EXHIBIT 4.36
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LOAN AND SECURITY AGREEMENT
Dated as of June 3, 2004
Between
ADDISON YORK INSURANCE BROKERS LTD.
(Borrower)
and
FCC, LLC, d/b/a First Capital
(Lender)
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TABLE OF CONTENTS
Page
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1. Definitions............................................................1
2. Borrowing..............................................................9
3. Interest and Fees.....................................................12
4. Representations and Warranties of Borrower............................13
5. Collateral............................................................15
6. Financial Covenants...................................................16
7. Collateral Covenants..................................................16
8. Negative Covenants....................................................18
9. Reporting and Information.............................................19
10. Inspection Rights; Expenses; Etc......................................21
11. Rights of Setoff, Application of Payments, Etc........................22
12. Attorney-in-Fact......................................................23
13. Defaults and Remedies.................................................23
14. Indemnification.......................................................26
15. General Provisions....................................................26
Attachments:
Schedule
Exhibit A - Form of Borrowing Base Certificate
Exhibit B - Form of Compliance Certificate
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LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT (this "Agreement") is entered into as of
this 3rd day of June, 2004 between ADDISON YORK INSURANCE BROKERS LTD., a
Delaware corporation ("Borrower"), and FCC, LLC, d/b/a FIRST CAPITAL, a Florida
limited liability company ("Lender").
RECITALS:
WHEREAS, Borrower has requested that Lender provide Borrower with a secured
lending facility; and
WHEREAS, Lender is willing to provide a secured lending facility to
Borrower on the terms set forth in this Agreement.
NOW, THEREFORE, Borrower and Lender hereby agree as follows:
1. Definitions. For purposes of this Agreement:
"Accounts" means all presently existing or hereafter arising accounts
receivable due to Borrower (including all Commissions and all medical and
health-care-insurance receivables), book debts, notes, drafts and acceptances
and other forms of obligations now or hereafter owing to Borrower, whether
arising from the sale or lease of goods or the rendition of services by Borrower
(including any obligation that might be characterized as an account, contract
right, general intangible or chattel paper under the UCC), all of Borrower's
rights in, to and under all purchase orders now or hereafter received by
Borrower for goods and services, all proceeds from the sale of Inventory, all
monies due or to become due to Borrower under all contracts for the sale or
lease of goods or the rendition of services by Borrower (whether or not yet
earned) (including the right to receive the proceeds of said purchase orders and
contracts), all collateral security and guarantees of any kind given by any
obligor with respect to any of the foregoing, and all goods returned to or
reclaimed by Borrower that correspond to any of the foregoing.
"Affiliate" means, with respect to a Person, (a) any family member,
officer, director, employee or managing agent of such Person, and (b) any other
Person (i) that, directly or indirectly, through one or more intermediaries,
controls, or is controlled by, or is under common control with, such given
Person, (ii) that, directly or indirectly beneficially owns or holds 10% or more
of any class of voting stock or partnership or other interest of such Person or
any subsidiary of such Person, or (iii) 10% or more of the voting stock or
partnership or other interest of which is directly or indirectly beneficially
owned or held by such Person or a subsidiary of such Person. The term "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through
ownership of voting securities or partnership or other interests, by contract or
otherwise.
"Agency Agreement" means a written agreement between Borrower and an
Insurance Company, pursuant to which such Insurance Company agrees to pay
Commissions to Borrower in connection with Insurance Policies issued by such
Insurance Company.
"Agreement Date" means the date as of which this Agreement is dated.
"Annualized Eligible Commissions" means, as of any date of determination,
the amount of Eligible Commissions payable to Borrower over the next one-year
period, assuming that all existing Insurance Policies are renewed.
"Borrowing Base" has the meaning set forth in Item 1 of the Schedule.
"Borrowing Base Certificate" means the certificate, substantially in form
of Exhibit A, with appropriate insertions, to be submitted to Lender by Borrower
pursuant to this Agreement and certified as true and correct by the Chief
Executive Officer of Borrower.
"Business Day" means any day excluding Saturday, Sunday, and any day which
is a legal holiday under the laws of the State of Georgia or which is a day on
which Lender is otherwise closed for transacting business with the public.
"Collateral" has the meaning set forth in Section 5(a).
"Commission" means the commission payable to Borrower from an Insurance
Company pursuant to the applicable Agency Agreement.
"Customer" means any Insurance Company or other account debtor or customer
of Borrower.
"Default" has the meaning set forth in Section 13(a).
"Eligible Commissions" means those Commissions arising from property and
casualty Insurance Policies, workers' compensation Insurance Policies and
Insurance Policies issued in connection with employee group health insurance
plans (but not any life Insurance Policy or other type of Insurance Policy) sold
or acquired by Borrower in the ordinary course of Borrower's business (excluding
fees or bonuses paid or payable by Insurance Companies based on volume, growth
or profitability, and, except as set forth below, excluding fees paid or payable
by any Policy Holder); provided, however, that Eligible Commissions shall not
include the following:
(a) Commissions with respect to which the Insurance Company or the Policy
Holder is an Affiliate of Borrower, Parent, any Support Party or any other
Obligor;
(b) Commissions with respect to which the Insurance Company (i) does not
maintain its chief executive office in the United States, or (ii) is not
organized under the laws of the United
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States of America or any state thereof; or (iii) is the government of any
foreign country or of any state, province, municipality, or other political
subdivision thereof;
(c) any and all Commissions as to which the perfection, enforceability, or
validity of Lender's Collateral or security interest in such Commission, or
Lender's right or ability to obtain direct payment to Lender of the proceeds of
such Commission, is governed by any federal or state statutory requirements
other than those of the Uniform Commercial Code;
(d) Commissions with respect to which the Insurance Company is the United
States of America, or any agency or state thereof, or any city, town,
municipality, county or other division of any state;
(e) Commissions which may be subject to offset or recoupment by the
Insurance Company or the Policy Holder, whether as the result of goods sold or
services rendered by the Insurance Company or the Policy Holder to Borrower, any
contractual arrangement between the Insurance Company or the Policy Holder and
Borrower (including any lease) or otherwise;
(f) those Commissions where Lender, in Lender's discretion, has notified
Borrower that the Commission, Insurance Company or Policy Holder is not
acceptable to Lender;
(g) any Commission which is more than 60 days past due (when calculating
Annualized Eligible Commissions) or which is not received by Borrower within 60
days after the due date thereof (when calculating Trailing Twelve Month Eligible
Commissions);
(h) all of the Commissions owed by an Insurance Company if the aggregate
outstanding dollar amount of such Commissions not considered as Eligible
Commissions under the immediately preceding paragraph is equal to or greater
than 30% of the total of all Commissions owed by such Insurance Company;
(i) Commissions not previously approved in writing by Lender where the
dollar value for the aggregate amount of Commissions associated with any
Insurance Company is greater than 25% of all Eligible Commissions, but only to
the extent of such excess;
(j) any Commission associated with an Insurance Company which does not
constitute a Level 1 Insurance Company or a Xxxxx 0 Xxxxxxxxx Xxxxxxx;
(k) any Commission with respect to all or part of which a check, promissory
note, draft, trade acceptance, or other instrument for the payment of money has
been received, presented for payment, and returned uncollected for any reason;
(l) any Commission with respect to which Borrower has extended the time for
payment without the consent of Lender;
(m) any Commission with respect to which any one or more of the following
events has occurred to the Insurance Company and/or the Policy Holder with
respect to such
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Commission: death or judicial declaration of an Insurance Company who is an
individual; the filing by or against the Insurance Company or Policy Holder of a
request or petition for liquidation, reorganization, arrangement, adjustment of
debts, adjudication as a bankrupt, winding-up, or other relief under the
bankruptcy, insolvency, or similar laws of the United States, any state or
territory thereof, or any foreign jurisdiction, now or hereafter in effect; the
making of any general assignment by the Insurance Company or Policy Holder for
the benefit of creditors; the appointment of a receiver or trustee for the
Insurance Company or Policy Holder or for any of the assets of the Insurance
Company or Policy Holder, including, without limitation, the appointment of or
taking possession by a "custodian," as defined in the Bankruptcy Code; the
institution by or against the Insurance Company or Policy Holder of any other
type of insolvency proceeding (under the bankruptcy laws of the United States or
otherwise) or of any formal or informal proceeding for the dissolution or
liquidation of, settlement of claims against, or winding up of affairs of, the
Insurance Company or the Policy Holder; the sale, assignment, or transfer of all
or any material part of the assets of the Insurance Company or the Policy
Holder; the nonpayment generally by the Insurance Company or the Policy Holder
of its debts as they become due; or the cessation of the business of the
Insurance Company or the Policy Holder (other than individuals) as a going
concern;
(n) any Commission which is evidenced by a note, draft, trade acceptance,
or other instrument for the payment of money where such instrument, document,
chattel paper, note, draft, trade acceptance or other instrument has not been
endorsed and delivered by Borrower to Lender;
(o) any Commission which is not payable pursuant to a duly executed Agency
Agreement which is acceptable to Lender in form and substance and for which, if
Lender has so requested, the Insurance Company has acknowledged Lender's
security interest in the Commissions payable thereunder; or
(p) any Commission in which Lender does not have a perfected,
first-priority security interest, subject to no other Lien (other than a junior
Lien in favor of Oak Street).
Lender acknowledges that, in certain circumstances, Borrower may cause insurance
policies to be issued via one or more wholesalers pursuant to a written
agreement between Borrower and the applicable wholesaler. These wholesalers are
insurance agencies which have contractual arrangements with insurance companies,
and the wholesalers pay Borrower a portion of the commissions earned by such
wholesalers in connection with the polices sold or placed by Borrower. Lender
may, in its sole discretion, include as "Eligible Commissions" the commissions
paid or payable to Borrower under such arrangements, and Lender will apply the
standards set forth above to both the insurance company issuing such policies
and the wholesaler itself in making such determination. In no event will
commissions paid or payable under any individual wholesaler arrangement exceed
5% of total Eligible Commissions, and in no event will the aggregate amount of
commissions paid or payable under all wholesaler arrangements exceed 20% of
total Eligible Commissions. Borrower acknowledges and agrees that the
representations, warranties and covenants of Borrower with respect to Insurance
Companies, Insurance Policies, Commissions and Agency Agreements shall apply in
a corresponding fashion
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to such wholesaler arrangements and that Lender has a security interest in all
amounts paid or payable to Borrower under such arrangements and all other rights
and interests of Borrower in such arrangements.
Lender also acknowledges and agrees that, in certain circumstances, Borrower
charges fees to its Policy Holders as additional compensation to Borrower with
respect to the underlying Insurance Policies. Lender may, in its sole
discretion, include as "Eligible Commissions" the fees paid or payable to
Borrower by such Policy Holders under such arrangements, and Lender will apply
the standards set forth above to such Policy Holders in making such
determination. Borrower acknowledges and agrees that the representations,
warranties and covenants of Borrower with respect to Insurance Companies,
Insurance Policies, Commissions and Agency Agreements shall apply in a
corresponding fashion to such Policy Holder arrangements and that Lender has a
security interest in all amounts paid or payable to Borrower under such
arrangements and all other rights and interests of Borrower in such
arrangements.
"Equipment" means all of Borrower's machinery, apparatus, equipment, motor
vehicles, tractors, trailers, rolling stock, fittings, fixtures and other
tangible personal property of every kind and description, together with all
parts, accessories and special tools and all increases and accessions thereto
and substitutions and replacements therefor.
"Expiration Date" has the meaning ascribed to such term in Item 6 of the
Schedule.
"Expirations" means all rights and information which Borrower may have at
any time with respect to Insurance Policies and Policy Holders which is used or
useful in connection with selling additional or renewal Insurance Policies to
such Policy Holders.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board that are applicable to the
circumstances as of the date of determination and applied on a consistent basis.
"General Intangibles" means all of Borrower's present and future general
intangibles and all other presently owned or hereafter acquired intangible
personal property of Borrower (including all Expirations, payment intangibles
and any and all choses or things in action, goodwill, patents and patent
applications, tradenames, servicemarks, trademarks and trademark applications,
copyrights, blueprints, drawings, purchase orders, customer lists, monies due or
recoverable from pension funds, route lists, infringement claims, software,
computer programs, computer discs, computer tapes, literature, reports,
catalogs, deposit accounts, tax refunds and tax refund claims) other than Goods
and Accounts, as well as Borrower's books and records relating to any of the
foregoing.
"Goods" means all of Borrower's present and hereafter acquired goods, as
defined in the UCC, wherever located, including imbedded software to the extent
included in "goods" as defined in the UCC, manufactured homes, and standing
timber that is cut and removed for sale.
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"Group One Insurance Policy" means an Insurance Policy which Lender, in its
discretion, designates as a Group One Insurance Policy.
"Group Two Insurance Policy" means an Insurance Policy (a) which is
acquired by Borrower pursuant to a Permitted Acquisition after the Agreement
Date, including all renewals thereof, (b) any other Insurance Policy which is
related to any book of business acquired by Borrower subsequent to the Agreement
Date, or (c) any other Insurance Policy which does not constitute a Group One
Insurance Policy. In the event of any doubt as to whether an Insurance Policy
constitutes a Group One Insurance Policy or a Group Two Insurance Policy, Lender
shall make such determination in its discretion. Lender may, in its discretion
from time to time, designate any Group Two Insurance Policy as a Group One
Insurance Policy, but Lender reserves the right to reverse any such designation
at any time.
"Insurance Company" means a Person in the business of issuing insurance
policies.
"Insurance Policy" means an insurance policy for which Borrower is the
insurance agent or broker and for which Borrower earns a Commission from the
Insurance Company or wholesaler which issues such policy.
"Inventory" means all of Borrower's inventory as defined in the UCC,
together with all of Borrower's present and future inventory, including goods
held for sale or lease or to be furnished under a contract of service and all of
Borrower's present and future raw materials, work in process, finished goods,
shelving and racking upon which the inventory is stored and packing and shipping
materials, wherever located, and any documents of title representing any of the
above.
"Level 1 Insurance Company" means an Insurance Company with a financial
strength rating of B+ or better, or that rating corresponding to a very good, an
excellent or a superior descriptor, by A.M. Best Company, Inc. Although the
California State Compensation Insurance Fund is not rated by A.M. Best Company,
Inc., such Insurance Company shall, unless Lender determines otherwise at any
time in its discretion, constitute a Level 1 Insurance Company.
"Level 2 Insurance Company" means an Insurance Company with a financial
strength rating of B- or B, or that rating corresponding to a fair descriptor,
by A.M. Best Company, Inc.
"Lien" means any security interest, security title, mortgage, deed to
secure debt, deed of trust, lien, pledge, charge, conditional sale or other
title retention agreement, or other encumbrance of any kind in respect of any
property, including the interest of each lessor under any capitalized lease and
the interest of any bondsman under any payment or performance bond, in, of or on
any assets or properties of a Person, whether now owned or hereafter acquired
and whether arising by agreement or operation of law.
"Loan Documents" means, collectively, this Agreement and any other
agreements, instruments, certificates or other documents entered into in
connection with this Agreement, including collateral documents, letter of credit
agreements, security agreements, pledges,
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guaranties, mortgages, deeds of trust, assignments and subordination agreements,
and any other agreement executed by Borrower, any other Obligor or any Affiliate
of Borrower or any other Obligor pursuant hereto or in connection herewith.
"Negotiable Collateral" means all of Borrower's present and future letters
of credit, advises of credit, notes, drafts, instruments, and documents,
including, without limitation, bills of lading, leases, and chattel paper, and
Borrower's books and records relating to any of the foregoing.
"Oak Street" means Oak Street Funding LLC, an Indiana limited liability
company, and its successors and assigns.
"Oak Street Credit Agreement" means that certain Credit Agreement between
Borrower and Oak Street dated as of March 19, 2004, as amended from time to time
with the written consent of Lender.
"Oak Street Intercreditor Agreement" means that certain Intercreditor
Agreement dated as of the Agreement Date between Lender and Oak Street.
"Oak Street Loan Documents" means the Oak Street Credit Agreement and each
guaranty, note, security agreement and other instrument and agreement executed
and/or delivered in connection therewith.
"Oak Street Obligations" means all indebtedness, obligations and
liabilities of Borrower to Oak Street under or in connection with the Oak Street
Loan Documents.
"Obligations" means all indebtedness, obligations and liabilities of
Borrower to Lender and its Affiliates of every kind and description, direct or
indirect, secured or unsecured, joint or several, absolute or contingent, due or
to become due, including any overdrafts, whether for payment or performance, now
existing or hereafter arising, whether presently contemplated or not, regardless
of how the same arise, or by what instrument, agreement or book account they may
be evidenced, or whether evidenced by any instrument, agreement or book account,
including, but not limited to, all loans (including any loan by modification,
renewal or extension), all indebtedness arising from any derivative
transactions, all undertakings to take or refrain from taking any action, all
indebtedness, liabilities or obligations owing from Borrower to others which
Lender may have obtained by purchase, negotiation, discount, assignment or
otherwise, and all interest, taxes, fees, charges, expenses and attorney's fees
(whether or not such attorney is a regularly salaried employee of Lender or any
of its Affiliates) chargeable to Borrower or incurred by Lender under this
Agreement or any other document or instrument delivered in connection herewith.
"Obligor" has the meaning set forth in Section 13(a).
"Parent" means Xxxxxxx Xxxxx International Insurance Brokers Ltd., a
corporation organized under the laws of the Province of Alberta.
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"Permitted Acquisition" means an acquisition of Insurance Policies and/or a
new book of business by Borrower to which Lender has consented in advance in
writing following Borrower's request for such consent and the delivery by
Borrower to Lender of all relevant information with respect to such proposed
acquisition.
"Permitted Liens" means (a) Liens or charges for current taxes, assessments
or other governmental charges which are not delinquent or remain payable without
any penalty, or the validity of which is contested in good faith by appropriate
proceedings upon stay of execution of the enforcement thereof and for which
appropriate reserves have been established in accordance with GAAP; (b) deposits
or pledges to secure (i) statutory obligations, (ii) surety or appeal bonds, or
(iii) bonds for release of attachment, stay of execution or injunction; (c)
statutory Liens on property arising in the ordinary course of business which, in
the aggregate, do not materially impair the use of such property or materially
detract from the value of such property; (d) Liens existing on the Agreement
Date and described on Item 2 of the Schedule; (e) Liens on Equipment securing
all or part of the purchase price of such Equipment; provided, however, that (i)
such Lien is created contemporaneously with the acquisition of such Equipment,
(ii) such Lien attaches only to the specific items of Equipment so acquired, and
(iii) such Lien secures only the indebtedness incurred to acquire such
Equipment; (f) Liens in favor of Oak Street so long as the Oak Street
Intercreditor Agreement is in full force and effect and no dispute between
Lender and Oak Street exists thereunder; and (g) Liens in favor of Lender.
"Person" means an individual, corporation, partnership, limited liability
company, association, trust, unincorporated organization, government or any
agency or political subdivision thereof, or any other entity.
"Policy Holder" means the owner of any Insurance Policy.
"Subordinated Debt" means all of the indebtedness owed by Borrower to any
other Person, the repayment of which is subordinated to the repayment of the
Obligations pursuant to the terms of a subordination agreement approved by
Lender in its reasonable discretion.
"Support Party" means Primo Podorieszach, Xxxx Xxxxxxxx, Xxxx Xxxxxxx and
any other Person that executes a validity guaranty and/or support agreement in
favor of Lender in connection with the Obligations.
"Trailing Twelve Month Eligible Commissions" means, as of any date of
determination, the amount of Eligible Commissions actually paid to Borrower over
the immediately preceding one-year period, measured from the last day of the
calendar month most recently ended.
"UCC" means the Uniform Commercial Code, as in effect from time to time, of
the State of Georgia or of any other state the laws of which are required as a
result thereof to be applied in connection with the issue of perfection of
security interests; provided, that to the extent that the UCC is used to define
any term herein or in any other documents and such term is defined
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differently in different Articles or Divisions of the UCC, the definition of
such term contained in Article or Division 9 shall govern.
Other Definitional Provisions. References to the "Schedule" or any
"Section" or "Exhibit" refer to the Schedule or a section or exhibit,
respectively, of this Agreement unless otherwise specifically provided. Any of
the terms defined in Section 1 may, unless the context otherwise requires, be
used in the singular or the plural depending on the reference. In this
Agreement: words importing any gender include the other genders; the words
"including", "includes" and "include" shall be deemed to be followed by the
words "without limitation"; references to agreements and other contractual
instruments shall be deemed to include subsequent amendments, assignments, and
other modifications thereto, but only to the extent such amendments, assignments
and other modifications are not prohibited by the terms of this Agreement;
references to any Person includes their respective permitted successors and
assigns or people succeeding to the relevant functions of such Persons; any and
all terms which are defined in the UCC and are not defined herein shall be
construed and defined in accordance with the definition of such terms under the
UCC; all references to statutes and related regulations shall include any
amendments of same and any successor statutes and regulations; and all
references to time of day shall refer to Atlanta, Georgia time. All references
to "dollars" and "$" refer to United States dollars, and all financial and
collateral reporting hereunder shall be in United States dollars unless
otherwise provided.
2. Borrowing.
(a) Amount Available to Be Borrowed. From time to time Borrower may
request, and Lender will, subject to the other terms and conditions of this
Agreement, lend to Borrower up to an amount equal to the Borrowing Base at any
time. Borrowed amounts that are repaid may be reborrowed upon the terms and
conditions of this Agreement.
(b) Standards. Lender will determine eligibility and the loan value of
Collateral, in its sole discretion, consistent with Lender's experience, prudent
business judgment and standards of commercial reasonableness applicable to
asset-based credits and in good faith. Any loans requested by Borrower and made
by Lender or at any time outstanding in excess of the Borrowing Base or any
other limitation set forth in this Agreement will, nevertheless, be subject to
the terms of this Agreement, will constitute Obligations for all purposes and be
entitled to the benefits of the Collateral.
(c) Persons Authorized to Request Loans. Borrower hereby authorizes and
directs Lender to make loan advances to or for the benefit of Borrower upon
receipt of instructions from any of the persons listed on Item 3 of the
Schedule. Lender shall have no liability whatsoever to Borrower or any other
Person for acting upon any such instructions which Lender, in good faith,
believes were given by any such person, and Lender shall have no duty to inquire
as to the propriety of any disbursement. Lender is hereby authorized to make the
loans provided for herein based on instructions received by facsimile,
electronic mail, telephone or other method of communication from any of such
persons. Although Lender shall make a reasonable effort to determine the
person's identity, Lender shall not be responsible for determining the
authenticity of any such instructions, and Lender may act on the instructions of
anyone it perceives to be one of the
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persons authorized to request loans hereunder. Lender shall have the right to
accept the instructions of any of the foregoing persons unless and until Lender
actually receives from Borrower (in accordance with the notice provisions of
this Agreement) written notice of termination of the authority of that person.
Borrower may change persons designated to give Lender borrowing instructions
only by delivering to Lender written notice of such change. Borrower will ensure
that each telephone instruction from any person designated in or pursuant to
this paragraph shall be followed by written confirmation of the request for
disbursement in such form as Lender makes available to Borrower from time to
time for such purpose; provided, however, that Borrower's failure to provide
written confirmation of any telephonic instruction shall not invalidate such
telephonic instruction.
(d) Application of Remittances. Borrower will use only invoices in forms
that Lender has approved, and Borrower's xxxxxxxx on such invoices will be
conclusive evidence of assignment and transfer hereunder to Lender of the
Accounts represented thereby, whether or not Borrower executes any other
instrument with regard to any specific Account. Borrower will cause the proceeds
of Accounts to be forwarded by all Customers directly to a lockbox designated by
Lender. Such lockbox shall be maintained by Fleet Bank, N.A. and all payments
received in such lockbox shall be deposited in a bank account in Lender's name
at Fleet Bank, N.A. for application to the Obligations. Notwithstanding the
foregoing, with respect to amounts billed by Borrower to Policy Holders,
Borrower may cause such payments to be made directly to Borrower. In the event
that the Commission portion of such payments made directly to Borrower which is
held in any trust account of Borrower's exceeds $75,000 at any time, Borrower
shall promptly forward such excess to the lockbox designated by Lender. All
checks or other remittances received by Borrower for application to Accounts
will be received by Borrower in trust for Lender, and Borrower will turn over to
Lender the identical remittances as speedily as possible, appropriately
endorsed, if necessary. As compensation to Lender for delays in the collection
and clearance of such checks, Borrower agrees to pay interest on each
remittance, including wire transfers, from the date of Lender's receipt thereof
plus the number of days set forth on Item 4 of the Schedule at the rate
applicable to loans outstanding hereunder, as set forth in Section 3 below.
Borrower will account fully and faithfully for and promptly pay or turn over to
Lender proceeds in whatever form received of the sale or other disposition of
any Collateral, and Borrower agrees that the inclusion of proceeds in
"Collateral" will not be deemed to mean that Lender consents to Borrower's
disposition of Collateral other than in accordance with the terms of this
Agreement.
(e) Conditions to Obligation to Make Loans. Borrower acknowledges that
Lender's obligation to make loans to Borrower (or to issue or create or cause
the issuance or creation by Lender or its Affiliates of letters of credit or
acceptances for Borrower's account) is subject to the following terms and
conditions:
(i) Lender has no obligation to make the initial loan to Borrower or
to extend any other financial accommodation to Borrower unless and until
Borrower delivers to Lender, in form and substance reasonably satisfactory to
Lender, each agreement, instrument, legal opinion and other document specified
on Item 5 of the Schedule.
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(ii) Lender's obligation to make any loans to Borrower and extend
other financial accommodations to Borrower (including the initial loans) is
subject to the conditions that, as of the date of any such loan or other
accommodation, no Default will have occurred and be continuing hereunder, there
will have occurred no material adverse change in Borrower's financial condition
or operations or in Borrower's business prospects as compared to the state of
facts existing on the Agreement Date, and Borrower's representations and
warranties set forth in this Agreement (including any amendment, modification,
supplement or extension hereof) will be true and correct in all material
respects as if made on and as of the date of each subsequent credit request.
Each request for a borrowing or other financial accommodation by Borrower will
be deemed to be a reaffirmation of each of Borrower's warranties and
representations hereunder.
(f) Repayment of Loans. Upon a Default, Borrower will repay upon demand all
of the Obligations. If no demand is earlier made, Borrower will repay all
Obligations in full, without demand or notice, on the last day of the term of
this Agreement (as provided in clause (g) below). If at any time for any reason,
the aggregate outstanding principal amount of all loans exceeds the Borrowing
Base or any other limitation on the amount available to be borrowed hereunder,
Borrower will immediately, without notice or demand, repay the outstanding
principal amount of the loans, together with accrued and unpaid interest on the
amount repaid, in an amount equal to such excess.
(g) Maturity. This Agreement will continue in full force and effect from
the Agreement Date until the termination date provided for in Item 6 of the
Schedule.
(h) Voluntary Termination. Borrower may terminate this Agreement at any
time upon 90 days' prior written notice to Lender. On the date specified in such
notice, termination will be effective, so long as Borrower has paid to Lender,
in same day funds, an amount equal to the aggregate principal amount of all
loans outstanding on such date, together with accrued interest thereon, the
originals of all letters of credit and bankers acceptances, if any, issued or
created by Lender or any of its Affiliates for Borrower's account have been
returned for cancellation or have been presented and paid by Borrower or other
arrangements satisfactory to Lender have been made, all other Obligations
outstanding and unpaid have been paid in full in cash, and Borrower has provided
Lender an indemnification agreement satisfactory to Lender with respect to
returned and dishonored items and such other matters as Lender shall require.
(i) Termination on Default. Notwithstanding the foregoing, should a Default
occur and be continuing, Lender will have the right to terminate this Agreement
at any time without notice.
(j) Survival. Notwithstanding termination, all the terms, conditions, and
provisions hereof (including Lender's security interest in the Collateral, but
excluding any obligations of Lender hereunder) will continue to be fully
operative until all Obligations have been fully disposed of, concluded, paid,
satisfied, and liquidated.
(k) Payments as Loans. Borrower's failure to pay any amount due from
Borrower under this Agreement or any other Loan Document, whether for principal,
interest, fees, premiums, costs, expenses or otherwise, shall be deemed to be a
request by Borrower for a loan
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hereunder, and Lender may charge Borrower's loan account for any such amount.
Additionally, if Lender determines in its discretion that extensions of credit
are necessary to protect the Collateral, Lender is hereby authorized to make
such extensions of credit and charge them to Borrower's loan account.
3. Interest and Fees.
(a) Interest on Loans. Borrower will pay Lender or, at Lender's option,
Lender may charge Borrower's loan account with, interest on the average daily
net principal amount of loans outstanding hereunder, calculated monthly and
payable on the first day of each calendar month, at a rate (computed on the
basis of the actual number of days elapsed over a year of 360 days) equal to sum
of the Prime Rate plus the interest margin specified in Item 7 of the Schedule.
The "Prime Rate" is, at any time, the rate of interest noted in The Wall Street
Journal, Money Rates section, as the "Prime Rate" (currently defined as the base
rate on corporate loans posted by at least 75% of the nation's thirty (30)
largest banks). In the event that The Wall Street Journal quotes more than one
rate, or a range of rates, as the Prime Rate, then the Prime Rate shall mean the
average of the quoted rates. In the event that The Wall Street Journal ceases to
publish a Prime Rate, then the Prime Rate shall be the average of the three (3)
largest U.S. money center commercial banks, as determined by Lender. The "Prime
Rate" may not be the lowest or best rate at which Lender calculates interest or
extends credit. Any change in the Prime Rate shall be effective for purposes of
calculating interest hereunder as of the date of such change.
(b) Default Interest. To the extent permitted by law and without limiting
any other right or remedy of Lender hereunder, whenever there is a Default under
this Agreement, the rate of interest on the unpaid principal balance of the
Obligations shall, at the option of Lender, be increased by adding the default
margin identified on Item 8 of the Schedule to the interest rate otherwise in
effect hereunder. Lender may charge such default interest rate retroactively
beginning on the date the applicable Default first occurred or existed. Borrower
acknowledges that: (i) such additional rate is a material inducement to Lender
to make the loans described herein; (ii) Lender would not have made the loans in
the absence of the agreement of Borrower to pay such additional rate; (iii) such
additional rate represents compensation for increased risk to Lender that the
loans will not be repaid; and (iv) such rate is not a penalty and represents a
reasonable estimate of (A) the cost to Lender in allocating its resources (both
personnel and financial) to the ongoing review, monitoring, administration and
collection of the loans, and (B) compensation to Lender for losses that are
difficult to ascertain. In the event of termination of this Agreement by either
party hereto, Lender's entitlement to this charge will continue until all
Obligations are paid in full.
(c) Fees. Borrower will pay to Lender the fees set forth in Item 9 of the
Schedule.
(d) No Usury. Borrower acknowledges that Lender does not intend to reserve,
charge or collect interest on money borrowed under this Agreement at any rate in
excess of the rates permitted by applicable law and that, should any interest
rate provided for in this Agreement exceed the legally permissible rate(s), the
rate will automatically be reduced to the maximum rate permitted under
applicable law. If Lender should collect any amount from Borrower which, if it
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were interest, would result in the interest rate charged hereunder exceeding the
maximum rate permitted by applicable law, such amount will be applied to reduce
principal of the Obligations or, if no Obligations remain outstanding, will be
refunded to Borrower.
(e) Monthly Statements. Lender will render a statement to Borrower each
month for loans, payments, and other transactions pursuant to this Agreement,
and such statement rendered by Lender will be binding upon Borrower (in the
absence of manifest error) unless Lender is notified in writing to the contrary
within 30 days after the date such statement is rendered.
4. Representations and Warranties of Borrower.
(a) Authority, Compliance with Laws, Litigation, No Material Adverse
Change, Etc. Borrower represents and warrants to Lender that: (i) Borrower's
exact legal name, type of organization, state of organization and organizational
identification number are fully and accurately set forth on Item 10 of the
Schedule, and Borrower is duly organized and validly existing under the laws of
such state of organization; (ii) the execution, delivery, and performance of
this Agreement and the other Loan Documents are within Borrower's corporate
powers, have been duly authorized, do not violate Borrower's constituent
documents, any law or regulation, including without limitation, any law or
regulation relating to occupational health and safety or protection of the
environment, applicable to Borrower, or any indenture, agreement, or undertaking
to which Borrower is a party or by which Borrower or Borrower's property is
bound; (iii) this Agreement and the other Loan Documents to which Borrower is a
party constitute valid, binding and enforceable obligations of Borrower in
accordance with the terms hereof and thereof, except as enforceability may be
limited by bankruptcy, insolvency, fraudulent conveyance, moratorium or other
similar laws applicable to creditors' rights generally or by generally
applicable equitable principles affecting the enforcement of creditors' rights;
(iv) Borrower has no subsidiaries or other investments in other Persons, except
as set forth on Item 11 of the Schedule; (v) Borrower is in compliance in all
material respects with all laws, rules and regulations applicable to Borrower,
including laws, rules or regulations concerning the environment, occupational
health and safety and pensions or other employee benefits, and including all
applicable insurance, laws and regulations; (vi) except as set forth on Item 12
of the Schedule, there is no litigation or investigation pending against
Borrower (or, so far as Borrower is aware, threatened) which, if it were decided
adversely to Borrower, could reasonably be expected to have a material adverse
effect on Borrower, Borrower's financial or operational condition or Borrower's
prospects (taking into account any insurance coverage that has been acknowledged
by the insurer); (vii) other than (A) debt that is to be repaid from the
proceeds of the first advance hereunder, (B) the Oak Street Obligations, and (C)
as set forth on Item 13 of the Schedule, Borrower is not indebted to any other
Person for money borrowed, nor has Borrower issued any guaranty of payment or
performance by any other Person; (viii) since the date of the financial
statements of Borrower most recently delivered to Lender, there has been no
material adverse change in Borrower's business, Borrower's financial or
operational condition or Borrower's business prospects; and (ix) Borrower is,
and after giving effect to the initial loans under this Agreement and the
application of the proceeds of such loans Borrower will be, solvent and has
sufficient revenues to pay Borrower's obligations as they come due and adequate
capital with which to conduct Borrower's business.
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(b) Title to Assets, Other Collateral Matters. Borrower represents and
warrants to Lender that: (i) Borrower has good and marketable title to the
Collateral, free of all Liens except for Permitted Liens, and no financing
statement, mortgage, notice of Lien, deed of trust, security agreement, or any
other agreement or instrument creating or giving notice of any Lien against any
of the Collateral has been signed, authorized or delivered by Borrower, except
in Lender's favor or with respect to Permitted Liens; (ii) with regard to each
Commission, except as set forth on a Borrowing Base Certificate including such
Commission: (A) the Insurance Policy and Agency Agreement shall be in full force
and effect; and (B) no dispute with the Insurance Company or the Policy Holder
will exist in any respect, including, without limitation, disputes as to price,
terms, or warranties, and claims of set-off, release from liability or defense
based upon any act of God or a public enemy or war or because of the
requirements of law or of rules, orders, or regulations having the force of law;
(iii) all Insurance Policies meet all applicable governmental standards and
comply with applicable laws; (iv) Borrower has all necessary licenses and
governmental approvals (including insurance licenses) necessary or appropriate
to operate Borrower's business in each state in which Borrower does business;
(v) all Equipment is in good condition and state of repair, ordinary wear and
tear excepted; (vi) in the past five years, except as set forth on Item 14 of
the Schedule (A) Borrower has not used any other legal, trade or fictitious
names, and (B) Borrower has not been a party to any merger or purchased assets
from any other Person other than in the ordinary course of business; and (vii)
each of Borrower's chief executive office and principal place of business, all
Inventory, all Equipment, all books and records and all other Collateral is
located at the addresses (including the county) set forth on Item 15 of the
Schedule and has not been located at any other location during the five year
period prior to the Agreement Date.
(c) Ownership Structure. Borrower represents and warrants that Item 16 of
the Schedule accurately describes the ownership of Borrower's outstanding
capital stock.
(d) Agency Agreements. Borrower has provided to Lender a true, correct and
complete copy of the Agency Agreements existing as of the Agreement Date which
represent at least 75% of Borrower's Commission revenue for the one-year period
immediately preceding the Agreement Date, together with all amendments thereto.
Each such Agency Agreement is in full force and effect and no default or event
of default exists by Borrower or the Insurance Company party thereto.
(e) Additional Representations. Borrower represents and warrants to Lender
that: (i) Borrower is not engaged as one of Borrower's principal activities in
owning, carrying or financing the purchase or ownership by others of "margin
stock" (as defined in Regulation U of the Board of Governors of the Federal
Reserve System); (ii) Borrower owns no real property and leases no real property
other than as listed on Item 17 of the Schedule; (iii) a true, correct and
complete list of any warehousemen, processors, consignees or other bailees with
possession or control of any Inventory is set forth on Item 17 of the Schedule;
and (iv) a list and brief description of all bank accounts maintained by
Borrower with any bank or financial institution is set forth on Item 18 of the
Schedule.
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5. Collateral.
(a) Grant of Security Interest. To induce Lender to accept this Agreement
and to make loans to Borrower from time to time pursuant to its terms, Borrower
hereby grants to Lender, for itself and as agent for any Affiliate of Lender, a
security interest in, and assigns, mortgages and pledges to Lender, for itself
and as agent for any Affiliate of Lender, all of Borrower's right, title and
interest in and to all of Borrower's property, whether real or personal,
tangible or intangible, now owned or existing or hereafter acquired or arising,
including all of the following (collectively, the "Collateral"):
(i) all Accounts, Inventory, Equipment, Goods, General Intangibles and
Negotiable Collateral;
(ii) all investment property, securities and securities accounts and
financial assets, as well as all bank and depository accounts;
(iii) all chattel paper (whether tangible or electronic) and contract
rights (including all of Borrower's rights to receive Commissions under all
Agency Agreements);
(iv) all guaranties, collateral, Liens on real or personal property,
leases, letters of credit, letter-of-credit rights, supporting obligations,
and all other rights, agreements, and property securing or relating to
payment of Accounts or any other Collateral;
(v) all documents, books and records relating to any Collateral or to
Borrower's business;
(vi) all other property of Borrower's now or hereafter in the
possession or control of Lender or any of Lender's Affiliates (including
cash, money, credits and balances of Borrower held by or on deposit with
Lender or any Affiliate of Lender);
(vii) all other assets of Borrower or any guarantor of the Obligations
in which Lender receives a security interest to secure all or part of the
Obligations or which hereafter come into the possession, custody or control
of Lender or any Affiliate of Lender;
(viii) all of Borrower's commercial tort claims listed on (A) Item 19
of the Schedule (which Borrower represents and warrants is a true, accurate
and complete list of all of Borrower's commercial tort claims as of the
Agreement Date) or (B) any other writing provided to Lender pursuant to
Section 7(g); and
(ix) all proceeds and products of all of the foregoing in any form,
including amounts payable under any policies of insurance insuring all or
any of the foregoing against loss or damage, all parts, accessories,
attachments, special tools, additions, replacements, substitutions and
accessions to or for all or any of the foregoing, all condemnation or
requisition payments with respect to all or any of the foregoing and all
increases and profits received from all or any of the foregoing.
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(b) Obligations. Such grant, assignment, mortgage and transfer is made for
the purpose of securing and the Collateral secures and will continue to secure
all of the Obligations.
6. Financial Covenants. Borrower shall comply with each of the financial
covenants set forth on Item 20 of the Schedule.
7. Collateral Covenants.
(a) Accounts. Borrower will notify Lender promptly of and settle all
disputes with each Customer and Policy Holder, but, if Lender so elects while a
Default exists, Lender will have the right at all times to settle, compromise,
adjust, or litigate all such disputes directly with the Customer, Policy Holder
or other complainant upon such terms and conditions as Lender deems advisable
without incurring liability to Borrower for Lender's performance of such acts.
All of Borrower's books and records concerning Commissions and other Accounts
and a copy of Borrower's general ledger will be maintained at one or more of the
locations set forth on Item 15 of the Schedule. All Commissions included on any
Borrowing Base Certificate will be, except as indicated on such Borrowing Base
Certificate or subsequently in writing to Lender, bona fide and existing
obligations of Insurance Companies arising out of the issuance of Insurance
Policies in the ordinary course of Borrower's business, owned by and owing to
Borrower without defense, setoff or counterclaim, and will be subject to a
perfected, first-priority security interest in Lender's favor and will be free
and clear of all other Liens (other than a junior Lien in favor of Oak Street).
Borrower shall not permit any Commission to be included as an "Eligible
Insurance Commission" under the Oak Street Credit Agreement at the same time
that such Commission is included as an Eligible Commission hereunder. Borrower
acknowledges and agrees that Oak Street and Lender will be advancing loans
against the value of similar types of Collateral, and Borrower agrees to provide
such information as Lender and/or Oak Street may request from time to time in
order to confirm that neither Lender nor Oak Street is making loan advances
against the value of a Commission in which such lender does not have a
first-priority security interest.
(b) Inventory. All Inventory will at all times be located at one of the
Inventory locations set forth on Item 15 of the Schedule as the current location
of Borrower's chief executive office or a current location of other Collateral,
will be subject to a perfected, first-priority security interest in Lender's
favor and will be free and clear of all other Liens, other than Permitted Liens.
Sales of Inventory will be made in compliance with all material requirements of
applicable law.
(c) Equipment. Borrower will maintain all Equipment used or useful in
Borrower's business in good and workable condition, ordinary wear and tear
excepted, subject to a perfected, first-priority security interest in Lender's
favor and free and clear of all other Liens (other than Permitted Liens), at one
of the locations set forth on Item 15 of the Schedule as the current location of
Borrower's chief executive office or a current location of other Collateral.
(d) Defense of Title. All Collateral will at all times be owned by
Borrower, and Borrower will defend Borrower's title to the Collateral against
the claims of third parties. Borrower will at all times keep accurate and
complete records of the Collateral.
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(e) Perfection; Further Assurances. Borrower will give Lender at least 30
days' prior written notice of any change in Borrower's name, state of
organization or organizational identification number, any change in the location
of Borrower's principal place of business or chief executive office, any change
in the locations of Borrower's Inventory or Equipment and any acquisition by
Borrower of any interest in real property. Borrower will, at Borrower's expense,
promptly execute and deliver from time to time at Lender's request and pay the
costs of filing such additional financing statements, mortgages, or other
evidences of Liens as may be necessary or desirable to perfect or continue
perfection of Lender's security interest in Borrower's property or, at Lender's
request, to create and perfect a Lien on newly acquired real property. Borrower
will use all reasonable efforts to obtain from any landlord, warehouseman, or
other third party operator of premises on which any Collateral is located an
acceptable Lien waiver or subordination agreement in Lender's favor with respect
to such Collateral. All Collateral is and will continue to be, except as
expressly consented to by Lender, personal property and will not, by reason of
attachment or connection to any realty, either become or be deemed to be a
fixture or appurtenance to such realty and will at all times be readily
removable without material damage to any realty. In the event that any
Collateral, including proceeds, is evidenced by or consists of Negotiable
Collateral, Borrower shall, immediately upon written request therefor from
Lender (but subject to the rights of Oak Street under the Oak Street
Intercreditor Agreement), endorse and assign such Negotiable Collateral over to
Lender and deliver actual physical possession of the Negotiable Collateral to
Lender. Borrower shall at any time and from time to time take such steps as
Lender may request for Lender (i) to obtain an acknowledgment, in form and
substance satisfactory to Lender, of any bailee having possession of any of the
Collateral that such bailee holds such Collateral for Lender, (ii) to obtain
"control" of any investment property, deposit accounts, letter-of-credit rights
or electronic chattel paper in accordance with Article 9 of the UCC, with any
agreements establishing control to be in form and substance satisfactory to
Lender, and (iii) otherwise to insure the continued perfection and priority of
Lender's security interest in any of the Collateral and of the preservation of
its rights therein.
(f) Insurance. Borrower will obtain and maintain in full force and effect
insurance covering the Collateral against all risks to which the Collateral is
exposed, including loss, damage, fire, theft, and all other such risks, in such
amounts, with such companies, under such policies and in such form as will be
satisfactory to Lender, which policies will name Lender as an additional insured
and provide that loss thereunder will be payable to Lender as Lender's interests
may appear upon a loss payee endorsement acceptable to Lender. All proceeds of
any such insurance will be paid over to Lender directly, and Lender may apply
such proceeds to payment of the Obligations, whether or not due, in such order
of application as Lender determines or, in Lender's sole discretion, apply such
proceeds, in whole or in part, to the replacement, restoration or rebuilding of
the lost or damaged property. Borrower will provide to Lender from time to time
certificates showing such coverage in effect and, at Lender's request, the
underlying policies.
(g) Commercial Tort Claims. If Borrower shall at any time acquire a
commercial tort claim, Borrower shall immediately notify Lender in a writing
signed by Borrower of the details thereof and grant to Lender in such writing a
security interest therein and in the proceeds
-17-
thereof, all upon the terms of this Agreement, with such writing to be in form
and substance satisfactory to Lender.
(h) Financing Statements. Lender may at any time and from time to time file
financing statements, continuation statements and amendments thereto that
describe the Collateral as "all assets" of Borrower or words of similar effect
and which contain any other information required by Part 5 of Article 9 of the
UCC for the sufficiency or filing office acceptance of any financing statement,
continuation statement or amendment, including whether Borrower is an
organization, the type of organization and any organization identification
number issued to Borrower. Borrower agrees to furnish any such information to
Lender promptly upon request. Any such financing statements, continuation
statements or amendments may be signed by Lender on behalf of Borrower or filed
by Lender without the signature of Borrower and may be filed at any time in any
jurisdiction. Borrower acknowledges that it is not authorized to file any
financing statement or amendment or termination statement with respect to any
financing statement naming Borrower as the debtor and Lender as the secured
party without the prior written consent of Lender, and Borrower agrees that it
shall not do so without the prior written consent of Lender.
8. Negative Covenants.
(a) No Merger. Borrower will not merge or consolidate with any other Person
or sell, transfer, lease, abandon, or otherwise dispose of a substantial portion
of Borrower's assets or any of the Collateral or any interest therein, except
that, so long as no Default has occurred and is continuing, Borrower may sell
Inventory in the ordinary course of Borrower's business.
(b) No Debt or Liens; Taxes. Borrower will not obtain or attempt to obtain
from any Person other than Lender any loans, advances, or other financial
accommodations or indebtedness of any kind, nor will Borrower enter into any
direct or indirect guaranty of any obligation of another Person, other than (i)
Subordinated Debt, (ii) the Oak Street Obligations in an aggregate principal
amount not to exceed $15,000,000, and (iii) indebtedness in connection with
purchase money security interests constituting Permitted Liens (and capital
leases) not to exceed, in aggregated principal amount, the amount set forth on
Item 21 of the Schedule at any one time outstanding. Borrower will not permit
any of Borrower's assets to be subject to any Lien other than Permitted Liens.
Borrower shall pay when due (or before the expiration of any extension period)
any tax or other assessment (including all required payments or deposits with
respect to withholding taxes), and Borrower will, upon request by Lender,
promptly furnish Lender with proof satisfactory to Lender that Borrower has made
such payments and deposits.
(c) No Distributions. Borrower will not retire, repurchase or redeem any of
Borrower's capital stock or other ownership interest in Borrower, nor declare or
pay any dividend in cash or other property (other than additional capital stock)
to Parent or any other owner or holder of any of Borrower's capital stock.
(d) No ERISA Liabilities. Borrower will make timely payments of all
contributions required to meet the minimum funding standards for Borrower's
employee benefit plans subject to the Employee Retirement Income Security Act of
1974 (as amended, "ERISA") and will promptly report to Lender the occurrence of
any reportable event (as defined in ERISA) and any
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giving or receipt by Borrower of any governmental notice (other than routine
requests for information) in respect of any such plan.
(e) Transactions with Affiliates. Borrower will not engage in any
transaction with any of Borrower's officers, directors, employees or other
Affiliates, except for an "arms-length" transaction on terms no less favorable
to Borrower than would be granted to Borrower in a transaction with a Person who
is not an Affiliate, which transaction shall be approved by Borrower's
disinterested directors and shall be disclosed in a timely manner to Lender
prior to the consummation of the transaction.
(f) Loans/Investments. Borrower will not make any loans or advances to or
extend any credit to any Person except (i) the extension of trade credit in the
ordinary course of business; and (ii) advances to employees not to exceed an
aggregate outstanding amount of $10,000 at any one time outstanding for all
employees. Borrower shall not purchase, acquire or otherwise invest in any
Person except: (A) existing investments in Borrower's subsidiaries described on
Item 11 of the Schedule; (B) direct obligations of the United States of America
maturing within one year from the acquisition thereof; (C) certificates of
deposit issued by, or investment accounts in, banks or financial institutions
having a net worth of not less than $50,000,000; and (D) commercial paper rated
A-1 by Standard & Poor's Ratings Group or P-1 by Xxxxx'x Investors Service, Inc.
Without limiting the generality of the foregoing, Borrower shall not (y) create
any new subsidiary, or (z) make any acquisition of any other Person, purchase
any all or substantially all of the assets of any other Person or purchase any
insurance policies or any "expirations" with respect to any insurance policies
from any other Person unless Lender has consented thereto in writing and such
acquisition otherwise constitutes a Permitted Acquisition.
(g) Capital Expenditures. Borrower and Parent, on a consolidated basis,
shall not make or incur capital expenditures in an aggregate amount in excess of
the amount set forth on Item 22 of the Schedule during any fiscal year.
(h) Oak Street Loan Documents. Borrower shall not amend, restate or
otherwise modify the Oak Street Credit Agreement or any other Oak Street Loan
Document without the prior written consent of Lender; provided, however, that
Borrower may amend the Oak Street Loan Documents without the consent of Lender
in order to increase the maximum principal amount of indebtedness thereunder to
an amount not to exceed Fifteen Million Dollars ($15,000,000).
9. Reporting and Information.
(a) Financial Statements. Borrower will submit to Lender as soon as
available, and in any case not later than 30 days after the end of each month,
on a consolidated and consolidating basis for Borrower and Parent, balance
sheets and detailed statements of profit and loss, prepared in accordance with
GAAP, certified by Borrower's Chief Executive Officer as presenting fairly, in
accordance with GAAP, Borrower's and Parent's financial condition as of the last
day of such month and Borrower's and Parent's results of operations for such
month and for the portion of Borrower's and Parent's fiscal year ending with
such month. Borrower will also submit to Lender annual financial statements, on
a consolidated and consolidating basis for
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Borrower and Parent, within 90 days after the end of each fiscal year, including
a balance sheet and the related statement of profit and loss and owners' equity,
prepared in accordance with the requirements set forth on Item 23 of the
Schedule. Borrower will also submit to Lender annually at least 60 days prior to
Borrower's fiscal year end forecasted financial statements for the upcoming
fiscal year on a consolidated and consolidating basis for Borrower and Parent,
containing a projected balance sheet and profit and loss statement. Together
with each monthly and annual financial statement, Borrower will deliver to
Lender the certification of Borrower's Chief Executive Officer in the form of
Exhibit B attached hereto to the effect that Borrower is in compliance with the
terms and conditions of this Agreement, and setting forth in detail the
calculation of all financial covenants, or, if Borrower is not in compliance,
describing the nature of any noncompliance and the steps Borrower is taking or
proposes to take to remedy the same.
(b) Collateral Reports. Concurrent with the execution of this Agreement by
Borrower and concurrent with each request for a loan pursuant to Section 2(a),
but no less frequently than as required by Item 24 of the Schedule, Borrower
shall deliver to Lender a fully completed Borrowing Base Certificate certified
by the Chief Executive Officer of Borrower as being true and correct. Concurrent
with the delivery of each such Borrowing Base Certificate, Borrower shall
provide a written report to Lender of all materially significant returns,
disputes and claims, together with sales and other reports relating to the
Accounts as required by Lender. Borrower shall deliver to Lender within fifteen
(15) days after the end of each month a report, reflecting the status as of the
end of each month and certified by the Chief Executive Officer of Borrower as
being true and correct, containing (i) a current detailed schedule (which may be
electronic so long as it is in a format reasonably accessible by Lender) of all
Insurance Policies and the Commissions payable in connection therewith,
segregated based on whether the Insurance Company is a Level 1 Insurance
Company, a Level 2 Insurance Company or otherwise, and whether the Insurance
Policy constitutes a Group One Policy or a Group Two Policy or otherwise, (ii) a
schedule detailing new Insurance Policies issued, Insurance Policies which have
been renewed, Insurance Policies which have expired and which not been renewed
and Insurance Policies which have been cancelled since the last such report,
segregated based on whether the Insurance Company is a Level 1 Insurance
Company, a Level 2 Insurance Company or otherwise, and whether the Insurance
Policy constitutes a Group One Policy or a Group Two Policy or otherwise, (iii)
a summary of the retention and loss rates for Insurance Companies representing
at least 85% of Borrower's revenue from Commissions, (iv) a current detailed
aging, by total and by vendor, of Borrower's accounts payable, (v) a copy of all
material correspondence relating to Insurance Policies, Commissions and/or any
other Collateral (e.g., terminations of or amendments to Agency Agreements,
decreases in Commissions payable to Borrower and errors and omissions claims),
and (vi) a schedule detailing all amounts received by Borrower directly from
Policy Holders (as opposed to Insurance Companies), which schedule shall set
forth the amounts allocated to premiums and to Commissions, all of which shall
be set forth in a form and shall contain such information as is acceptable to
Lender. At Lender's request, Borrower shall deliver such information more or
less often than described above and such other information with respect to the
Collateral, Borrower or Borrower's business or financial condition as Lender may
reasonably request.
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(c) Electronic Commission Statements. To the extent not prohibited by
applicable law or by the applicable Insurance Company, Borrower will grant
Lender direct access to any electronic Commission statements furnished by any
Insurance Company, and Borrower will provide Lender with any passwords or other
information necessary to obtain such access. If electronic Commission
information is not available from any Insurance Company, then Borrower shall
furnish to Lender such financial information, including original (manual)
Commission statements and/or electronic Commission statements as made available
to Borrower from such Insurance Company from time to time.
(d) Agency Agreements. Borrower will notify Lender as promptly as possible
of the termination of any material Agency Agreement or any material amendment
thereto and any material change in Commissions payable to Borrower thereunder.
(e) Obligor Financials. Within ninety days after each fiscal year-end,
Borrower will cause each Obligor to deliver to Lender a financial statement as
of such year-end, in such form as Lender may reasonably request.
(f) Oak Street. Borrower will promptly (i) notify Lender of any loan
requested by Borrower from Oak Street, (ii) notify Lender of any default or
event of default by Borrower under any Oak Street Loan Document and provide
Lender with a copy of any correspondence to or from Oak Street in connection
therewith, (iii) provide Lender with a copy of each borrowing base certificate
and compliance certificate submitted to Oak Street, (iv) provide Lender with a
copy of each statement for the Oak Street Obligations, and (v) provide Lender
with such other information as Lender may reasonably request from time to time
with respect to the Oak Street Loan Documents and the Oak Street Obligations.
(g) Other Information. Borrower will notify Lender as promptly as possible
of any Default, any receipt by Borrower of notice from any governmental
authority that Borrower has or may have violated any law, rule or regulation
applicable to Borrower or the terms or conditions of any permit or license
Borrower holds or is required to hold in connection with the conduct of
Borrower's business, any amendment to Borrower's constituent documents, any
change in Borrower's management or ownership, and the commencement of any
material litigation, claim or action against Borrower.
10. Inspection Rights; Expenses; Etc.
(a) Inspection. Lender may examine and make copies of Borrower's records,
the Collateral and all other assets of Borrower or any portion thereof, wherever
located, and may enter upon Borrower's premises for such purposes, without
notice, during business hours. Borrower will assist Lender in whatever way
necessary to make each such examination. Lender may discuss Borrower's financial
condition with Borrower's independent accountants without liability to Lender or
such accountants.
(b) Appraisals. Lender or its designees may conduct appraisals of the
Insurance Policies, the Expirations and the other Collateral from time to time
at the expense of Borrower. Borrower agrees to provide such access and
information with respect to such appraisals as may be
-21-
reasonably requested by Lender, and Borrower agrees to take such action or
provide such other cooperation as Lender may reasonably request in connection
with such appraisals. Borrower acknowledges and agrees that Lender may adjust
the advance rates set forth in the definition of "Borrowing Base" upward or
downward in its discretion based on the results of such appraisals, and Borrower
agrees to promptly repay the Obligations to the extent any overadvance results
therefrom. The foregoing sentence shall not be deemed to limit any of Lender's
other rights hereunder, including Lender's right to establish reserves in its
discretion or to adjust the advance rates set forth in the definition of
"Borrowing Base" while a Default exists.
(c) Performance by Lender. Lender may, from time to time at Lender's
option, perform any agreement of Borrower's hereunder which Borrower fails to
perform and take any other action which Lender deems necessary for the
maintenance or preservation of any of the Collateral or Lender's interest
therein, and Borrower agrees to reimburse Lender immediately on demand for all
of Lender's expenses in connection with the foregoing (including, without being
limited to, reasonable fees and expenses of legal counsel), together with
interest thereon at the default rate of interest provided for herein from the
date any such expense is incurred until reimbursed by Borrower.
(d) Field Examinations; Inspections. Lender shall have the right without
hindrance or delay to conduct field examinations to inspect the Collateral,
Borrower's books and records and all other aspects of Borrower's business.
Borrower agrees to pay for such examinations as more fully described on Item 25
of the Schedule. Lender shall have full access to all records available to
Borrower from any credit reporting service, bureau or similar service and shall
have the right to examine and make copies of any such records. Lender may
exhibit a copy of this Agreement to such service and such service shall be
entitled to rely on the provisions hereof in providing access to Lender as
provided herein.
11. Rights of Setoff, Application of Payments, Etc. Lender will be entitled
to hold or set off all sums and all other property of Borrower at any time to
Borrower's credit or in Lender's possession (or the possession of any of
Lender's Affiliates) by pledge or otherwise or upon or in which Lender may have
a Lien, as security for any and all of the Obligations. Lender will have the
right and is hereby irrevocably authorized and directed to charge to Borrower's
account the amounts of any and all such Obligations. Recourse to the Collateral
or other security for the Obligations will not at any time be required and
Borrower hereby waives any right of marshalling Borrower may have. Borrower's
obligation to pay or repay the Obligations is unconditional. Borrower agrees
that Lender may take such action with regard to the custody and collection of
Accounts assigned to Lender as Lender may deem necessary. Borrower agrees that
failure to take any action with regard to any given Account will not be
unreasonable until and unless Lender receives a written request for specific
action from Borrower with regard thereto and fails to respond thereto within a
commercially reasonable time. Borrower irrevocably waives the right to direct
the application of any and all payments and collections at any time or times
hereafter received by Lender from or on behalf of Borrower (including any rights
Borrower may have under Section 13-4-42 of the Official Code of Georgia), and
Borrower hereby irrevocably agrees that Lender shall have the continuing
exclusive right to apply and reapply any and all such payments and collections
received at any time or times hereafter by Lender or its agent against the
Obligations, in such manner and in such order as Lender may deem advisable.
-22-
12. Attorney-in-Fact. Borrower hereby appoints and constitutes Lender as
Borrower's attorney-in-fact: (a) at any time, (i) to endorse Borrower's name
upon any notes, acceptances, checks, drafts, money orders, and other evidences
of payment that come into Lender's possession and to deposit or otherwise
collect the same; (ii) to send verifications of Accounts to Customers; and (iii)
to execute in Borrower's name any financing statements, affidavits and notices
with regard to any and all Lien rights; and (b) while any Default exists, (i) to
receive, open, and dispose of all mail addressed to Borrower; (ii) to notify the
postal authorities to change the address and delivery of mail addressed to
Borrower to such address as Lender may designate; (iii) to sign Borrower's name
on any invoice or xxxx of lading relating to the Collateral, on drafts against
Customers, and notices to Customers; (iv) to sign Borrower's name on any
correspondence or instructions to any Insurance Company in order to cause such
Insurance Company to pay Commissions directly to Lender; (v) to sign Borrower's
name on any correspondence or instructions necessary to sell or otherwise
realize upon the Expirations or any other Collateral, and (vi) to do all other
acts and things necessary to carry out this Agreement. All acts of said
attorney-in-fact are hereby authorized, ratified and approved, and said
attorney-in-fact will not be liable for any errors or mistake of fact or law.
This power, being coupled with an interest, is irrevocable while any of the
Obligations remain unpaid or Lender has any commitment to Borrower under this
Agreement or otherwise.
13. Defaults and Remedies.
(a) Defaults. For purposes of this Agreement, "Default" means the
occurrence of any of the following events: (i) non-payment when due of any
amount payable on any of the Obligations or breach of any covenant or failure to
perform any agreement or failure to meet any of Borrower's obligations contained
herein, in any other Loan Document or in any agreement out of which any of the
Obligations arose; (ii) non-payment when due of the premium on any insurance
policy required to be maintained hereunder; (iii) any statement, representation,
or warranty made in writing in this Agreement or in any other writing or
statement at any time furnished or made by Borrower to Lender proves to have
been untrue in any material respect as of the date furnished or made; (iv) any
default by Borrower or Parent under (A) any Oak Street Loan Document, (B) any
other agreement for borrowed money, or (C) any other agreement involving more
than the amount set forth on Item 26 of the Schedule; (v) suspension of the
operation of Borrower's or Parent's present business; (vi) Borrower, Parent, any
Support Party or any other Person primarily or secondarily, directly or
indirectly, liable on any of the Obligations, including, but not limited to, any
guarantor thereof (individually an "Obligor" and collectively, the "Obligors"),
becomes insolvent or unable to pay its debts as they mature, or admits in
writing that it is insolvent or unable to pay its debts, makes an assignment for
the benefit of creditors, makes a conveyance fraudulent as to creditors under
any state or federal law, or a proceeding is instituted by or against any
Obligor alleging that such Obligor is insolvent or unable to pay debts as they
mature, or a petition under any provision of Title 11 of the United States Code,
as amended, is filed by or against any Obligor, and in the case of any such
involuntary proceeding, such proceeding continues undismissed or unstayed for 30
consecutive calendar days or any order granting the relief requested shall be
entered; (vii) entry of any judgment in excess of the amount set forth on Item
27 of the Schedule against any Obligor or creation, assertion, or filing of any
judgment or tax Lien against the property of any Obligor, in each case which
remains
-23-
undischarged for 10 days after such entry or filing, unless such Obligor has
provided evidence satisfactory to Lender in Lender's discretion that such
Obligor has set aside adequate cash reserves to fully satisfy such judgment or
tax Lien, including any interest and penalties with respect thereto; (viii)
death of any Obligor who was a natural person, or death or withdrawal of any
partner of any Obligor which is a partnership, or dissolution, merger, or
consolidation of any Obligor which is a corporation, partnership or limited
liability company; (ix) transfer of a substantial part (determined by market
value) of the property of any Obligor; (x) sale, transfer or exchange, either
directly or indirectly, of a controlling stock or equity ownership interest of
any Obligor; (xi) termination, unenforceability or withdrawal of any guaranty or
support agreement for or with respect to the Obligations, or failure of any
Obligor to perform any of its obligations under such a guaranty or support
agreement or assertion by any Obligor that it has no liability or obligation
under such guaranty or support agreement; (xii) appointment of a receiver for
the Collateral or for any other property in which Borrower has an interest;
(xiii) seizure of any Collateral by any Person other than Lender; (xiv) any
person identified on Item 28 of the Schedule shall for any reason cease to hold
the office of Borrower or Parent set forth opposite such person's name on Item
28 of the Schedule and a replacement satisfactory to Lender shall not be
appointed within 60 days; (xv) the occurrence of any act, omission, event or
circumstance which has or could reasonably be excepted to have a materially
adverse effect on Borrower or any other Obligor; (xvi) payment by Borrower on
any Subordinated Debt in violation of the applicable subordination agreement;
(xvii) Parent shall cease to own 100% of the outstanding capital stock of
Borrower; (xviii) the Oak Street Intercreditor Agreement (or any material
portion thereof) shall be ineffective or unenforceable, or Oak Street shall
assert any such ineffectiveness or unenforceability, or any dispute, conflict or
disagreement shall arise between Lender and Oak Street with respect to Borrower,
Parent or any Collateral (including the relative priorities of Lender and Oak
Street therein), or (xix) the Pension Benefit Guaranty Corporation or the
Department of Labor commences proceedings under ERISA to terminate any of
Borrower's employee pension benefit plans.
(b) Remedies. If a Default occurs and is continuing:
(i) Lender may, without demand or notice to Borrower, terminate
Lender's commitment, if any, to make loans or to extend other financial
accommodations to Borrower, and may declare the entire principal amount of all
loans outstanding hereunder, all interest thereon, any unpaid fees and all other
Obligations of any kind or nature to be, and thereupon the same will immediately
become, due and payable in full; and, in the event of a Default described under
clause (vi) of Section 13(a), such termination and acceleration shall
automatically occur without any notice, demand or presentment of any kind.
Borrower agrees to deposit with Lender a cash sum equal to the amount of letters
of credit and acceptances issued or guaranteed by Lender or any Affiliate of
Lender which have not been drawn upon or matured, which funds will be used to
reimburse Lender or such Affiliate of Lender upon drawing under any letter of
credit or maturity of any acceptances.
(ii) Lender may decrease the advance rates set forth in the definition
of "Borrowing Base" in Lender's discretion.
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(iii) Lender or Lender's designee may notify Customers (including any
Insurance Company and any Policy Holder) that the Accounts (including the
Commissions) have been assigned to Lender and that Lender has a security
interest therein, collect them directly, and charge the collection costs and
expenses to Borrower's loan account.
(iv) Without notice to or demand upon Borrower or any other Person,
Lender may make such payments and do such acts as Lender considers necessary or
reasonable to protect its security interest in the Collateral. Borrower
authorizes Lender to enter each premises where any Collateral is located, take
and maintain possession of the Collateral, or any part of it, and to pay,
purchase, contest or compromise any Lien which in Lender's opinion appears to be
prior or superior to its security interest and to pay all expenses incurred in
connection therewith.
(v) Lender may ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale and sell the Collateral. Any such
sale may be either a public or private sale, or both, by way of one or more
contracts or transactions, for cash or on terms. It is not necessary that the
Collateral be present at any such sale.
(vi) Lender may cause incoming telephone calls and electronic mail to
Borrower's customer service center(s) to be re-directed to Lender or its
designee.
(vii) Lender may, without notice to Borrower except as expressly
provided herein, at Lender's option, exercise any of the remedies available to
Lender as a secured party under the Uniform Commercial Code as in effect in any
applicable jurisdiction, or otherwise available to Lender under applicable law.
Borrower agrees, upon Default, to cease the sale or other disposition of the
Collateral, except with Lender's prior written consent, and to assemble at
Borrower's expense all the Collateral at a convenient place acceptable to Lender
and, within three Business Days of Lender's request, provide Lender with the
original of all Agency Agreements. Lender may charge to Borrower's loan account
and Borrower will pay Lender upon demand all costs and expenses, including
reasonable attorneys' fees (including fees of attorneys that are regular
salaried employees of Lender or any of its Affiliates), in connection with: (A)
the liquidation of any Collateral; (B) obtaining or enforcing payment of the
Obligations; (C) the settlement, adjustment, compromise, or litigation of
Customer disputes; or (D) the prosecution or defense of any action or proceeding
either against Lender or against Borrower concerning any matter growing out of
or in connection with this Agreement and/or any Collateral and/or any
Obligations. If at any time Lender pays any state, city, local, federal, or
other tax or levy attributable to the Collateral, Borrower will repay to Lender
the amount of tax so paid by Lender. Borrower agrees that Lender may apply any
proceeds from disposition of the Collateral first to satisfy obligations secured
by Liens prior to Lender's security interest. Borrower will remain liable and
will pay on demand any deficiencies arising upon the liquidation of any
Collateral held by Lender.
(c) Notices. If any notice of intended disposition of the Collateral or of
any other act by Lender is required by law and a specific time period is not
stated therein, such notice, if given five days before such disposition or act,
in accordance with the provisions of Section 15(a), will be deemed reasonably
and properly given.
-25-
(d) License. Borrower hereby grants to Lender a license or other right to
use, without charge, Borrower's labels, patents, copyrights, rights of use of
any name, trade secrets, trade names, trademarks and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale and selling any Collateral and Borrower's
rights under all licenses, and all franchise agreements shall inure to Lender's
benefit.
(e) Remedies Cumulative. Lender's rights and remedies under this Agreement
and all other Loan Documents shall be cumulative. Lender shall have all other
rights and remedies not inconsistent herewith as provided under the UCC, by law,
or in equity. No exercise by Lender of one right or remedy shall be deemed an
election, and no waiver by Lender of any default on Borrower's part shall be
deemed a continuing waiver. No delay by Lender shall constitute a waiver,
election or acquiescence by it.
14. Indemnification. Borrower agrees to defend, indemnify, and hold
harmless Lender and Lender's directors, officers, employees, Affiliates,
representatives, attorneys and agents (each an "Indemnified Person") from and
against any and all penalties, fines, liabilities, damages, costs, or expenses
of whatever kind or nature asserted against any such Indemnified Person, arising
out of, or in any way related to this Agreement or any other Loan Document, or
the transactions contemplated hereby or thereby, including by reason of the
violation of any law or regulation relating to the protection of the environment
or the presence, generation, disposal, release, or threatened release of any
hazardous materials in connection with Borrower's business on, at or from any
property at any time owned or operated by Borrower, including, without
limitation, reasonable attorneys' and consultants' fees, investigation and
laboratory fees, court costs, and litigation expenses actually incurred;
provided, however, that Borrower shall not be required to indemnify any
Indemnified Person for any such penalties, fines, liabilities, damages, costs,
or expenses arising from the gross negligence or willful misconduct of such
Indemnified Person. Without limiting the foregoing, Borrower represents and
warrants that there has been no loan broker or investment banker involved in
connection with the transactions contemplated hereby other than GVC Financial
Services, LLC, and Borrower agrees to indemnify and hold Lender harmless from
any claim of compensation payable to GVC Financial Services, LLC and any other
loan broker or investment banker in connection with the transactions
contemplated hereby.
15. General Provisions.
(a) Notices. Except as specifically provided in this Agreement or in any of
the other Loan Documents, all notices and communications hereunder and
thereunder will be in writing or by telephone subsequently confirmed in writing.
Notices in writing will be delivered personally or sent by overnight courier
service, by certified or registered mail, postage pre-paid, or by facsimile
transmission and will be deemed received, in the case of personal delivery, when
delivered; in the case of overnight courier service, on the next Business Day
after delivery to such service; in the case of mailing, on the fourth Business
Day after mailing; and, in the case of facsimile transmission, upon transmittal
if confirmed by the sender's facsimile device; provided that in the case of
notices to Lender, Lender will be charged with knowledge of the contents thereof
only when such notice is actually received by Lender. A telephonic notice to
Lender as
-26-
understood by Lender will be deemed to be the controlling and proper notice in
the event of a discrepancy with or failure to receive a confirming written
notice. Notices to Lender or Borrower will be sent to the addresses set forth on
Item 29 of the Schedule, or any other address for either of Borrower or Lender
of which the other is notified by like notice.
(b) Governing Law. This Agreement will be governed by and construed and
enforced according to the laws of the State of Georgia.
(c) No Waiver. No waiver hereunder will be valid unless in writing signed
by Lender and then only to the extent therein stated. No delay or failure on
Lender's part in the exercise of any right or remedy hereunder will operate as a
waiver thereof or of Lender's right to exercise any other right or remedy.
(d) Time of Essence. Time is of the essence of this Agreement.
(e) Severability. Wherever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement will be prohibited by or invalid under
applicable law, such provision will be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
(f) Successors and Assigns. Borrower's and Lender's rights and obligations
hereunder will inure to the benefit of Borrower's and Lender's respective
successors and assigns, provided that Borrower acknowledges and agrees that
without Lender's prior written consent, which may be withheld for any reason or
no reason, Borrower may not assign Borrower's rights or obligations or any part
thereof hereunder to any other Person. Lender may assign this Agreement and its
rights and duties hereunder. Lender reserves the right to sell, assign,
transfer, negotiate or grant participations in all or any part of, or any
interest in, Lender's rights and benefits hereunder.
(g) Submission to Jurisdiction, Service, Etc. (i) Borrower agrees that any
suit, action or proceeding directly or indirectly arising out of or relating to
this Agreement, any other Loan Documents, the Obligations, the relationship
between Borrower and Lender created hereby, or arising out of any judgment
against Borrower entered by any court or other tribunal of competent
jurisdiction with respect to the enforcement of this Agreement, may be
instituted in any state court located in the state of Georgia or the United
States District Court for the Northern District of Georgia or in any other court
having subject matter jurisdiction, as Lender may select in Lender's sole
discretion. Borrower hereby expressly and irrevocably submits and consents to
the non-exclusive jurisdiction of any such court in any such suit, action or
proceeding, hereby waiving personal service of the summons and complaint, or
other process or papers issued therein. Borrower hereby waives, to the fullest
extent permitted by law, any objection Borrower may have to the venue of any
such suit, action or proceeding. Further, Borrower hereby irrevocably waives, to
the fullest extent Borrower may effectively do so, the defense of an
inconvenient forum to the maintenance of such suit, action or proceeding.
Borrower further agrees that a final judgment in any such suit, action or
proceeding brought in any such court or
-27-
tribunal will be conclusive and may be enforced in other jurisdictions by suit
on the judgment or in any other manner provided by law.
(ii) Borrower hereby agrees that service of process mailed or
delivered to Borrower at Borrower's address for notices provided herein will be
deemed in every respect effective service of process upon Borrower in any such
suit, action or proceeding in any such court or tribunal and will be taken and
held to be valid, personal service on Borrower, irrespective of whether Borrower
will then be doing, or at any time will have done, business within the State of
Georgia.
(iii) Nothing in this Section 15(g) will affect Lender's right to
serve legal process in any other manner permitted by law or affect Lender's
right to bring any action or proceeding against Borrower or Borrower's property
in the courts of any other jurisdiction.
(h) Waiver of Jury Trial. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, BORROWER AND LENDER HEREBY IRREVOCABLY AND EXPRESSLY WAIVE ALL RIGHT TO A
TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON
CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY
OTHER LOAN DOCUMENT, THE OBLIGATIONS OR ANY OF THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY OR EITHER PARTY'S ACTIONS IN THE NEGOTIATION, ADMINISTRATION,
OR ENFORCEMENT HEREOF OR THEREOF. EACH OF BORROWER AND LENDER ACKNOWLEDGES THAT
SUCH WAIVER IS MADE WITH FULL KNOWLEDGE AND UNDERSTANDING OF THE NATURE OF THE
RIGHTS AND BENEFITS WAIVED HEREBY, AND WITH THE BENEFIT OF ADVICE OF COUNSEL OF
ITS CHOOSING.
(i) Waiver of Hearing. BORROWER HEREBY KNOWINGLY, INTENTIONALLY AND
VOLUNTARILY WAIVES ALL RIGHTS WHICH BORROWER HAS UNDER CHAPTER 14 OF TITLE 44 OF
THE OFFICIAL CODE OF GEORGIA OR UNDER ANY SIMILAR PROVISION OF APPLICABLE LAW TO
NOTICE AND TO A JUDICIAL HEARING PRIOR TO THE ISSUANCE OF A WRIT OF POSSESSION
ENTITLING LENDER, ITS SUCCESSORS AND ASSIGNS TO POSSESSION OF THE COLLATERAL
UPON A DEFAULT. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING AND WITHOUT
LIMITING ANY OTHER RIGHT WHICH LENDER MAY HAVE, BORROWER CONSENTS THAT, IF
LENDER FILES A PETITION FOR AN IMMEDIATE WRIT OF POSSESSION IN COMPLIANCE WITH
SECTIONS 00-00-000 AND 00-00-000 OF THE OFFICIAL CODE OF GEORGIA OR UNDER ANY
SIMILAR PROVISION OF APPLICABLE LAW AND THIS WAIVER OR A COPY HEREOF IS ALLEGED
IN SUCH PETITION AND ATTACHED THERETO, THE COURT BEFORE WHICH SUCH PETITION IS
FILED MAY DISPENSE WITH ALL RIGHTS AND PROCEDURES HEREIN WAIVED AND MAY ISSUE
FORTHWITH AN IMMEDIATE WRIT OF POSSESSION IN ACCORDANCE WITH CHAPTER 14 OF TITLE
44 OF THE OFFICIAL CODE OF GEORGIA OR IN ACCORDANCE WITH ANY SIMILAR PROVISION
OF APPLICABLE LAW, WITHOUT THE NECESSITY OF AN ACCOMPANYING BOND AS OTHERWISE
REQUIRED BY SECTION 00-00-000 OF THE OFFICIAL CODE OF
-28-
GEORGIA OR IN ACCORDANCE WITH ANY SIMILAR PROVISION OF APPLICABLE LAW.
(j) Expenses. Borrower shall pay on demand all of Lender's costs and
expenses in connection with underwriting and performing due diligence with
respect to the transactions contemplated hereby and the preparation,
reproduction, execution, delivery, administration and enforcement of this
Agreement, including the reasonable fees and out-of-pocket expenses of Lender's
counsel, in each case whether incurred on, prior or subsequent to the Agreement
Date. In addition, Borrower shall pay any and all stamp and other taxes and
recording and filing fees payable in connection with the execution and delivery
of all other instruments and documents to be delivered hereunder. Such amounts
may be charged by Lender to Borrower's account as one or more loans hereunder.
All provisions in this Agreement providing for the payment or reimbursement of
Lender's attorneys' fees and expenses include, without limitation, such fees and
expenses incurred pursuant to or in connection with proceedings brought under 11
U.S.C., the Federal Bankruptcy Code.
(k) Execution in Counterparts. This Agreement may be executed in separate
counterparts, all of which shall constitute one and the same agreement.
(l) Entire Agreement. This Agreement and the other Loan Documents embody
the entire agreement and understanding between Lender and Borrower and supersede
all prior agreements and understandings relating to the subject matter hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement as of
the day and year first above written.
ADDISON YORK INSURANCE BROKERS LTD.
By: /s/ P. Podorieszach
-------------------------------------------
Primo Podorieszach, Chief Executive Officer
FCC, LLC, d/b/a FIRST CAPITAL
By: /s/ Xxxxx Xxxxxx
-------------------------------------------
Xxxxx Xxxxxx, Vice President
NOTARY JURAT FOR EXECUTION OF
WRITTEN OBLIGATIONS TO PAY MONEY
On this the ____ day of June, 2004, before me, the undersigned, a Notary
Public in and for the Province of British Columbia, County of Yale, Canada,
Primo Podorieszach personally appeared, who is personally known to me or proved
to me on the basis of satisfactory evidence to be the Chief Executive Officer of
Addison York Insurance Brokers Ltd., a Delaware corporation, who, being by me
first duly sworn, stated that:
1. He executed the foregoing Loan and Security Agreement on behalf of such
corporation pursuant to its operating agreement or a resolution of its
members and/or managers, said execution taking place in the City of
Kamloops, Province of British Columbia, County of Yale, Canada; and
2. He has this day delivered the foregoing Loan and Security Agreement to FCC,
LLC, d/b/a FIRST CAPITAL, at Xxxx County, Georgia via overnight courier.
Signature of Borrower's Officer:
By: /s/ P. Podorieszach
------------------------------------
Primo Podorieszach
Sworn to and subscribed before me this 3 day of June, 2004:
/s/ Xxxxxxx Xxxxxxx Xxxxxx
----------------------------------
Notary Signature
My Commission Expires: Xxxxxxx Xxxxxxx Xxxxxx
Barrister & Solicitor
000 -000 Xxxxxxx Xx.
Xxx-xxxxxxxx Xxxxxxxx, X.X. X0X 0X0
---------------------------------
[Affix Notarial Seal]
AFFIDAVIT REGARDING DELIVERY
On this the 3rd day of June, 2004, before me, the undersigned, a Notary
Public in and for the State of Georgia, County of Cherokee, Xxxxx Xxxxxx
personally appeared, personally known to me or proved to me on the basis of
satisfactory evidence to be a Vice President of FCC, LLC, d/b/a FIRST CAPITAL,
who, being by me first duly sworn, stated that he has received delivery of the
foregoing Loan and Security Agreement on behalf of FCC, LLC, d/b/a FIRST CAPITAL
in the State of Georgia, County of Xxxx.
/s/ Xxxxx Xxxxxx
-------------------------------------------
Signature of Officer of FCC, LLC,
d/b/a First Capital
Sworn to and subscribed before me this 3rd day of June, 2004:
/s/ Xxxxx Xxxxxxx
----------------------------------
Notary Signature
My Commission Expires:
9-22-07
---------------------------------
[Affix Notarial Seal]
SCHEDULE
This Schedule is a part of the foregoing Loan and Security Agreement dated
as of June 3, 2004, between ADDISON YORK INSURANCE BROKERS LTD., as borrower
("Borrower"), and FCC, LLC, d/b/a FIRST CAPITAL, as lender ("Lender").
1. Borrowing Base
"Borrowing Base" means, at any time, an amount equal to:
(a) the lesser of:
(i) $7,500,000, and
(ii) the sum of:
(A) 80% of the lesser of the dollar amount of Trailing Twelve
Month Eligible Commissions and the dollar amount of
Annualized Eligible Commissions with respect to Group One
Insurance Policies which are issued by Level 1 Insurance
Companies; plus
(B) 72% of the lesser of the dollar amount of Trailing Twelve
Month Eligible Commissions and the dollar amount of
Annualized Eligible Commissions with respect to Group Two
Insurance Policies which are issued by Level 1 Insurance
Companies; plus
(C) the lesser of (1) 65% of the lesser of the dollar amount of
Trailing Twelve Month Eligible Commissions and the dollar
amount of Annualized Eligible Commissions with respect to
Group One Insurance Policies which are issued by Level 2
Insurance Companies, (2) 5% of total Eligible Commissions,
and (3) $300,000; plus
(D) the lesser of (1) 57% of the lesser of the
dollar amount of Trailing Twelve Month
Eligible Commissions and the dollar amount
of Annualized Eligible Commissions with
respect to Group Two Insurance Policies
which are issued by Level 2 Insurance
Companies, (2) 5% of total Eligible
Commissions, and (3) $300,000;
minus
(b) the sum of:
(i) such reserves as Lender may establish from time to time in its
discretion, plus
(ii) the amount available to be drawn under, plus the amount of any
unreimbursed draws with respect to, any letters of credit or
acceptances which have been issued or created by Lender or any
Affiliate of Lender for Borrower's account.
Borrower acknowledges and agrees that Lender may decrease the advance rates
set forth above and/or institute reserves in amounts acceptable to Lender
based upon fluctuations in the mid-term interest rate environment. Such
fluctuations will likely be gauged based upon the ten-year U.S. Treasury
yield curve but are not required to be based upon such benchmark.
2. Permitted Liens
Existing Liens and financing statements: None.
3. Persons Authorized to Request Loans
Name: Title:
---- -----
Primo Podorieszach Chief Executive Officer of Borrower
4. Collection Days: Three Business Days
5. Conditions To Initial Loans
Items listed below are required to be delivered, in form and substance
satisfactory to Lender in its sole discretion, as a condition to Lender's
obligation to fund the initial loan or extend the first financial accommodation
to Borrower under this Agreement.
Certified copy of articles of incorporation of Borrower and Parent
By-laws of Borrower and Parent
Secretary's certificate as to constituent documents, bylaws, authorizing action
(e.g., resolutions) and incumbency of officers/status and specimen signatures of
authorized signers for Borrower and Parent
Good Standing Certificate (Delaware, California and all other states in which
Borrower is qualified to do business)
Lien search results for Borrower and Parent
Lien termination documents from existing lender, any other creditor whose
filings are to be terminated, etc.
Landlord waivers
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Guaranty and security documents from Parent
Validity Guaranty/Support Agreements from each Support Party
Pledge of all of Borrower's outstanding capital stock pursuant to documentation
acceptable to Lender
Oak Street Intercreditor Agreement
Certified Copy of Oak Street Loan Documents (including an amendment to the Oak
Street Credit Agreement to address such issues as Lender may request)
Subordination Agreement from Xxxxxxx Family Trust of July 1998, together with
copies of all notes, security agreements and related documents between Borrower
and Xxxxxxx Family Trust of July 1998 in connection with the debt of Borrower
owing to Xxxxxxx Family Trust of July 1998, certified as true, correct and
complete by Borrower's Chief Executive Officer
Financial statements
Borrowing Base Certificate as of a date acceptable to Lender, together with
supporting documentation and schedules of Accounts
Financing statements
Officer's certificate as to representations, warranties and no defaults
Solvency certificates
Opinion letter of Borrower's legal counsel (which shall include opinions with
respect to insurance regulatory issues and the perfection of Lender's security
interest in Commissions and Expirations).
All other items described on the Schedule of Closing Documents previously
delivered by Lender or Lender's counsel to Borrower or Borrower's counsel
Additionally, Lender shall have received the closing fee described in Item 9 of
the Schedule, Borrower shall have paid all amounts due to GVC Financial
Services, LLC in connection with the loan transaction contemplated hereby, and
Borrower shall have reimbursed Lender for all of Lender's expenses in connection
with the transaction contemplated hereby (including legal fees) to the extent
the same exceed the deposit paid by Borrower to Lender.
6. Termination Date
This Agreement will terminate on the second anniversary of the Agreement Date;
provided, however, that this Agreement will be renewed for succeeding one-year
periods thereafter unless written notice of termination is provided by either
party to the other at least 90 days' prior to the
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then-effective termination date (the first anniversary of the Agreement Date on
which no such renewal occurs is hereafter referred to as the "Expiration Date").
In the event that this Agreement is not renewed for any reason in accordance
with the immediately preceding sentence, then, so long as no Default exists,
Borrower may elect, by written notice to Lender at least five Business Days
prior to the Expiration Date, to repay the then-outstanding loans via quarterly
payments of principal (together with all accrued interest) based on a
twenty-quarter amortization on each March 31, June 30, September 30 and December
31, commencing with the first such date following the Expiration Date, with a
final payment of all outstanding principal and interest due and payable on the
third anniversary of the Expiration Date. If a Default exists or if Borrower
does not exercise its right to amortize the loans as set forth above, then all
outstanding Obligations shall be due and payable on the Expiration Date. Lender
shall have no obligation to make any additional loans or cause any letter of
credit to be issued on or after the Expiration Date, but Lender's security
interest in the Collateral shall remain in full force and effect and Borrower
shall remain obligated with respect to all of its agreements and obligations
under this Agreement and the other Loan Documents until all Obligations are
repaid in full in cash. The fees described in clauses (b) and (c) of Item 9 of
the Schedule shall continue to be due and payable following the Expiration Date
until such time as all loans and other Obligations have been repaid in full and
this Agreement has terminated, but the fee described in clause (d) of Item 9 of
the Schedule shall not be charged to Borrower for any period following the
Expiration Date.
7. Interest Margin: 2.00%
8. Default Margin: 3.00%
9. Fees
a. In consideration of Lender's structuring, approving and committing to this
Agreement, but without affecting Borrower's obligation to reimburse Lender for
costs associated with this Agreement and the transactions contemplated hereby as
provided elsewhere in this Agreement, Borrower agrees to pay Lender a fee in the
amount of $75,000 on the Agreement Date.
b. For services performed by Lender in connection with Lender's continuing
administration hereof, Borrower shall pay to Lender a fee of $75,000 per annum,
payable annually in advance on each anniversary of the Agreement Date and
continuing so long as any loan shall remain outstanding or this Agreement shall
not have been terminated.
c. For services performed by Lender in connection with Lender's continuing
administration hereof, Borrower shall pay to Lender a monthly fee equal to the
greater of (i) $2,500, and (ii) 0.25% of the average outstanding principal
amount of loans outstanding hereunder during the immediately preceding month;
provided, however, that such fee shall not exceed $12,000 for any month. Such
fee is payable on the first day of each calendar month beginning with the first
such date following the Agreement Date and continuing so long as any loan shall
remain outstanding hereunder or this Agreement shall not have been terminated.
d. In consideration of the maintenance of Lender's commitment hereunder,
Borrower will pay Lender a fee at the rate of 0.50% per annum on the daily
average unused portion of Lender's
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commitment to make revolving loans hereunder, payable monthly in arrears on the
first day of each calendar month, beginning on the first such date following the
Agreement Date.
All of the foregoing fees constitute compensation to Lender for services
rendered and are not interest or a charge for the use of money. Each installment
of such fees shall be fully earned when due and payable and shall not be subject
to refund or rebate.
10. Organizational Information
--------------------------
Exact Legal Name of Borrower: Addison York Insurance Brokers Ltd.
State of Organization: Delaware
Type of Organization: Corporation
Organizational Identification Number: 3547034
11. Subsidiaries and Investments in Other Persons: None.
---------------------------------------------
12. Pending Litigation: None.
------------------
13. Existing Debt and Guarantees:
-----------------------------
14. Prior Legal Names:
------------------
Avanti Insurance Brokers LLC
Addison York Insurance Brokers LLC
Prior or Current Trade or Fictitious Names:
-------------------------------------------
Xxxxx Insurance Agency
Vista International Insurance Brokers
Mergers and Acquisitions:
-------------------------
In October, 2003, Borrower purchased substantially all of the insurance
agency assets of Xxxxxxx Family Trust of July 1998, which were processed by DKWS
Enterprises, Inc. which used the name "Vista International Insurance Brokers".
In October, 2003, Borrower purchased substantially all of the assets of
Xxxxx Insurance Agency, Inc.
15. Locations of Offices and Collateral
-----------------------------------
Current Chief Executive Office:
00000 Xxxxxxxxx Xxxx X.X., Xxxxx 000
Xxxxxxx, Xxxxxxx
X0X 0X0
Other Locations of Chief Executive Office in past five years:
-------------------------------------------------------------
None.
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Other Current Collateral Locations:
-----------------------------------
Suite LM3
000 Xxxxxxxx Xxxxxx X.X.
Xxxxxxx, Xxxxxxx
X0X 0X0
0000 Xxxxxx Xxxx., Xxxxx 000 xxx Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
16. Ownership Structure: Parent owns 100% of the outstanding capital stock of
Borrower.
17. Owned Real Property: None.
Leased Real Property (including legal name of landlord and monthly rent):
-------------------------------------------------------------------------
Address: Landlord: Monthly Rent:
00000 Xxxxxxxxx Xxxx X.X. Xxxxxxx Xxxxxx Ltd. $21,135 (Canadian)
Xxxxx 000
Xxxxxxx, Xxxxxxx
X0X 0X0
(Parent is the actual tenant under this lease)
Suite LM3
000 Xxxxxxxx Xxxxxx S.E. Burnswest Corporation $3,221
Xxxxxxx, Xxxxxxx
X0X 0X0
0000 Xxxxxx Xxxx. Xxxx Xxxxxx Group $20,319
Xxxxx 000 xxx Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
000 Xxxx Xxxxxxx Xxxxxx 000 Xxxxxxx Xxxxxx $2,042
Xxxxxxx, Xxxxxxxxxx 00000 Partnership
Warehousemen, processors, consignees or other bailees in possession or
control of any Inventory (include name, address where Inventory is stored
and description of the arrangement): None.
18. Bank Accounts:
[Omitted]
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19. Commercial Tort Claims: None.
20. Financial Covenants:
(a) Borrower and Parent shall maintain, as of the last day of each quarter for
the four-quarter period then ended, a ratio of Borrower's and Parent's (i) net
income (excluding extraordinary gains) before provision for interest expense,
taxes, depreciation and amortization, to (ii) interest expense, of at least (w)
1.5 to 1 for the period commencing with the fiscal quarter ending September 30,
2004 through and including the fiscal quarter ending December 31, 2005; (x) 2.0
to 1 for the period commencing with the fiscal quarter ending March 31, 2006
through and including the fiscal quarter ending December 31, 2006; (y) 2.25 to 1
for the period commencing with the fiscal quarter ending March 31, 2007 through
and including the fiscal quarter ending December 31, 2007; and (z) 2.5 to 1
thereafter.
(b) Borrower and Parent shall at all times maintain, on a consolidated basis, a
Tangible Net Worth, plus the outstanding principal balance of Subordinated Debt,
of at least $3,000,000, plus an amount equal to 50% of Borrower's and Parent's
net income (determined in conformity with GAAP) for each fiscal year of Borrower
commencing with the fiscal year ending March 31, 2005. Each increase in the
required Tangible Net Worth hereunder in connection with Borrower's and Parent's
net income shall be determined based on Borrower's interim financial statements
required to be delivered to Lender under this Agreement, and each increase shall
be effective from and after the date that Borrower is required to deliver such
interim financial statements to Lender. The minimum Tangible Net Worth required
hereunder shall not be reduced by any net loss of Borrower or Parent. As used
herein, "Tangible Net Worth" means, as of any date, the total assets of Borrower
and Parent minus the total liabilities of Borrower and Parent calculated in
conformity with GAAP, less all amounts due from Affiliates of Borrower, Parent,
any Support Party or any other Obligor (other than amounts due to Borrower under
or in connection with agency agreements pursuant to which a Person which was
acquired by Borrower agrees to process the purchased book of business until such
time as the agency contracts between such Person and the applicable Insurance
Companies are placed in Borrower's name), and the amount of all intangible items
reflected therein, including all unamortized debt discount and expense,
unamortized research and development expense, unamortized deferred charges,
goodwill, intellectual property, unamortized excess cost of investments in
subsidiaries over equity at dates of acquisition, and all similar items which
should properly be treated as intangibles in accordance with GAAP; provided,
however, that the "Customer Accounts" item on Borrower's balance sheet shall not
be considered an intangible asset under this paragraph so long as Borrower
continues its current accounting practices with respect thereto.
(c) Borrower and Parent shall at all times maintain, on a consolidated basis, a
ratio of (i) total liabilities (determined in accordance with GAAP), to (ii) (A)
Tangible Net Worth, plus (B) the outstanding principal balance of Subordinated
Debt, of at not more than (y) 10.0 to 1 from the Agreement Date through and
including March 31, 2005, and (z) 8.0 to 1 thereafter.
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(d) Borrower shall at all times maintain a Net Worth (exclusive of any assets or
liabilities of Parent) of at least $3,000,000. As used herein, "Net Worth"
means, as of any date, the total assets of Borrower minus the total liabilities
of Borrower (other than Subordinated Debt), calculated in conformity with GAAP.
21. Permitted Purchase Money Debt: $100,000
22. Permitted Capital Expenditures: $100,000; provided, however, that capital
expenditures approved by Lender in connection with a Permitted Acquisition shall
not count against such $100,000 per year limitation.
23. Annual Financial Statements: To be audited and certified without
qualification by an independent practicing certified public accountant
acceptable to Lender.
24. Borrowing Base Certificates: Borrower shall deliver to Lender a Borrowing
Base Certificate no less frequently than monthly (by the fifth Business Day of
each month and determined as of the close of business on the last Business Day
of the immediately preceding month).
25. Field Examinations: Borrower agrees to pay to Lender Lender's customary
fees and disbursements relating to field examinations of the Collateral,
Borrower, Borrower's business and Borrower's books and records, which, as of the
Agreement Date, are $850 per examiner per day plus all of the out-of-pocket
examination costs and travel and other expenses incurred by such examiners.
26. Cross Default Amount: $100,000
27. Judgment Cross Default Amount: $100,000
28. Change of Management Default:
Name Office
Primo Podorieszach President of Parent
Primo Podorieszach Chief Executive Officer of Borrower
Xxxx Xxxxxxxx Chief Operating Officer of Borrower
29. Notice Addresses:
If to Borrower: Addison York Insurance Brokers Ltd.
00000 Xxxxxxxxx Xxxx X.X., Xxxxx 000
Xxxxxxx, Xxxxxxx, X0X 0X0
Attn.: Primo Podorieszach
Facsimile No.: 000-000-0000
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With a copy to: Xxxxxxx & Xxxxx
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000-0000
Attn.: Xxxx Xxxxxx
Facsimile No.: 414-271-3552
If to Lender : FCC, LLC, d/b/a First Capital
000 XxxxXxxx Xxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxx 00000
Attn.: Xxxxx X. Xxxxxx, Senior Vice
President
Facsimile No.: 000-000-0000
With a copy to: Xxxxxxx X. Xxxxxx, Esq.
Xxxxxxxx Xxxxxxx LLP
000 Xxxxxxxxx Xxxxxx, X.X., Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000-0000
Facsimile No.: 000-000-0000
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EXHIBIT A
[Attach form of Borrowing Base Certificate]
EXHIBIT B
FORM OF COMPLIANCE CERTIFICATE
[TO BE PROVIDED ON BORROWER'S LETTERHEAD]
__________________, 200__
FCC, LLC, d/b/a First Capital
000 XxxxXxxx Xxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxx 00000
Attn.: Xxxxx X. Xxxxxx, Senior Vice President
The undersigned, the _________________ of ADDISON YORK INSURANCE BROKERS LTD., a
Delaware corporation ("Borrower"), gives this certificate to FCC, LLC, d/b/a
First Capital, a Florida limited liability company ("Lender"), in accordance
with the requirements of that certain Loan and Security Agreement dated as of
June 3, 2004 between Borrower and Lender (as amended from time to time, the
"Loan Agreement"). Capitalized terms used in this Certificate, unless otherwise
defined herein, shall have the meanings ascribed to them in the Loan Agreement.
No Default exists on the date hereof, other than: ________________________ [if
none, so state].
As of the date hereof, Borrower is current in its payment of all accrued rent
and other charges to Persons who own or lease any premises where any of the
Collateral is located, and there are no pending disputes or claims regarding
Borrower's failure to pay or delay in payment of any such rent or other charges.
Set forth on Appendix 1 attached hereto is a true, accurate and complete
calculation with respect to the financial covenants of Borrower under the Loan
Agreement.
Yours truly,
ADDISON YORK INSURANCE BROKERS LTD.
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
Appendix 1
A. Minimum Interest Coverage Ratio Requirement of ___ to 1 (Borrower and
Parent)
Interest Coverage Ratio (a) net income (excluding extraordinary
gains), plus interest expense, plus taxes,
plus depreciation and amortization,
divided by (b) interest expense
Net Income $______________________, plus
Interest Expense $______________________, plus
Taxes $______________________, plus
Depreciation $______________________, plus
Amortization $______________________ equals
Numerator $______________________
Interest Expense $______________________, plus
Actual Interest Coverage
Ratio = __________ to 1
B. Minimum Tangible Net Worth Plus Subordinated Debt Requirement of $________
(Borrower and Parent)
Tangible Net Worth = Net Worth, plus Subordinated Debt less Intangibles
Net Worth $_________________, plus
Subordinated Debt $_________________, less
Intangible assets $_________________
Actual Tangible Net Worth $___________________
C. Maximum Ratio of Total Liabilities to Tangible Net Worth, plus Subordinated
Debt, Requirement of ___ to 1 (Borrower and Parent)
Required Ratio = (a) Total liabilities divided by (b) the sum of
(i) Tangible Net Worth, plus (ii) Subordinated Debt
Total liabilities $_________________, divided by the
sum of
Tangible Net Worth $_________________, plus
Subordinated Debt $_________________
Actual Ratio of Total Liabilities to Tangible Net Worth plus Subordinated
Debt: ____ to 1
D. Minimum Net Worth of $1,400,000 (Borrower only)
Net Worth = Total Assets less Total Liabilities (other than Subordinated
Debt)
Total Assets $_________________, less
Total Liabilities $_________________, plus
Subordinated Debt $_________________
Actual Net Worth of Borrower: $_________________
[INSERT OR REVISE FINANCIAL COVENANT CALCULATIONS AS APPROPRIATE.]
