LOAN AGREEMENT
This LOAN AGREEMENT ("Agreement"), effective November 1, 2000, is between XXXXXX
& XXXXXX, INC., a Delaware corporation with a principal place of business at
0000 Xxxxxxxxxx Xxxxxx, Xxxxx Xxxxxx, Xxx Xxxx 10605(hereinafter referred to as
"Borrower") and THE TRAVELERS INSURANCE COMPANY, a Connecticut corporation with
its principal place of business at Xxx Xxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxxxxx 00000
(hereinafter referred to as "Travelers").
RECITALS
WHEREAS, Borrower and Travelers desire to enhance their business relationship;
and
WHEREAS, Travelers desires to provide Borrower with additional working capital;
and
WHEREAS, Borrower owns all the stock of Prime Capital Assets, Inc. (hereinafter
referred to as "Prime Capital") and places its securities business (including
the sale of certain variable insurance products) through Prime Capital and Prime
Capital shall benefit from the receipt of the loan proceeds by its parent
corporation; and
WHEREAS, REDACTED
WHEREAS, REDACTED
WHEREAS, Travelers is willing to make a loan to Borrower on the terms and
conditions set forth in this Agreement (including, but not limited to the grant
of a security interest from Borrower and the receipt of the personal guaranties
from certain individuals who are shareholders and officers of Borrower) and in
consideration of Borrower's execution and delivery of the warrant agreements of
even date herewith to purchase its capital stock (the "Warrant Agreement"); and
WHEREAS, as a condition to the loan by Travelers, Borrower must obtain a line of
credit from European American Bank (hereinafter referred to as "EAB") or a
substituted lender as approved by Travelers, which approval will not be
unreasonably withheld in the amount of at least Six Million Dollars ($6,000,000)
and not to exceed Seven Million Dollars ($7,000,000) (the "EAB Financing").
NOW, THEREFORE, IN CONSIDERATION of the above recitals, the covenants and
conditions herein contained, and other good and valuable consideration, the
receipt of which is acknowledged, Borrower and Travelers agree as follows:
SECTION ONE: AMOUNT OF LOAN, OFFSET OF COMMISSIONS TO REPAY LOAN. Subject to the
----------------------------------------------------
terms and conditions contained herein, Travelers shall lend to Borrower the sum
of $5,000,000.00 (FIVE MILLION DOLLARS) to be evidenced by execution of a
promissory note which shall incorporate the terms and conditions of this
Agreement by reference (the "Note"), a copy of which is attached hereto as
Schedule A. The Note shall provide that interest only shall be payable through
October 31, 2002, and that such interest payments shall be made annually, in
arrears within ten (10) days of October 31, 2001 and October 31, 2002 or as soon
as practicable after the appropriate interest rate for such annual period is
determined in accordance with Section 3 hereof. Beginning November 30, 2002,
Borrower shall pay the principal amount hereof in 35 equal monthly installments
of $138,889 on the last day of each month up through and including September 30,
2005 and then shall make a final principal payment of $138,885.00 on October 31,
2005. Interest during the amortization period shall be payable annually in
arrears within ten (10) days of each of October 31, 2003, October 31, 2004 and
October 31, 2005, respectively (or as soon as practicable after the appropriate
interest rate is determined in accordance with Section 3 hereof). Interest for
each of the three interest payments due during the amortization period shall be
based upon the average outstanding (daily) balance of the loan during the prior
12-month period. The loan shall be secured by all assets of the Borrower,
(evidenced by a security agreement) and guaranties from Xxxxxxx Xxxx, Xxxxxxx
Xxxxxx, Xxxxxx Xxxxxxxxx and Xxxxx Xxxxxx, each of whom are shareholders and
officers of Borrower (hereinafter collectively referred to as "Guarantors").
Final payment of all outstanding principal and accrued but unpaid interest shall
be payable on November 4, 2005, if not sooner paid.
Beginning November 1, 2003, Borrower may prepay the entire balance of its
indebtedness under this loan agreement (and the Note). No partial prepayment is
permissible; nor may Borrower prepay the indebtedness prior to November 1, 2003.
Prepayment of principal and all accrued but unpaid interest under this agreement
and the Note in accordance with the terms of this paragraph shall terminate this
agreement; provided that such prepayment does not alter the terms of the Warrant
Agreement.
SECTION TWO: INTEREST.
--------- An interest rate will be established for each annual
period (from the date of the loan through October 31, 2001); November 1, 2001
through October 31, 2002; November 1, 2002 through October 31, 2003, November 1,
2003 through October 31, 2004 and November 1, 2004 through October 31, 2005,
each an "Annual Period" at the end of each such Annual Period; provided that
interest for the first Annual Period shall begin to accrue on the date the funds
are advanced by Travelers to Borrower. The interest rate for each such Annual
Period will be equal to the prime interest rate of Fleet Bank, N.A. as of the
day immediately prior to the beginning of such Annual Period (the date hereof
for the first Annual Period and each October 31 prior to the beginning of each
subsequent Annual Period), plus two and one-quarter (2.25%) percent (the "Basic
Rate"), minus the applicable adjustment percentage described in Section 3 herein
(the "Adjustment Percentage"), if any.
Interest will be payable in arrears on October 31, the final day of each Annual
Period (or as soon as practicable thereafter when the applicable Adjustment
Percentage can be determined in accordance with Section 3 hereof). Interest
shall be calculated on the average outstanding daily balance of the loan during
the applicable Annual Period.
SECTION THREE: REDACTED
SECTION FOUR: REDACTED
SECTION FIVE: REDACTED
SECTION SIX: REDACTED
SECTION SEVEN: REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER. The
---------------- ---------- --- --------- -- --------
Borrower hereby represents and warrants to Travelers that:
(a) Borrower is a corporation duly organized, validly existing and in
good standing under the laws of the State of New York, is
licensed by the Insurance Commissioner of the State of New York
to conduct insurance agency business, and has all requisite power
and all governmental licenses, authorizations, consents and
approvals required to carry on its business in each jurisdiction
in which its business is conducted, including, without
limitation, such licenses, authorizations, consents and approvals
necessary or appropriate to carry on its insurance business,
except in each case to the extent the failure of such would not
be reasonably likely to have a material adverse effect on
Borrower.
(b) The execution, delivery and performance by Borrower of this
Agreement and each other document related to the loan, and
Borrower's use of the proceeds hereunder, are within its powers,
have been duly authorized by all necessary corporate action, do
not contravene or violate (i) its certificate or articles of
incorporation or by-laws, (ii) any law, rule or regulation
applicable to it, (iii) any restrictions under any agreement,
contract or instrument to which it is a party or by which it or
any of its property is bound, or (iv) any order, writ, judgment,
award, injunction or decree binding on or affecting it or its
property, and do not result in the creation or imposition of any
adverse claim on the Borrower's assets (except as created
hereunder), except where such contravention or violation would
not be reasonably likely to have a material adverse effect on
Borrower. This agreement and each other document related to the
loan has been duly authorized, executed and delivered by
Borrower.
(c) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body
which has not been obtained or delivered is required for the due
execution, delivery and performance by Borrower of this agreement
or any document related to the loan, except where the absence of
such authorization, approval, action, notice or filing would not
be reasonably likely to have a material adverse effect on
Borrower, Prime Capital or their Affiliates.
(d) This agreement and each other document related to the loan
constitute the legal, valid and binding obligations of Borrower
against Borrower in accordance with their respective terms,
except as such enforcement may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws
relating to or limiting creditors' rights generally and by the
effect of general principles of equity (whether considered in a
suit at law or in equity).
(e) There are no actions, suits or proceedings pending, or to the
knowledge of Borrower threatened, against or affecting Borrower,
Prime Capital or their Affiliates, or the property of Borrower,
Prime Capital or any of their Affiliates, in any court, or before
any arbitrator of any kind, or before or by any governmental
body, which could reasonably be expected to have a material
adverse effect on Borrower, Prime Capital or their Affiliates.
None of Borrower, Prime Capital or their Affiliates is in default
with respect to any order of any court, arbitrator or
governmental authority.
(f) All information heretofore furnished by the Borrower, Prime
Capital or any of their Affiliates to Travelers for purposes of
or in connection with this agreement or any transaction
contemplated hereby is, and all such information hereafter
furnished by Borrower, Prime Capital or any of their Affiliates
to Travelers will be, true and accurate in every material
respect, on the date such information is stated or certified and
does not and will not contain any material misstatement of fact
or omit to state a material fact or any fact necessary to make
the statements contained therein not misleading.
(g) Borrower will preserve and maintain (i) its existence, rights,
franchises, licenses (including, without limitation, its license
from the State of New York Insurance Commissioner),
authorizations, consents, approvals and privileges and qualify
and remain qualified in good standing as a corporation in the
jurisdiction of its formation, and (ii) in each other
jurisdiction where any such failure would have a material adverse
effect on Borrower, Prime Capital and their Affiliates, such
licenses, authorizations, consents and approvals from any such
jurisdiction necessary or appropriate to carry on its business.
(h) Borrower will pay promptly when due all material taxes,
assessments and governmental charges or levies imposed upon it or
in respect of income or profits therefrom except that no such
amount need be paid if (i) the charge or levy is being contested
in good faith and by appropriate proceedings, and (ii) the
obligation to pay such amount is adequately reserved against in
accordance with and to the extent required by generally accepted
accounting principles.
(i) Borrower will not, and will not permit Prime Capital to, enter
into any transaction with, or pay any management fees to, any of
its Affiliates except in the ordinary course of business and then
only upon terms that are no less favorable to Borrower or Prime
Capital, as the case may be, than would be obtainable at the time
in arms'-length transactions with unrelated third parties,
provided that this Section 7(i) shall not apply to any
transactions between Borrower and any wholly-owned subsidiary or
to any management fees payable by Borrower to Prime Capital or
any wholly-owned subsidiary.
(j) Borrower, Prime Capital and their Affiliates are not subject to,
or participating in, any agreement of guarantee or
indemnification; and Borrower hereby covenants for itself and
Prime Capital and their Affiliates, that none of them will become
a party to any such guarantee or indemnification agreement during
the term of this agreement without the prior written consent of
Travelers.
(k) Borrower will maintain good title to its assets, free and clear
of all liens, claims and encumbrances except for the liens and
security interests contemplated hereby, and such assets shall be
held separate and apart from all other assets of the Company.
(l) Borrower will not change its name, identity, jurisdiction or
organization or corporate structure (within the meaning of
Section 9-402(7) of any applicable enactment of the UCC as in
effect on the date hereof) or relocate its chief executive office
or any office where Records are kept unless it shall have: (i)
given the Travelers at least forty-five (45) days prior notice
thereof and (ii) delivered to the Travelers all duly executed
financing statements, instruments and other documents requested
by the Travelers in connection with such change or relocation.
(m) Beginning with the calendar quarter ending December 31, 2000,
Borrower will not permit the amount of its indebtedness for money
borrowed to exceed the respective "Debt to Equity Ratio"
specified below for each Annual Period.
Annual Period Debt to Equity Ratio
December 31, 2000 through October 31, 2001 .6 to 1.0
November 1, 2001 through October 31, 2002 .8 to 1.0
November 1, 2002 through October 31, 2003 1.0 to 1.0
November 1, 2003 through October 31, 2004 1.0 to 1.0
November 1, 2004 through October 31, 2005 1.0 to 1.0
For purposes of this agreement, the "Debt to Equity Ratio" shall be the ratio of
Borrower's indebtedness for money borrowed to Borrower's total stockholders'
equity. In addition, the term "indebtedness for money borrowed" shall include,
but not be limited to, the principal amount of all indebtedness, current or
funded, secured or unsecured, incurred in connection with any borrowings of
Borrower (including the sale of debt securities); all debt created or arising
under any conditional sale or other title retention agreement with respect to
any property acquired by Borrower; all debt issued, incurred or assumed in
respect of the purchase price of property; all obligations evidenced by a note
bond, debenture or similar instrument; the present value of all obligations
under a capital lease; all assurances, guarantees or indemnifications related to
the indebtedness of another party; the maximum potential amounts owed under a
letter of credit; and the total amount of any lines of credit.
(n) If Borrower receives an offer from any third party to purchase
more than 25% of its assets or 10% of its outstanding stock, or
any expression of interest or intent from any third party to make
such purchase of its stock or assets during the term of this
agreement, Borrower shall notify Travelers of such offer or
expression of interest or intent as soon as practicable, and in
any event within than two business days from such offer or
expression of interest or intent.
SECTION EIGHT: FINANCIAL ARRANGEMENTS WITH EAB; OTHER LIENS ON BORROWER'S
---------------------------------------------------------------
PROPERTY.
---------Borrower represents and warrants to Travelers that, except as to the
existing security interest granted to European American Bank (hereinafter
referred to as "EAB") to secure a line of credit of up to $7,000,000 and except
as permitted by Travelers by inclusion in Schedule B hereto, Borrower agrees not
to sell, pledge, assign, encumber, grant, create or permit the creation or
continuance of any lien or encumbrance on the collateral as security hereunder.
Any action to the contrary shall constitute a material breach of this agreement.
Borrower represents that none of the collateral is currently pledged or
encumbered except to EAB and as indicated on Schedule B hereto, and Borrower
further agrees that in the event of any increase in the line of credit with EAB,
the security interest granted to EAB in connection with amounts borrowed in
excess of $7,000,000 shall be subordinate to Travelers' lien under this
agreement and the Note; and that any future debt incurred by Borrower will not
exceed the limits prescribed in Section 7(m).
Borrower will provide complete disclosure concerning the terms and conditions of
the financing agreement that it has represented that it is entering into with
EAB. The parties to this agreement understand that the completion of this
agreement is contingent on the acceptability to Travelers of any proposed
subordination or inter-creditor agreement among EAB, Travelers and Borrower.
SECTION NINE: EVENTS OF DEFAULT.
------------------Upon the occurrence of any of the following
events ("Events of Default"), and notwithstanding Travelers previous knowledge
thereof, the principal unpaid balance of the Note, together with interest
thereon, shall, except as provided in subsections (h) and (i) hereunder,
immediately become due and payable without notice, presentment, demand, protest,
or notice of protest of any kind, all of which are expressly waived by Borrower:
a. Any default by Borrower in the payment, when due, of any part of
the principal of or interest on the Note, or any other
indebtedness for borrowed money has not been paid within thirty
(30) days after it has become due;
b. Any warranty or representation by Borrower or Prime Capital
contained in this agreement or in any instrument furnished in
compliance with this agreement is false or incorrect in any
material respect and such default and or lack of observance
remains uncured for thirty (30) days of written notice of such
failure is given by Travelers to Borrower;
c. Borrower or Prime Capital, without prior written consent of
Travelers, defaults in the performance or observance of any of
the agreements furnished in connection with the loan transaction
contemplated hereby (and such default is not cured within the
applicable cure period under such agreement, if any) or fails to
comply with any provision of this agreement;
d. Borrower or Prime Capital shall dissolve or terminate existence,
or merge or consolidate or enter into a transaction involving the
transfer of more than twenty-five (25%) percent of its assets,
after notice from the appropriate regulatory body, fails to
comply with any applicable law or regulation within a reasonable
period of time, it being agreed that nothing shall prevent
Borrower from contesting, in good faith, the applicability or
legality of any such law or regulation;
e. Borrower or Prime Capital shall make a general assignment for the
benefit of creditors or file a petition in voluntary bankruptcy
or a petition or answer seeking reorganization of Borrower or
Prime Capital or a readjustment of its indebtedness under the
federal Bankruptcy Law, or consent to the appointment of a
receiver or trustee of its properties;
f. Borrower or Prime Capital shall be adjudged bankrupt or
insolvent, or a petition or proceedings for bankruptcy or for
reorganization shall be filed against it and it shall admit the
material allegations, or an order, judgment, or decree shall be
made approving such a petition, and such order, judgment, or
decree shall not be vacated or stayed within thirty (30) days of
its entry, or a receiver or trustee shall be appointed for
Borrower or Prime Capital or its properties or any part thereof
and remain in possession for thirty (30) days;
g. Any default in any material agreement that Borrower has with
Affiliates or non-affiliates (including, but not limited to, the
line of credit from EAB), that is not cured within the time
allowed under the terms of such agreement (or if such agreement
does not define a cure period, then the cure period for purposes
of this agreement shall be sixty (60) days). For purposes of this
subsection, the term "material agreement" means an agreement the
premature cancellation of which or default under would have a
material adverse effect on the business, results of operations or
the financial condition of Borrower;
h. REDACTED
i. REDACTED
j. The failure by Borrower or Prime Capital to maintain applicable
insurance and securities licensing and appointment necessary to
sell Travelers annuity and life products.
k. Any default by any Guarantor in the payment of any amount due to
Travelers under any loan, advance or other agreement or any other
obligation, which remains uncured for thirty (30) days after it
has become due.
SECTION TEN: CONDITIONS FOR LOAN.
-------------------- The advance of the loan proceeds by Travelers
is subject to the following conditions precedent.
(a) The closing by Borrower of the EAB Financing;
(b) The delivery of the following instruments, documents and
agreements, all in form and substance acceptable to Travelers:
(i) The Note executed by Borrower,
(ii) Security Agreement from Borrower,
(iii) Applicable financing statements,
(iv) Release of Xxxxxxx Xxxxx security agreement,
(v) Personal Guarantees from:
Xxxxxxx Xxxx
Xxxxxxx Xxxxxx
Xxxxxx Povenelli
Xxxxx Xxxxxx,
(vi) Inter-creditor Agreement (EAB),
(vii) Warrant Agreements (2), and
(viii) Registration Rights Agreement;
(c) All representations, warranties and covenants of Borrower
contained herein are true as of the day of the advance and
Travelers shall have received a certificate of the President or
Chief Financial Officer to that effect; and
(d) There have been no material adverse changes with regard to (i)
the business, results of operations or financial condition of
Borrower or Prime Capital, (ii) the ability of Borrower to
perform its obligations under this agreement, or (iii) the
legality, validity of enforceability of this agreement or any of
the documents listed in subsection (b) of this Section 10 from
the date hereof to the day of the advance.
(e) In the event that all of the conditions set forth in subsections
(a) - (d) of this Section 10 are not satisfied by December 31,
2000, this agreement shall terminate and Travelers shall be under
no obligation to make any loan or any other advance to Borrower.
SECTION ELEVEN: TAXES ON LOAN.
-------------- Borrower agrees to pay any and all tax or taxes
directly assessed on account of this loan or any loan or advance made under this
agreement.
SECTION TWELVE: NOTICES TO PARTIES.
--------------------- All notices, demands and other
communications under this agreement shall be in writing and shall be deemed to
have been duly given: (i) on the date of service if served personally on the
party to whom notice is to be given; (ii) on the day of transmission if sent via
facsimile to the facsimile number given below, and telephonic confirmation of
receipt is obtained promptly after completion of transmission; (iii) on the day
after delivery to Federal Express or similar overnight courier or the Express
Mail service maintained by the United States Postal Service; or (v) on the fifth
day after mailing, if mailed to the party to whom notice is to be given, by
first class mail, registered or certified, postage prepaid and properly
addressed, to the party as follows:
If to Travelers:
Xx. Xxxxxx May
Senior Vice President
The Travelers Insurance Company
Xxx Xxxxx Xxxxxx - 0 XX
Xxxxxxxx, Xxxxxxxxxxx 00000
Telecopy Number: (000) 000-0000
With a copy to:
Xx. Xxxxx Xxxxxx
Chief Financial Officer and Senior Vice President
The Travelers Insurance Company
Xxx Xxxxx Xxxxxx - 0 XX
Xxxxxxxx, Xxxxxxxxxxx 00000
Telecopy Number: (000) 000-0000
If to Borrower:
Xx. Xxxxx Xxxxxx
Xxxxxx & Xxxxxx
0000 Xxxxxxxxxx Xxxxxx
Xxxxx Xxxxxx, Xxx Xxxx 00000
Telecopy Number: (000) 000-0000
With a copy to:
Mr. Xxxxxxx Xxxx
Prime Financial
00 Xxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxx Xxxx 00000
Telecopy Number: (000) 000-0000
SECTION THIRTEEN: PROTECTION OF TRAVELERS RIGHTS.
-------------------------------- No delay or failure on the
part of Travelers in exercising any right, power, or privilege under the terms
of this agreement shall affect such right, power, or privilege; nor shall any
single or partial exercise preclude any further exercise, or the exercise of any
other right, power, or privilege.
SECTION FOURTEEN: SECURITY.
--------- As security for payment of the Note and any future
loans or advances made (at its sole option) by Travelers, Borrower shall assign,
transfer, grant and pledge to Travelers a security interest in all property,
tangible and intangible, now existing or hereafter acquired. In addition, the
Guarantors shall each give personal guarantees on a joint and several basis.
SECTION FIFTEEN: PREEMPTIVE RIGHTS.
------------------ During the continuation of this agreement,
Borrower shall provide Travelers with a written notice of any public or private
offering by Borrower of shares of common stock of Borrower or any other equity
interests in Borrower being offered. Such notice shall specify the material
terms of such proposed offering and shall offer to Travelers the right to
purchase the entire offering of common stock or other equity interest of
Borrower at the price(s) contained in such offering. Travelers may exercise the
preemptive rights set forth herein in whole or in any part by written notice
delivered to Borrower within ten (10) business days following the mailing of the
written notice by Borrower as required hereinabove.
SECTION SIXTEEN: ATTORNEY FEES ON DEFAULT.
------------------------- In the event Borrower shall default
in any of its obligations under this agreement or the Note and, in the sole
opinion of Travelers, it becomes necessary or proper to employ an attorney to
enforce collection of the indebtedness owed by Borrower or to enforce compliance
by Borrower or Prime Capital with any of the provisions herein contained,
Borrower agrees to pay reasonable attorney fees and all other costs that may
reasonably be incurred.
SECTION SEVENTEEN: GOVERNING LAW; COPIES.
---------------------- This agreement shall be construed in
accordance with and governed by the laws of the State of New York, and may be
executed in several counterparts, each of which shall be an original and all
collectively shall constitute but one instrument. With respect to any suits,
actions or proceedings arising out of or relating to this Agreement, Borrower
and Travelers each irrevocably and unconditionally submits, for itself and its
property, to the non-exclusive jurisdiction of any state court or federal court
in Connecticut.
SECTION EIGHTEEN: ASSIGNMENT OF RIGHTS.
---------------------- The rights of each party under this
Agreement are personal to that party and may not be assigned or transferred to
any other person, firm, corporation, or other entity without the prior, express,
and written consent of the other party.
SECTION NINETEEN: ENTIRE AGREEMENT.
----------------- This Agreement, together with the Note, the
security agreement, the guaranty agreements referenced in Section 13 hereof, and
the Warrant Agreement constitutes the entire agreement between the parties
relating to the matters contained herein and supersedes all previous
communications, representations or agreements, either oral or written with
respect to the subject matter herein. Any modification to this Agreement must be
in writing and signed by authorized officers of both parties.
SECTION TWENTY: PARAGRAPH HEADINGS.
-------------------- The titles to the paragraphs of this
Agreement are solely for the convenience of the parties and shall not be used to
explain, modify, simplify, or aid in the interpretation of the provisions of
this Agreement.
SECTION TWENTY-ONE: DISCLOSURE OF TERMS OF AGREEMENT.
------------------------------------- The parties will
participate jointly in the drafting and communication of the existence and terms
of this agreement. No press release or other disclosure will be made without the
consent of Borrower and Travelers.
SECTION TWENTY-TWO: SEVERABILITY.
------------- In the event that any part of this agreement
is declared by any court or other judicial or administrative body to be null,
void or unenforceable, said provision shall survive to the extent it is not so
declared, and all of the other provisions of this agreement shall remain in full
force and effect.
In witness whereof, each party has caused Agreement to be executed on
its behalf by a duly authorized person on this 31st day of October, 2000.
XXXXXX & XXXXXX, INC.
/s/ Xxxxxxxx Xxxxxxxxxx By: /s/ Xxxxx X. Xxxxxx
-------------------------------- -----------------------------------
Title:Chief Financial Officer
-----------------------------------
Date: October 31, 2000
-----------------------------------
THE TRAVELERS INSURANCE COMPANY
/s/ Xxxxxxx X. Xxxxx By: /s/ Xxxxx X. Xxxxxx
-------------------------------- -----------------------------------
Title: Vice President and Controller
-----------------------------------
Date: November 1, 2000
-----------------------------------
