |
|
By:
|
/s/
Ronald F. Wilson |
| |
Name:
|
Ronald
F. Wilson
|
| |
Title:
|
Secretary
|
INDEX
TO EXHIBITS
|
Exhibit
Number
|
|
Description
|
| |
|
|
|
10.1
|
|
Ninth
Amendment to Eighth Amended and Restated Loan Agreement
|
| |
|
|
|
10.2
|
|
Eighth
Amendment to Seventh Amended and Restated Security
Agreement
|
| |
|
|
|
10.3
|
|
Eighth
Amendment to Seventh Amended and Restated Pledge and Security
Agreement
|