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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1998 Commission file number 0-22629
UNIFIED FINANCIAL SERVICES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 35-1797759
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
431 North Pennsylvania Street, Indianapolis, Indiana 46204-1873
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (317) 634-3301
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act
Common Stock, $.01 par value
Preferred Stock, $.01 par value
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(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X . No .
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Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-B is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB. [ ]
For the fiscal year ended December 31, 1998, revenues totaled:
$22,971,836.
As of March 31, 1999, the aggregate market value of the voting
stock held by non-affiliates of the Registrant was approximately
$53,754,960.
As of March 31, 1999, there were 2,275,580 shares of the
Registrant's Common Stock, $.01 par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The following document is incorporated by reference into the
indicated Part of this Report:
Document Part of Form 10-KSB
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Proxy Statement for the 1999
Annual Meeting of Stockholders III
Transitional Small Business Disclosure Format: Yes ; No X
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UNIFIED FINANCIAL SERVICES, INC.
FORM 10-KSB
TABLE OF CONTENTS
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PART I
Item 1. Description of Business 1
Item 2. Description of Property 14
Item 3. Legal Proceedings 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 4A. Executive Officers of the Registrant 15
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters 17
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations 17
Item 7. Financial Statements 22
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 48
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act 48
Item 10. Executive Compensation 48
Item 11. Security Ownership of Certain Beneficial Owners and Management 48
Item 12. Certain Relationships and Related Transactions 48
Item 13. Exhibits and Reports on Form 8-K 48
SIGNATURES 50
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PART I
Item 1. Description of Business
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Annual Report on Form 10-KSB
are or may constitute forward-looking statements (as such term is defined
in the Private Securities Litigation Reform Act of 1995). These forward-
looking statements involve certain risks and uncertainties. For example, a
down turn in economic conditions generally and in particular those
affecting bond and securities markets could lead to an exit of investors
from mutual funds. Similarly, an increase in federal and state regulations
of the mutual fund industry or the imposition of regulatory penalties could
have an effect on operating results of the Company. These uncertainties,
as well as others, are present in the financial services industry and
stockholders are cautioned that management's view of the future on which it
prices its products and estimates costs of operations and regulations may
prove to be other than as anticipated.
GENERAL
Unified Financial Services, Inc., a Delaware corporation ("Unified"
or the "Company"), was organized on December 7, 1989. Reference in this
filing to the "Company" or "Unified" includes Unified and its subsidiaries.
The following table sets forth the Company's active subsidiaries as of
March 31, 1999.
<TABLE>
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PERCENT
PRINCIPAL PLACE OWNED BY
SUBSIDIARY NAME OF BUSINESS DESCRIPTION OF SUBSIDIARY COMPANY
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<S> <C> <C> <C>
Unified Management Corporation Indianapolis, Indiana A licensed National Association of 100%
Securities Dealers, Inc. ("NASD") broker-dealer
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Unified Fund Services, Inc. Indianapolis, Indiana A registered investment adviser and transfer agent 100%
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Health Financial, Inc. Lexington, Kentucky A registered investment adviser 100%
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First Lexington Trust Company Lexington, Kentucky A non-bank affiliated trust company that is regulated 100%
by the Department of Financial Institutions,
Commonwealth of Kentucky
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Unified Internet Services, Inc. Indianapolis, Indiana An internet services company 100%
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Resource Benefit Planners, Inc. Lexington, Kentucky A professional services firm 100%
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Unified Investment Advisers, Inc. Indianapolis, Indiana A provider of mutual fund advisory services for the 100%
Unified Funds, the Company's no load mutual fund family
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Fiduciary Counsel, Inc New York, New York An investment management firm 100%
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EMCO Estate Management Company, Inc. New York, New York A wealth management firm 100%
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AmeriPrime Financial Services, Inc. Southlake, Texas A provider of administrative, regulatory, compliance 100%
and start-up support services to investment advisors,
banks and other money managers in their proprietary
mutual fund efforts
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AmeriPrime Financial Securities, Inc. Southlake, Texas An NASD broker-dealer in all 50 states 100%<F1>
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Equity Underwriting Group, Inc. Lexington, Kentucky A holding company that provides, through its 100%
subsidiaries, specialty insurance products as a
general agent or broker
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Equity Insurance Managers, Inc. Lexington, Kentucky A provider of specialty property and casualty 100%
insurance products as a managing general agent and
broker
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21st Century Claims Service, Inc. Lexington, Kentucky A provider of adjusting services and third-party 100%<F2>
claim administration services
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PERCENT
PRINCIPAL PLACE OWNED BY
SUBSIDIARY NAME OF BUSINESS DESCRIPTION OF SUBSIDIARY COMPANY
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<S> <C> <C> <C>
Equity Insurance Administrators, Inc. Lexington, Kentucky A provider of third-party claim administration 100%<F3>
services to insurance companies and program managers
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Equity Insurance Managers of Illinois A wholesale brokerage firm 55%<F4>
Illinois, L.L.C. (d/b/a/ Irland &
Rogers)
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Commonwealth Premium Finance Lexington, Kentucky A provider of financing for the payment of premiums 100%
Corporation on insurance coverage placed by Equity Underwriting
Group, Inc.
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Strategic Fund Services, Inc. New York, New York A provider of mutual fund administration services 100%
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Unified Aviation, Inc. Lexington, Kentucky An aviation operating company 100%
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VSX Technologies, Inc. New York, New York A developer of software systems for the brokerage 100%
industry
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Unified Capital Resources, Inc. New York, New York An investment and merchant banking company 100%
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M. Wilson & Associates, Inc. Lexington, Kentucky A claim processing and management company 100%<F5>
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<FN>
_____________________________________
<F1> AmeriPrime Financial Securities, Inc. is a wholly owned subsidiary
of AmeriPrime Financial Services, Inc.
<F2> 21st Century Claims Service, Inc. is 50% owned by Equity
Underwriting Group, Inc. and 50% owned by Equity Insurance Managers,
Inc.
<F3> Equity Insurance Administrators, Inc. is a wholly owned subsidiary
of Equity Insurance Managers, Inc.
<F4> Equity Insurance Managers of Illinois, L.L.C. is 55% owned by
Equity Insurance Managers, Inc.
<F5> M. Wilson & Associates, Inc. is a wholly owned subsidiary of Equity
Underwriting Group, Inc.
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The Company conducts substantially all of its operations through its
wholly owned subsidiaries. The Company's principal business is to provide
and maintain vertical integration in the financial services industry for
its subsidiaries, a "platform" that creates synergy and revenues among its
subsidiaries from the fees associated with gathering, managing, maintaining
and servicing assets under management. The Company currently maintains
approximately $1.5 billion of assets under management and approximately $5
billion of assets under service. The vertically integrated "platform," a
subsidiary "home" for managing and servicing virtually every type of
wealth-building asset, is primarily accomplished through three strategies:
(1) consolidating financial services companies that expand or deepen the
integration by means of tax-free, stock-for-stock, pooling-of-interests
transactions (This particular consolidation strategy is driven by the
Company's goal to protect, maintain, nurture and advance the
entrepreneurial spirit of small businesses by providing capital, synergy
and vertical integration in an "autonomous" subsidiary environment.); (2)
consolidating small mutual funds into the Company's mutual fund families by
means of tax-free reorganizations (The mutual fund consolidation strategy
is assisted by the Company's mutual fund services capabilities and a highly
qualified systems staff which provides innovative and flexible programming
options, alternatives and solutions required by small mutual funds to
compete against the larger more capitalized mutual fund families.); and (3)
the formation of new subsidiaries to develop proprietary products and
services that deepen the integration and enhance and advance the synergy
and revenues among the Company's subsidiaries.
Once a component of the Company's vertically integrated network,
each subsidiary then implements its individual business plan in an
autonomous environment and achieves its growth and thereby increases
earnings and share value predominantly by: (1) leveraging the existing
infrastructure and utilizing the vertically integrated platform to fully
realize and effect the synergy and the related earnings impact to the
Company's stock; (2) consolidations by the subsidiary, using the Company's
stock and/or capital, to acquire important and critical business components
along its horizontal business plane; (3) utilizing the Company's capital
for necessary expansion; (4) traditional advertising, marketing and selling
of the subsidiary's products and services; and (5) networking with the
Company's subsidiaries.
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The Company positions itself as the new, "consumer first," consumer-
focused company missioned to build financial knowledge, through information
and a diverse range of options, to provide more individual (client) control
in the long-term quest to build financial security. The Company provides
management services, working capital, systems support and development and
equipment for its wholly owned subsidiaries. The Company's principal
business is (1) providing for its subsidiaries a platform for attaining and
maintaining vertical integration in the financial services and insurance
industries by means of an aggressive merger and acquisition program featuring
stock-for-stock pooling-of-interests transactions and (2) providing management
services and equipment for its subsidiaries, which, in turn, concentrate
their services over the following lines of business in the financial
services and insurance industries: (i) mutual fund services, including
transfer agency, shareholder and administrative services, fund accounting,
compliance and distribution; (ii) brokerage and securities services,
including third-party introduced clearing services; (iii) investment
advisory and asset management services for various asset management
categories and objectives; (iv) tax-free reorganizations and consolidations
of financial services companies and small mutual funds; (v) certain non-
bank custodial services; (vi) trust and retirement services; (vii)
qualified plan services, including plan participant education; (viii)
internal and external proprietary product and systems development for
financial services institutions, predominantly mutual funds, including the
Unified Funds, a family of no-load mutual funds sponsored by UIA
(hereinafter referred to as the "Unified Funds"); (ix) asset allocation
services; (x) investment advisory services; (xi) financial planning
services; (xii) Internet technology and services; (xiii) specialty
insurance general agent and brokerage services; (xiv) adjusting services;
(xv) third-party claim administration services; (xvi) financing for the
payment of insurance premiums; and (xvii) claim processing and management.
Unified's principal executive offices are located at 431 North
Pennsylvania Street, Indianapolis, Indiana 46204, and its telephone number
is (317) 634-3301. The Company also maintains administrative offices at
2353 Alexandria Drive, Suite 100, Lexington, Kentucky 40504, telephone
number (606) 296-4407; 220 Lexington Green Circle, Suite 600, Lexington,
Kentucky 40512, telephone number (606) 245-2500; 1793 Kingswood Drive,
Southlake, Texas 76092, telephone number (817) 431-2197; and at 36 West
44th Street, The Bar Association Building, Suite 1310, New York, New York
10036, telephone number (212) 852-8852.
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ACQUISITIONS AND ASSET PURCHASES
The following table lists the acquisitions and asset purchases
completed by the Company during the years ended December 31, 1998 and 1997.
No acquisitions or asset purchases were completed in 1996.
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CONSIDERATION
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SHARES OF
COMMON ACCOUNTING
ACQUISITIONS AND ASSET PURCHASES COMPLETED DATE CASH STOCK METHOD
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Health Financial, Inc. 06/01/97 325,000 Pooling
First Lexington Trust Company 12/31/97 80,008 Pooling
Resource Benefit Planners, Inc. 03/10/98 12,000 Pooling
Unified Investment Advisers, Inc. 03/31/98 <F1> <F1>
Fiduciary Counsel, Inc. 08/21/98 $800,835 36,110 Purchase
EMCO Estate Management Company, Inc.<F2> 08/21/98 11,000 Pooling
Equity Underwriting Group, Inc.<F3> 12/17/98 241,745 Pooling
Commonwealth Premium Finance Corporation 12/17/98 12,800 Pooling
Strategic Fund Services, Inc. 12/22/98 7,500 Pooling
AmeriPrime Financial Services, Inc.<F4> 12/31/98 410,000 Pooling
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<FN>
<F1> UIA became a wholly owned subsidiary of the Company upon the
surrender to UIA by all of its stockholders (other than the Company)
of their capital stock.
<F2> The Company purchased certain of the assets and business and assumed
certain of the obligations of The Patty Corporation (f/k/a EMCO
Estate Management Company, Inc.). The acquisition company used by
the Company to acquire such assets and obligations changed its name
after the acquisition to EMCO Estate Management Company, Inc.
<F3> Equity Underwriting Group, Inc. is a 100% shareholder of Equity
Insurance Managers, Inc. and a 50% owner of 21st Century Claims
Service, Inc. Equity Insurance Managers, Inc. is a 100% shareholder
of Equity Insurance Administrators, Inc., a 50% shareholder of 21st
Century Claims Service, Inc. and a 55% shareholder of Equity
Insurance Managers of Illinois, L.L.C. (d/b/a/ Irland & Rogers).
<F4> AmeriPrime Financial Services, Inc. is a 100% shareholder of
AmeriPrime Financial Securities, Inc.
</TABLE>
RECENT DEVELOPMENTS AND PENDING TRANSACTIONS
On January 1, 1999, the Company consummated the acquisition of
M. Wilson & Associates, Inc., a Kentucky corporation ("M. Wilson &
Associates"). In connection with the acquisition, Equity purchased all of
the outstanding capital stock of M. Wilson & Associates for a purchase
price of 3,636 shares of Common Stock. The acquisition was accounted for
pursuant to the pooling-of-interests method of accounting.
M. Wilson & Associates is a claim processing and management company
that has experience in handling liability, property and workers
compensation claims for a self-insured trust fund. M. Wilson & Associates
processes claims for an occupational accident program for independent
truckers. M. Wilson & Associates also does statewide property adjusting
for Kentucky risk and insurance service division and property adjusting for
the Fair Plan of Louisville, Kentucky.
On October 16, 1998, the Company entered into an Agreement and Plan
of Merger with Commonwealth Investment Services, Inc., a Kentucky
corporation ("Commonwealth"), pursuant to which the Company will acquire
Commonwealth through a merger of Commonwealth with and into HFI Acquisition
Corporation, a Kentucky corporation and a wholly owned subsidiary of the
Company
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("HFI"). In connection with the acquisition, the Company will issue a total
of 27,500 shares of Common Stock, $.01 par value of Unified (the "Unified
Stock"), and the associated preferred share purchase rights (the "Rights" and
collectively with the Unified Stock, the "Common Stock") under the Company's
Rights Agreement, dated August 26, 1998, between the Company and Unified Fund
Services, Inc. ("Unified Fund Services") (the "Rights Agreement"), in exchange
for all of the outstanding capital stock of Commonwealth. Consummation of the
acquisition is subject to various closing conditions and is intended to be
accounted for pursuant to the pooling-of-interests method of accounting.
Commonwealth provides investment services to individuals, businesses
and institutions throughout the Commonwealth of Kentucky and surrounding
areas through a network of independent agents, primarily certified public
accountants.
On March 25, 1999, the Company entered into an Agreement and Plan of
Merger with Fully Armed Productions, Inc., a Kentucky corporation ("Fully
Armed Productions"), pursuant to which the Company will acquire Fully Armed
Productions through a merger of FAP Acquisition Corporation, a Kentucky
corporation and a wholly owned subsidiary of the Company ("FAP"), with and
into Fully Armed Productions. In connection with the acquisition, the
Company will issue a total of 18,182 shares of Common Stock in exchange for
all of the outstanding capital stock of Fully Armed Productions.
Consummation of the acquisition is subject to various closing conditions and
is intended to be accounted for pursuant to the pooling-of-interests method
of accounting.
Fully Armed Productions provides creative and technological services
for the television, radio and Internet industries through its specialty
production capabilities. Fully Armed Productions performs videography,
programming and production services for NBC, ESPN and numerous cable,
satellite and television stations, including services for the past two
Olympic games.
The Company has filed applications with the Office of Thrift
Supervision (the "OTS") and the Federal Deposit Insurance Corporation (the
"FDIC") with respect to the organization by the Company of a Federal
savings bank (the "Savings Bank") which would be headquartered at 2353
Alexandria Drive, Lexington, Kentucky, and is intended to be named Unified
Banking Company. The Company expects to commence operations of the Savings
Bank during the third quarter of 1999, subject to the receipt of the
required regulatory approvals and the issuance of a charter. The Savings
Bank would be a member of the Savings Association Insurance Fund of the
FDIC. The Savings Bank will offer various bank products and services
(including but not limited to, certificates of deposit, residential
mortgage loans and secured personal loans) to the general public, its
banking customer base and to the Company's subsidiaries' customer bases,
including investors in the mutual funds managed, advised or administered by
the Company's subsidiaries.
On March 25, 1999, the Board of Directors of the Company adopted a
resolution approving an amendment to the Company's Amended and Restated
Certificate of Incorporation. Such proposed amendment would increase the
number of shares of authorized Common Stock from 10,000,000 shares to
20,000,000 shares. The amendment is subject to stockholder approval at the
1999 Annual Meeting of Stockholders.
On March 25, 1999, the Board of Directors of the Company adopted a
resolution to amend and restate the Unified Financial Services, Inc. 1998
Stock Incentive Plan (the "Plan") to decrease to 500,000 the number of shares
of Common Stock that may be issued pursuant to the Plan. The amended Plan,
which is to be entitled the Amended and Restated Unified Financial Services,
Inc. 1998 Stock Incentive Plan, is subject to stockholder approval at the 1999
Annual Meeting of Stockholders.
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THE COMPANY'S SUBSIDIARIES AND OPERATIONS
As of March 31, 1999, the Company had 22 active subsidiaries through
which it conducted its operations, all of which are described below.
UNIFIED FUND SERVICES, INC. Unified Fund Services, an Indiana
corporation, is a registered transfer agent and mutual fund services
company, and provides transfer agency, fund accounting, administrative and
start-up services for mutual funds. Unified Fund Services' primary services
include: mutual fund transfer agency and shareholder recordkeeping;
shareholder services support; mutual fund start-up services;
administration; fund accounting; compliance; asset allocation services;
statement processing; retirement plan services; and fulfillment. Unified
Fund Services also provides all of the mutual fund services for the Unified
Funds portfolios, and performs other clerical functions for the Unified
Funds in addition to typical mutual fund services.
UNIFIED MANAGEMENT CORPORATION. UMC, an Indiana corporation, is a
registered broker dealer under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and is a member of the NASD. UMC specializes
in mutual fund distribution and shareholder servicing liaison providing
such services as: mutual fund distribution, distribution services and
support; mutual fund conversion support for broker-dealer requirements;
mutual fund trades; individual retirement account ("IRA") custodial
services; 12b-1 maintenance, accounting and marketing support; securities
(stock and bond) brokerage; brokerage clearing and execution services;
consolidated brokerage statement processing; mutual fund and brokerage
software development; asset allocation and performance measurement services
and statement processing; and retirement account record keeping.
UMC, as a broker-dealer subsidiary of the Company, functions as the
distributor of the Unified Funds and also provides specialty services for
certain customers of the Unified Funds in addition to its discount
brokerage activities. The brokerage subsidiary clears, on a fully-
disclosed basis, through U.S. Clearing, a division of Fleet Securities,
Inc., and Pershing, a division of Donaldson, Lufkin & Jenrette Securities
Corporation.
HEALTH FINANCIAL, INC. Health Financial, Inc., a Kentucky
corporation formed in 1986 ("Health Financial"), is an SEC registered
investment adviser. As of December 31, 1998, Health Financial managed
approximately $360 million in assets for both individuals and institutions,
principally private pension plans and foundations. Health Financial
specializes in an investment management philosophy that features a balanced
discipline of asset allocation utilizing no-load index funds over six asset
classes, including an S&P 500 index, a small cap U.S. bond index, an
international stock index, a REIT index and cash.
FIRST LEXINGTON TRUST COMPANY. First Lexington Trust Company, a
Kentucky corporation ("First Lexington"), is a non-bank trust company
specializing in retirement plans. As of December 31, 1998, First Lexington
maintained approximately $96 million in assets under management. Directed
by its trust investment committee, the Lexington-based Kentucky trust
company provides the same investment philosophy as its sister company,
Health Financial, while providing full trust powers and retirement plan
services to its customer base. Chartered in 1994, First Lexington is
regulated by the Kentucky Commissioner of Banking under the Department
of Financial Institutions, Commonwealth of Kentucky.
UNIFIED INTERNET SERVICES, INC. In 1998, the Company formed Unified
Internet Services, Inc., an Indiana corporation ("Unified Internet
Services"), to develop the Company's website, website television
programming and its proprietary search engine for the financial services
industry. It is
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currently anticipated that Unified Internet Services will develop the
Company's other industry-related internet products, including an interactive
"switch" that will allow consumers access to the Company's products, via
their television, cable or satellite stations. The Company anticipates
development of such products to be completed by the end of 1999.
RESOURCE BENEFIT PLANNERS, INC. Resource Benefit Planners, Inc., a
Kentucky corporation ("Resource Benefit Planners"), is a professional
services firm specializing in qualified retirement plans. Resource Benefit
Planners provides the following specific services to the retirement
industry and to the Company's customer base: retirement plan consulting,
recordkeeping, trust accounting services, plan participant education,
feasibility studies, originations, terminations, implementations,
installations, employee communications and administration.
UNIFIED INVESTMENT ADVISERS, INC. UIA, a Delaware corporation,
provides mutual fund advisory services for the Unified Funds and is an
important component in the tax-free reorganization strategy for
consolidating small mutual fund assets. UIA also retains the exclusive
rights to the proprietary V.O.I.C.E. product (Vision for Ongoing Investment
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in Charity and Education), which the Company believes is a significant and
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valuable asset for the future gathering of mutual fund assets.
FIDUCIARY COUNSEL, INC. Fiduciary Counsel, Inc., a Delaware
corporation that is based in New York City ("Fiduciary"), provides on a
customized basis professional investment management to individuals and
institutions located throughout the United States and Western Europe. The
Fiduciary Counsel philosophy is primarily "fundamentalist" and encompasses
the long-term investment viewpoint that includes: (1) preservation of
capital and maintenance of purchasing power of client dollars; (2)
protection against foreseeable market hazards; and (3) sound long-term
capital appreciation.
EMCO ESTATE MANAGEMENT COMPANY, INC. EMCO Estate Management
Company, Inc., a Delaware corporation ("EMCO"), is a wealth management firm
based in New York City. EMCO provides fee only services to individuals,
families and fiduciaries. EMCO professionals assist clients in a variety
of disciplines, including the following: financial, tax and estate
planning; family office services such as budgeting, bill paying and
payroll administration; trust administration; and income tax return
preparation and filing for individuals, trusts, partnerships and small
businesses.
AMERIPRIME FINANCIAL SERVICES, INC. AmeriPrime Financial Services,
Inc. ("AmeriPrime") is a Texas corporation headquartered in Southlake,
Texas. AmeriPrime provides administrative, regulatory, compliance and
start-up support services to investment advisors, banks and other money
managers in their proprietary mutual fund efforts. AmeriPrime provides
mutual fund distribution through its subsidiary, AmeriPrime Financial
Securities, Inc. ("AFSI"). AmeriPrime is the administrator of the
AmeriPrime Funds, an open-end management investment company consisting of
multiple series, each managed by unaffiliated registered investment
advisors, and sponsored by AFSI (the "AmeriPrime Funds"), and AmeriPrime
Insurance Trust, an open-end management investment company consisting of
multiple series, each managed by unaffiliated registered investment
advisors, and sponsored by AFSI ("AmeriPrime Insurance Trust"). As of
December 31, 1998, AmeriPrime supported 35 mutual funds consisting of over
$500 million in assets under management.
AMERIPRIME FINANCIAL SECURITIES, INC. AFSI, a Texas corporation
headquartered in Southlake, Texas, is an NASD broker-dealer registered in
all 50 states. AFSI, as the broker-dealer of AmeriPrime, functions as the
distributor of AmeriPrime's mutual funds, including the AmeriPrime Funds
and AmeriPrime Insurance Trust. AFSI also specializes in the
administration of mutual funds.
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EQUITY UNDERWRITING GROUP, INC. Equity Underwriting Group, Inc., a
Kentucky corporation headquartered in Lexington, Kentucky ("Equity"), is a
holding company for Equity Insurance Managers, Inc. ("EIM"), Equity
Insurance Managers, Inc. of Illinois, L.L.C. d/b/a/ Irland & Rogers ("EIM
of Illinois"), 21st Century Claims Service, Inc. (21st Century") and Equity
Insurance Administrators, Inc. ("EIA"), and provides, through its
subsidiaries, specialty insurance products as a general agent or as a
broker and currently provides services in the States of Kentucky,
Tennessee, West Virginia, Ohio, Indiana and Illinois. Equity writes
insurance products for primarily niche areas in the insurance marketplace
that are considered more "non-standard," representing a higher risk of
insured.
EQUITY INSURANCE MANAGERS, INC. EIM, a Kentucky corporation
headquartered in Lexington, Kentucky, operates in the States of Kentucky,
Tennessee, West Virginia, Ohio, Indiana and Illinois offering specialty
property and casualty insurance products as a managing general agent and
broker. The agents that are contracted to write business through EIM
principal lines include commercial, auto, garage, packages and general
liability. EIM is a member of the American Association of Managing General
Agents ("AAMGA"), National Association of Professional Surplus Lines
Offices Limited ("NAPSLO"), USA Alliance, Kentucky Lloyd's Agents
Association, the Kentucky Surplus Line Association and the Insurers of
Tennessee. In each of the six operating states, EIM also is an associate
member of Independent Insurance Agents and the Professional Insurance
Organization.
EQUITY INSURANCE MANAGERS OF ILLINOIS, L.L.C. D/B/A IRLAND & ROGERS
(55% OWNED). EIM of Illinois, an Illinois limited liability company
operating principally in the States of Illinois and Indiana, was formed to
purchase the Chicago wholesale brokerage firm Irland & Rogers. The principal
lines written as a wholesale broker include excess workers compensation,
commercial auto and general liability. EIM of Illinois currently represents
multiple insurance companies and has recently received a number of binding
authority contracts from Equity to expand into a national oriented brokerage
organization. EIM owns 55% of EIM of Illinois.
21ST CENTURY CLAIMS SERVICE, INC. 21st Century, a Kentucky
corporation headquartered in Lexington, Kentucky, provides adjusting
services and third-party claim administration services to various companies
represented by Equity and other third-party clients. The adjusting
resource and knowledge base of 21st Century provides complete program
administration to the Equity group. 21st Century is 50% owned by Equity
and 50% owned by EIM.
EQUITY INSURANCE ADMINISTRATORS, INC. EIA, a Kentucky corporation
headquartered in Lexington, Kentucky, provides third-party administrative
services to insurance companies and program managers. EIA's services
include policy issuance on contractual terms or a temporary basis either in
a local or remote environment, premium billing and collection on direct or
agency bill programs, electronic data translation and transmission
services, data warehousing of policy and claims data, policy and claims
information retrieval and processing services, imaging and archival
services, and policy issuance systems design and support. EIA is a wholly
owned subsidiary of EIM.
COMMONWEALTH PREMIUM FINANCE CORPORATION. Commonwealth Premium
Finance Corporation, a Kentucky corporation headquartered in Lexington,
Kentucky ("CPFC"), provides financing for the payment of premiums on
insurance coverage placed by Equity.
STRATEGIC FUND SERVICES, INC. Strategic Fund Services, Inc., a
Delaware corporation headquartered in New York, New York ("Strategic"),
provides mutual fund administration services to smaller mutual funds and
fund complexes, utilizing a proprietary database.
- 8 -
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<PAGE>
VSX TECHNOLOGIES, INC. VSX Technologies, Inc., a New York
corporation formed on March 10, 1999 ("VSX"), develops, implements and
operates software systems specifically designed for the brokerage industry.
UNIFIED CAPITAL RESOURCES, INC. Unified Capital Resources, Inc., a
New York corporation ("UCR"), was formed on March 16, 1999 to operate as
the Company's investment and merchant banking facility, which involves: (i)
assisting in raising funds required to support the Company's capital
requirements; (ii) assisting the Company's subsidiaries in merger and
acquisition opportunities; (iii) developing an on-line investment banking
capability; and (iv) identifying strategic investments which will
profitably contribute to the Company's overall results.
M. WILSON & ASSOCIATES, INC. M. Wilson & Associates, a Kentucky
corporation, is a claim processing and management company that has
experience in handling liability, property and workers compensation
claims for a self-insured trust fund. M. Wilson & Associates processes
claims for an occupational accident program for independent truckers.
M. Wilson & Associates also does statewide property adjusting for Kentucky
risk and insurance services division and property adjusting for the Fair
Plan of Louisville, Kentucky.
UNIFIED AVIATION, INC. Unified Aviation, Inc., a Delaware corporation
formed on February 23, 1999 ("Unified Aviation"), is an aviation
operating company.
THE COMPANY'S AFFILIATED MUTUAL FUNDS
As of December 31, 1998, the Unified Funds maintained approximately
$68.3 million in total net assets, predominantly in its money market
portfolio. AmeriPrime Insurance Trust maintained approximately $100,000 in
total net assets, and the AmeriPrime Funds maintained approximately $84.2
million in total net assets.
The Unified Funds features its proprietary property, V.O.I.C.E.
(Vision for Ongoing Investment in Charity and Education).(sm) The Unified
- - - - -
Funds' mission, largely due to its relationship with UIA, is to capture
existing small fund assets via: tax-free reorganizations; acquisitions;
asset mergers; construction of portfolios for certain registered investment
advisers; and the marketing of its V.O.I.C.E.(sm) concept. One of the three
Unified Fund's equity portfolios is a fund-of-funds.
Each of the AmeriPrime Funds and AmeriPrime Insurance Trust are
administered by AmeriPrime and distributed by AFSI. With respect to
AmeriPrime Insurance Trust, shares of the funds are sold exclusively to
separate accounts of insurance companies that offer variable annuity
contracts or variable life insurance policies.
The Board of Trustees of the Unified Funds consists of five
disinterested trustees and one interested trustee, Timothy L. Ashburn, the
Chairman of the Board, President and Chief Executive Officer of the Company.
The Board of Trustees of each of the AmeriPrime Funds and AmeriPrime
Insurance Trust consists of two disinterested trustees and one interested
trustee, Kenneth D. Trumpfheller, a director and the President and
Secretary of each of AmeriPrime and AFSI.
THE PHILANTHROPIC V.O.I.C.E.(SM) (VISION FOR ONGOING INVESTMENT IN CHARITY
- - - -
AND EDUCATION)(SM) PROGRAM.
-
The Company oversees and manages the V.O.I.C.E.(sm) program for UIA,
exclusively for the Unified Funds. V.O.I.C.E.(sm) is a unique and
innovative philanthropic program through which
- 9 -
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<PAGE>
individuals and institutions can cause contributions to be made to educational,
charitable and philanthropic "not-for-profit" organizations at no expense to
the Unified Fund or to the shareholder. UIA makes the contributions from its
own revenue to certain accredited college or university endowments or general
scholarship funds designated by qualifying shareholders.
The Unified Funds, since their formation in December 1994, have
licensed the V.O.I.C.E.(sm) program from UIA and, pursuant to the licensing
agreement, UIA is required to make a contribution each quarter on behalf of
each qualifying Unified Fund shareholder participating in the
V.O.I.C.E.(sm) program. All shareholders in all Unified Funds maintaining
an average annualized aggregate net asset value of $25,000 or more over the
period of an entire calendar quarter will be qualified to designate an
eligible institution to receive a donation under the program for that
quarterly period. UIA will contribute, on a quarterly basis, an amount
equal to that quarter's portion of 0.25% of the average annualized
aggregate net asset value, as long as the average annualized aggregate net
assets remain above $25,000 for the quarterly period. Although the
contributions will be made in the shareholder's name and behalf, there are
no tax deductions or tax advantages to the shareholders, since UIA is
making the contributions on behalf of the shareholders and neither the
shareholders' nor the Funds' assets are reduced. The contributions made by
UIA during fiscal years 1998 and 1997 were $9,872 and $11,789,
respectively.
Philanthropic institutions outside the area of education may be
accepted, at the discretion of UIA. The V.O.I.C.E.(sm) program is the
proprietary property of UIA.
REGULATION OF THE COMPANY'S BUSINESS
Under the Investment Company Act of 1940, as amended (the "1940
Act"), the advisory, subadvisory shareholder servicing and distribution
agreements between the Company's subsidiaries and various mutual funds are
subject to annual review by each fund's board of directors and the
agreements must be approved annually to remain in effect. There are no
assurances that the funds' boards of directors will renew each agreement
with these funds. The non-renewal of those agreements by a fund's board of
directors could have a material adverse effect on the Company's business.
The Company has no reason to believe that such approvals will not be
granted and that the various mutual fund agreements will not be renewed.
The securities industry, including broker-dealer, investment
advisory and transfer agency firms in the United States, are subject to
extensive regulation under Federal and state laws. Much of the regulation
of broker-dealers has been delegated to self-regulatory organizations,
principally the NASD. The regulations to which broker-dealers are
subjected cover all aspects of the securities business, including sales
methods, trade practices, capital structure of securities firms,
recordkeeping and the conduct of directors, officers and employees.
Additional state and Federal legislation, changes in rules promulgated by
the SEC and by self-regulatory organizations, or changes in the
interpretation or enforcement of existing laws and rules often directly
affect the methods of operation and profitability of money managers,
broker-dealers and transfer agents. Subject to certain preemptive Federal
law, investment-related firms also are subject to regulation and licensing
by state securities commissions in the states in which they transact
business. The SEC, state securities administrators and the self-regulatory
organizations may conduct administrative proceedings that can result in
censure, fine, suspension or expulsion of an investment adviser or broker-
dealer, its officers or employees. The principal purpose of regulation and
discipline of broker-dealers, investment advisers and transfer agents is
the protection of customers and the securities markets rather than
protection of creditors and shareholders of such firms. The Company also
is subject to extensive regulation as to its duties, affiliations, conduct
and limitations on fees.
- 10 -
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<PAGE>
The insurance industry is highly regulated by state law. CPFC
must be licensed as a premium finance company in the states of Kentucky,
Tennessee, Illinois and Ohio. Although CPFC also conducts business in
the states of West Virginia and Indiana, such states presently do not
require premium finance licensure. Applicable regulations in all states
in which CPFC conducts business require the approval of service charges,
forms and applications used by CPFC in its business and also require
compliance with certain recordkeeping and record inspection
requirements.
The Company's other insurance-related subsidiaries also are
subject to state regulation. 21st Century must be licensed as a claims
adjusting company in all states in which it conducts business or, in the
alternative, must employ licensed claims adjusters. Each of EIM and EIM
of Ill. must be licensed as a managing general agent or broker in most
states in which it conducts business and, in some instances, must employ
licensed agents. Most insurance programs written by EIM and EIM of Ill.
are subject to some degree of regulation by state insurance departments.
Violations of state regulations may subject these companies to civil and
criminal penalties, including fines.
INDUSTRY REGULATIONS
The Company's broker-dealer subsidiaries, UMC and AFSI, are NASD
members. The NASD is a self-regulatory organization that has prescribed
rules with respect to maximum commissions, charges and fees related to
sales of shares in any open-end investment company registered under the
1940 Act.
Each of UIA, Health Financial and Fiduciary Counsel is an investment
adviser registered with the SEC under the Investment Advisers Act of 1940,
as amended (the "Advisers Act"). UIA serves as the adviser to the Unified
Funds. Under the Advisers Act, it is unlawful for any investment adviser
to: (1) employ any device, scheme or artifice to defraud any client or
prospective client; (2) engage in any transaction, practice or course of
business that operates as a fraud or deceit upon any client or prospective
client; or (3) engage in any act, practice or course of business that is
fraudulent, deceptive or manipulative.
The Company aggressively pursues a strategy of acquiring investment
advisers to mutual funds. Once an investment adviser is acquired, its
advisory agreement is assigned to the Company and automatically terminates
under the 1940 Act. UIA's assumption of an advisory agreement must be
approved by a majority of the fund's board of directors and a majority of
its outstanding voting securities. An investment adviser purchased by the
Company may not benefit from the sale of its advisory business to UIA which
results in the assignment of an advisory contract with a mutual fund
unless, for a period of three years after the sale, at least 75% of the
board of directors of the fund are not interested persons of the new
adviser or the predecessor adviser, and no unfair burden is imposed on the
fund as a result of the sale. This 75% requirement is stricter than the
general requirement that only two-thirds of mutual fund's board of
directors must be "disinterested" under the 1940 Act. The effect of such
transfer results in the assignment of the old investment advisory
agreement, which requires the new agreement to be approved by the Boards of
Trustees and the acquired fund's shareholders. There can be no assurances
that a fund's board or its shareholders will approve an advisory agreement
with UIA after UIA has acquired the former adviser to the fund. In
addition, UIA may be required to assume an advisory contract previously
entered into under disadvantageous terms in order to convince the fund's board
or its shareholders to approve UIA's assumption of the agreement.
Mutual fund directors and investment advisers to mutual funds are
deemed to be "fiduciaries" of the fund. The SEC is authorized to initiate
an action to enjoin a breach of fiduciary duties involving personal
misconduct by any officers, directors, investment advisers and principal
underwriters
- 11 -
<PAGE>
<PAGE>
of a fund. Shareholders or the SEC also may bring an action against the
officers, directors, investment adviser or principal underwriters for breach
of fiduciary duty in establishing the compensation paid to the investment
adviser or underwriter. An investment adviser or underwriter to a fund, its
principals and its employees, also may be subject to proceedings initiated by
the SEC to impose remedial sanctions for violation of any provision of the
Federal securities laws and the regulations adopted thereunder, and the SEC
may preclude a firm that has been sanctioned from continuing to act in such
capacity. Investment companies such as the Unified Funds, the AmeriPrime
Funds and AmeriPrime Insurance Trust are subject to substantive regulation
under the 1940 Act. Such companies must comply with periodic reporting
requirements. Proxy solicitations are subject to the general proxy rules as
well as to special proxy rules applicable only to investment companies. Shares
of investment companies can only be offered at the next-determined net asset
value plus any sales load. A fund's management agreement initially must be
approved by the fund's board of directors and a majority of the outstanding
shares and, after two years, must be annually approved, either by the board or
by the outstanding voting shares. A fund's management agreement must
automatically terminate in the event of assignment and typically is subject
to termination upon 60-days notice by the board or by a vote of the majority
of the outstanding voting shares. The underwriting or distribution agreement
also must be annually approved by the board or by a vote of a majority of the
outstanding voting shares, and must provide for automatic termination in event
of assignment. Transactions between the investment company and an affiliate are
prohibited.
REGULATORY PENALTIES FOR FAILURE TO MAINTAIN MINIMUM NET CAPITAL
REQUIREMENTS
The Exchange Act imposes minimum net capital requirements for
broker-dealer firms. A decrease below the minimum level of net capital
required to be maintained by UMC and AFSI under the Exchange Act could
force UMC and AFSI to suspend activities pending recovery of net capital.
Factors that may affect UMC's and AFSI's net capital include the general
investment climate as well as the ability of the Company to obtain any
assets necessary to contribute equity capital to UMC and AFSI.
RISKS OF BUSINESS
The Company's investment advisory, transfer agent, shareholder
servicing and broker-dealer businesses are subject to various risks and
contingencies, many of which are beyond the ability of the Company to
control. These risks include: economic conditions generally and, in
particular, those affecting the bond and securities markets; fluctuations
in interest rates; discretionary income available for investment; customer
inability to meet payment or delivery commitments; customer fraud; and
employee fraud, misconduct and error.
COMPLIANCE REQUIREMENTS AND REGULATORY PENALTIES FOR NONCOMPLIANCE
Various aspects of the Company's business are subject to Federal and
state regulation as well as to oversight by self-regulatory organizations
that, depending on the nature of any failure to comply with an applicable
entity's rules, may result in the suspension or revocation of licenses or
registration, including broker-dealer, investment adviser, transfer agent,
premium finance and managing general agent licenses and registrations, as
well as the imposition of civil fines and criminal penalties. Failure by the
Company or any of its employees to comply with such regulations or with any
of the laws, rules or regulations of Federal, state or industry authorities
(principally the NASD, SEC and state insurance departments) could result in
censure, imposition of fines or other sanctions, including revocation of the
Company's right to do business or in suspension or expulsion from the NASD.
Any of the foregoing could have a material adverse effect upon the Company.
Such regulations are designed primarily for the protection of the investing
customers of securities firms and not the Company's stockholders. Finally,
there is no assurance that the Company, along with other fund
- 12 -<PAGE>
<PAGE>
distributors, administrators and managers will not be subjected to
additional stringent regulation and publicity that may adversely affect
their business.
COMPETITION
Since its inception, the Company has encountered substantial
competition in the businesses in which it competes. The Company's
principal competitors include mutual finds, investment advisors, investment
counsel firms and financial institutions such as banks, savings and loan
institutions and credit unions. Competition is influenced by various
factors, including breadth, quality of service and price. All aspects of
the Company's business are competitive, including competition for mutual
fund assets to manage. Large national firms have much greater marketing
capabilities, offer a broader range of financial services and compete not
only with the Company and among themselves but also with commercial banks,
insurance companies and others for retail and institutional clients. The
Company's affiliated mutual funds are subject to competition from
nationally and regionally distributed funds offering equivalent financial
products with returns equal to or greater than those offered by the Unified
Funds, the AmeriPrime Funds or AmeriPrime Insurance Trust. The Company is
focused on the niche area of tax-free reorganizations and consolidations of
small mutual funds into the Unified Funds family and its proprietary products,
such as V.O.I.C.E.(sm) Competition for assets under management is intense from
both national and regional based firms. Access to local investment and the
population of the region by modern communication systems is so efficient that
the Company's geographical position cannot be deemed an advantage. The
Company's investment management operations compete with a large number of other
investment management firms, commercial banks, insurance companies, broker-
dealers and other financial service firms. Most of these firms are larger
and have access to greater resources than the Company. The investment
advisory industry is characterized by relatively low cost of entry and the
formation of new investment advisory entities that may compete directly
with the Company is a frequent occurrence. The Company directly competes
with as many as several hundred firms that are of similar or larger size.
The Company's ability to increase and retain clients' assets could be
materially adversely affected if client accounts under-perform the market.
The ability of the Company's investment management subsidiaries to compete
with other investment management firms also is dependent, in part, on the
relative attractiveness of their investment philosophies and methods under
prevailing market conditions. A large number of mutual funds are sold to
the public by investment management firms, broker-dealers, insurance
companies and banks in competition with the Unified Funds, the
AmeriPrime Funds and AmeriPrime Insurance Trust. Many of the Company's
competitors apply substantial resources to advertising and marketing their
mutual funds, which may adversely affect the ability of the Unified Funds,
the AmeriPrime Funds and AmeriPrime Insurance Trust to attract new assets.
The Company expects that there will be increasing pressures among mutual
fund sponsors to obtain and hold market share. Although the Company may expand
the financial services it can provide to its customers, it does not now offer
as broad a range of financial services as national stock exchange member firms,
commercial banks, insurance companies and others.
DEPENDENCE ON KEY CLIENTS
As of December 31, 1998, the Company provided mutual fund services,
transfer agency, fund accounting, administration and distribution services
to 18 mutual fund families consisting of 53 portfolios. Four of those
portfolios, the Unified Funds, originally were organized and are sponsored
by UIA. The Unified Funds and those of the remaining parties, have entered
into contracts with the Company that typically expire within one to three
years. No assurance can be given that any of these third party funds will
remain clients of the Company upon expiration or termination of the various
administration and distribution agreements. The loss by the Company of
such mutual fund clients could have a material adverse effect on the
Company.
- 13 -
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<PAGE>
Additionally, UMC has entered into clearing agreements with its
introduced broker-dealer clients that represent a substantial portion of
the assets in the Unified Funds through the use of the Unified Taxable
Money Market Funds as their brokerage sweep facility. The introduced
broker-dealer relationships also represent a significant portion of UMC's
revenues from trading commissions. The loss of clearing clients could have
a material adverse effect on the Unified Funds and the Company.
UIA receives management fees from the Unified Funds. As the Unified
Funds' manager and adviser, UIA, and, therefore, the Company, are
economically dependent on the Unified Funds for a portion of
their revenue.
Contracts for portfolio management performed by UIA in the case of
the Unified Funds are awarded annually by review and approval of the
independent Boards of Trustee of the various Unified Funds. The Boards of
Trustee consist of six trustees, five of whom are independent, and Timothy L.
Ashburn who is affiliated with the Company. These Boards also are
responsible for awarding the Company's subsidiaries the various service
agreements for the Unified Funds.
DEPENDENCE ON KEY PERSONNEL
The Company is dependent in a large part on Timothy L. Ashburn, the
President, Chief Executive Officer and Chairman of the Board, as well as a
group of senior management personnel. The loss or unavailability of any of
these persons could have a material adverse effect on the Company. The
Company's success also will depend on its ability to attract and retain
highly skilled personnel in all areas of its business. There can be no
assurance that the Company will be able to attract and retain personnel on
acceptable terms in the future. Other than a $1 million policy on the life
of each of Timothy L. Ashburn and Dr. Gregory W. Kasten, the President of
Health Financial and First Lexington, each a wholly owned subsidiary of the
Company, the Company does not presently own insurance covering the lives of
the senior management of the Company. There can be no assurance that the
services of the senior management of the Company will continue to be
available.
EMPLOYEES
As of December 31, 1998, the Company and its subsidiaries had 165
employees, of which 158 were full-time employees. None of the employees of
the Company and its subsidiaries are subject to a collective bargaining
agreement. The Company considers its relationships with its employees and
those of the subsidiaries to be good.
ITEM 2. DESCRIPTION OF PROPERTY
-----------------------
The Company, through its subsidiary, UMC, leases its corporate
headquarters and administrative office facilities located at 431 North
Pennsylvania Street, Indianapolis, Indiana. This facility is comprised of
approximately 10,820 square feet and is subject to a lease expiring in
2007. Health Financial's, First Lexington's and Resource Benefit Planners'
administrative offices are located at 2353 Alexandria Drive, Lexington,
Kentucky. The operating lease for Health Financial's and First Lexington's
offices expires in 2002 and such offices have approximately 2,320 square
feet. The operating lease for Resource Benefit Planners' offices expires
in 2002 and such offices have approximately 2,180 square feet. The Company
also leases a portion of such property for corporate offices. Fiduciary's,
Strategic's, VSX's and UCR's administrative offices are located at 36 West 44th
Street, New York, New York. The operating lease for Fiduciary Counsel
expires in 2002 and such offices have approximately 3,231 square feet.
Equity's administrative offices are located at 220 Lexington Green
- 14 -
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<PAGE>
Circle, Suite 600, Lexington, Kentucky. The operating lease for Equity
expires in 2001 and such offices have approximately 20,080 square feet.
AmeriPrime's administrative offices are located at 175 Westwood Drive,
Suite 500, Southlake, Texas. The operating lease for AmeriPrime expires
in 1999 and such offices have approximately 600 square feet. The Company's
current administrative offices are considered adequate to serve the Company's
foreseeable needs. Other than the administrative offices leases, the Company
has no other significant property holdings.
ITEM 3. LEGAL PROCEEDINGS
-----------------
Various claims and lawsuits, incidental to its ordinary course of
business, are pending against the Company and its subsidiaries. In the
opinion of management, after consultation with legal counsel, resolution of
these matters is not expected to have a material effect on the Company's
financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
There were no matters submitted during the quarter ended
December 31, 1998 to a vote of the Company's stockholders, through the
solicitation of proxies or otherwise.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------
The name, age and position with respect to each of the executive
officers of the Company are set forth below:
TIMOTHY L. ASHBURN, 48, has served as Chairman of the Board of the
Company since 1989, as Chief Executive Officer from 1989 to 1992 and 1994
to present, and as President since November 1997. Mr. Ashburn was employed
by Vine Street Trust Company, Lexington, Kentucky, a wholly owned
subsidiary of Cardinal Bancshares, a Kentucky bank holding company, for the
two-year period from April 1992 through March 1994. Mr. Ashburn also is a
director of each of UMC, Unified Fund Services, First Lexington, Health
Financial, Resource Benefit Planners, Unified Internet Services, UIA,
Fiduciary, EMCO, Equity, CPFC, Strategic, AmeriPrime, AFSI, Unified
Aviation, VSX and UCR, is Chairman of the Board of Trustees, President, Chief
Executive Officer and Assistant Secretary of the Unified Funds, is Chairman
and Chief Executive Officer of Unified Fund Services, is Chairman of UMC, is
President and Assistant Secretary of Unified Aviation, is Assistant Secretary
of each of Fiduciary, EMCO, Equity, CPFC, Strategic, AmeriPrime and AFSI and
is Vice President and Assistant Secretary of VSX and UCR. Mr. Ashburn is a
member of the Executive Committee.
THOMAS G. NAPURANO, 57, a certified public accountant and a
certified management accountant, has served as a director, the Chief
Financial Officer and Executive Vice President of the Company since 1989.
Mr. Napurano also is a director and the Chief Financial Officer of Unified
Internet Services, is a director and the Chief Financial Officer and
Executive Vice President of each of UMC and Unified Fund Services, is a
director and the Treasurer of Unified Aviation, is a director and the
Assistant Treasurer of VSX and UCR, is the Chief Financial Officer and the
Treasurer for the Unified Funds, is the Assistant Treasurer of each of
Fiduciary, EMCO, Equity and CPFC, and is the Treasurer of each of
Strategic, AmeriPrime and AFSI. Mr. Napurano is a member of the
Executive Committee.
LYNN E. WOOD, 52, has served as a director of the Company since 1992
and served as Chief Operating Officer and President of the Company from
1993 through November 1997. Mr. Wood also has served as Executive Vice
President of the Company since 1998. Mr. Wood is a director and the
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<PAGE>
President and Chief Executive Officer of UMC, is a director of Unified
Internet Services and is the Assistant Secretary to the Unified Funds.
DAVID A. BOGAERT, 35, has served as an Executive Vice President of
the Company since 1992, as the President of Unified Fund Services since
November 1997, as a director and an Executive Vice President of UIA from
1995 and as an Executive Vice President of UMC from 1994 through September
1998. Mr. Bogaert has been the national sales and marketing director since
1995 as well as the telephone service representative, brokerage services
supervisor, institutional sales representative and Assistant Vice President
from 1986 through 1992.
DR. GREGORY W. KASTEN, 44, has served as a director of the Company
since 1997. Dr. Kasten has served as President and Chief Executive Officer
of Health Financial and First Lexington since 1986 and 1994, respectively.
Dr. Kasten also is a director of each of Health Financial, First Lexington
and Resource Benefit Planners. Dr. Kasten has been awarded Certified
Financial Planner and Certified Pension Consultant designations and
received a Master of Business Administration degree with an emphasis on
Finance and Investment Management. Dr. Kasten also received a medical
degree but has retired from medical practice.
JACK R. ORBEN, 60, has served as a director of the Company since
1989. Mr. Orben also is a director and the Chairman of the Board, Chief
Executive Officer and Treasurer of each of Fiduciary Counsel, EMCO and
Associated Family Services, Inc. and is a director and the President and
Treasurer of Fiduciary Alliance. For various periods during the past five
years, Mr. Orben served as the Chairman of the Board, Chief Executive
Officer and Treasurer of each of Venvestech Corp., Seward, Groves, Richards
& Wells, Starwood Corporation, Fiduciary Alliance Inc., NUSTAR Inc.,
Intellectronic Management Systems Inc., Economic Analysts Inc., Ra X
Productions Inc. and EMCO Nominees Inc. and as a director of UIA. Mr.
Orben is a member of the Audit, Nominating and Compensation Committee.
JOHN R. OWENS, 45, a certified public accountant, has served as a
director and an Executive Vice President of the Company since 1998. Mr.
Owens has served as a director and the President of Equity since 1998, a
director and the Vice-President and a director and the Vice-President,
Secretary and Treasurer of CPFC since 1991 and 1998, respectively, a
director and the President of each of EIM and EIA since 1990 and 1997,
respectively, a director and the Treasurer of 21st Century since 1996 and a
director of EIM of Illinois since 1996. Mr. Owens also is a director, the
Vice President and Secretary of Unified Aviation. Mr. Owens is a member of
the Executive Committee.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
---------------------------------------------------------------------
There currently is no established public trading market for the
Common Stock. All share and price information has been adjusted to reflect
all stock splits and stock dividends paid by the Company since January 1,
1997.
<TABLE>
<CAPTION>
SALES PRICE
---------------------------
HIGH LOW
------- -------
<S> <C> <C>
1997
----
First Quarter $0.1028 $0.0935
Second Quarter -- --
Third Quarter 1.2312 1.2312
Fourth Quarter -- --
1998
----
First Quarter 25.00 25.00
Second Quarter 27.50 25.00
Third Quarter 27.50 25.00
Fourth Quarter 27.50 27.50
</TABLE>
Because of the closely held nature of the Company, no representation
is made that the foregoing prices are or are not reflective of a "market
price." As of March 15, 1999, the Company reported approximately 270
stockholders of record holding the Common Stock.
The Company has not paid any cash dividends with respect to the
Common Stock during the disclosed time periods.
For the three months ended December 31, 1998, the only sales of the
Company's securities were the following: (i) 7,500 shares of Common Stock
issued in connection with the acquisition of Strategic (such shares were
issued in exchange for the outstanding capital stock of Strategic); (ii)
241,745 shares of Common Stock issued in connection with the acquisition of
Equity (such shares were issued in exchange for the outstanding capital
stock of Equity); (iii) 12,800 shares of Common Stock issued in connection
with the acquisition of CPFC (such shares were issued in exchange for the
outstanding capital stock of CPFC); (iv) 410,000 shares of Common Stock
issued in connection with the acquisition of AmeriPrime (such shares were
issued in exchange for the outstanding capital stock of AmeriPrime); and
(v) 11,400 shares of Common Stock issued in connection with private
offerings of Common Stock at a price of $27.50 per share. All shares of
Common Stock issued by the Company during such period were issued pursuant
to the exemption provided by Rule 506, as promulgated by the SEC.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
The following presents management's discussion and analysis of the
Company's consolidated financial condition and results of operations as of
the dates and for the periods indicated. This discussion should be read in
conjunction with the other information set forth in this Annual Report on
Form 10-KSB, including the Company's audited, consolidated financial
statements and the accompanying notes thereto.
COMPARISON OF RESULTS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
Total revenue for the year ended December 31, 1998 as compared to
the year ended December 31, 1997 increased $3,722,619, or 19.3%, from
$19,249,217 to $22,971,836. For such periods,
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<PAGE>
brokerage revenue increased $1,862,142, or 64.8%, investment advisory revenue
increased $1,559,894, or 77.8%, financial services administration revenues
increased $631,645, or 16.5%, insurance brokerage revenue declined $315,364,
or 3.2%, and software and programming services and other income decreased
$15,698, or 2.2%. The increase in brokerage revenues primarily was due to
$772,000 in commissions received by UMC from the sale of Common Stock in
connection with the Company's private placement (the "Private Placement").
Investment advisory revenue increased principally due to growth in assets under
management plus the increased revenue ($1,003,472) due to the acquisitions by
the Company in March 1998 and August 1998 of UIA and Fiduciary, respectively.
Financial services administration revenues increased principally due to growth
in assets under services and growth in claim service contracts and premium
financing activities. Gross insurance brokerage revenues decreased slightly
due to lesser premium income being written in the current year. Overall,
$42,934,060 in premiums was written during 1998 as compared to $44,105,396 in
1997, a decrease of 2.7%. Software and programming services and other income
declined slightly from 1997 to 1998, principally as a result of additional
interest income earned on cash and cash equivalents received in connection
with the Private Placement, offset by a reduction in software and programming
revenue.
Gross profit for the year ended December 31, 1998 as compared to the
year ended December 31, 1997 increased $2,603,952, or 21.9%, from
$11,879,096 to $14,483,048. For such periods, gross profit as a percentage
of revenue increased to 63.0% from 61.7%. Brokerage gross profit increased
to $1,647,500 for the year ended December 31, 1998 from $1,001,100 for the
prior year, reflecting the increased brokerage revenues received by UMC in
connection with the Private Placement. Investment advisory gross profit
increased to $3,492,672 for the year ended December 31, 1998 from
$1,949,749 for the year ended December 31, 1997. For such periods,
investment advisory gross profit increased $1,542,923, of which $991,287
was due to the acquisitions of UIA and Fiduciary on March 31, 1998 and
August 21, 1998, respectively, plus increased assets under management.
Financial services administration gross profit increased to $3,725,593 for
the year ended December 31, 1998 from $3,265,090 for the year ended
December 31, 1997, reflecting the increased assets under service and growth
in claim service contracts and premium financing activities. Insurance
brokerage gross profit of $4,931,363 declined slightly for the year ended
December 31, 1998 compared to $5,090,342 for the prior year. The insurance
brokerage gross profit decrease was attributable to a premium decline of
approximately $3,500,000 in private passenger automobile business, but was
tempered by increases in other lines of commercial business, at lower
margins. The premium decline is reflective of the very competitive nature
of the present insurance market. The increase in all other gross profit of
$113,074 reflects the increased interest income earned on cash and cash
equivalents received in connection with the Private Placement and the growth
in the claims and premium finance operations.
Income from operations for the year ended December 31, 1998 was
$1,195,353, or 5.2% of total revenue, as compared to a loss from operations
of $1,017,533 for the prior year. Total expenses for the year ended
December 31, 1998 were $13,287,695, or 57.8% of total revenue, as compared
to $12,896,629, or 67% of total revenue, for the year ended December 31,
1997. Fiduciary and UIA, each of which was acquired by the Company during
1998, accounted for $1,044,927 of the expenses during 1998 when compared
to 1997. The 1998 compensation and benefit expense of $6,698,826, or
50.4% of total expenses, was $919,442 lower than the 1997 total expenses of
$7,618,268. The cost of additional personnel hired during 1998 due to
increased volume was more than offset by a one-time special bonus paid in
1997 of approximately $125,000, acquisition related guaranteed payments of
approximately $825,000 related to the purchase of a new subsidiary and the
retirement of stock held by a former shareholder of Equity and an overall
reduction in executive compensation in 1998 at Equity. Investment
administration expenses increased $180,104 from $235,561 due to a $261,000
one-time charge related to the fund administration activity from 1989 and
prior years, partially offset by the increased cost in 1997 due to a change
in the Company's fund service provider. The 1997 depreciation and
amortization
- 18 -
<PAGE>
<PAGE>
expense reflected accelerated adjustments of $278,000 in goodwill expense
related to a subsidiary purchased by Equity. Interest expense related to
the cost of capital used to retire the shares held by a former shareholder
of Equity.
For the year ended December 31, 1998, the Company's portion of
profit from affiliates was $59,197 as compared to $295,525 profit from
affiliates for the year ended December 31, 1997. The Company's portion of
the loss of UIA (prior to the Company's acquisition of 100% of the capital
stock of UIA on March 31, 1998) was $39,945 as compared to a $160,298 loss
for the year ended December 31, 1997. Equity's portion of profit of an
affiliate for the year ended December 31, 1998 was $99,142 as compared to
$455,823 profit from an affiliate for the year ended December 31, 1997.
Unrealized and realized gains on securities of approximately $37,441 in
1998 compared to $76,058 in 1997, reflecting the change in the stock
market.
Net income of $1,132,781 for the year ended December 31, 1998
increased $1,410,714 as compared to a net loss of $277,933 for the year ended
December 31, 1997. Increased revenue (19.3%) for the year ended December 31,
1998 more than offset the increased expenses (3.0%) during such year as
compared to the year ended December 31, 1997. The growth in assets under
management and services, coupled with the commissions received by UMC from
the sale of Common Stock in the Private Placement, resulted in increased
gross revenue The acquisition of each of UIA and Fiduciary was reported
pursuant to the purchase method of accounting and included in the Company's
consolidated financial statements from the date of each respective acquisition.
The 1998 revenue and expenses from acquisitions were increased 5.2% and 8.1%,
respectively. The 1997 expenses from merged subsidiaries reflect
acquisition-related compensation, depreciation and amortization and
equipment rental expense, net of tax of $898,000.
LIQUIDITY AND CAPITAL RESOURCES
The assets and liabilities of each of UIA and Fiduciary are included
in the Company's balance sheet as of December 31, 1998. The inclusion of
these companies and the receipt of funds pursuant to the Private Placement
are the principal reasons for the increase of most balance sheet items from
December 31, 1997 to December 31, 1998. The Company's primary sources of
liquidity historically have been and continue to be cash flow from
operating activities, available borrowing capacity from capitalized leases
and a loan from a regional bank to finance capital equipment. The net
increase in cash and cash equivalents at year-end 1998 from year-end 1997
was $7,776,107. The principal increase reflects net proceeds from the
Private Placement of $10,222,635 and bank borrowings of $3,373,770, which
monies offset the $1,706,900 utilized to redeem the Series A and Series B
Preferred Stock, as well as cash the Company expended for the purchase of
Fiduciary, the purchase of fixed assets and the purchase of common stock of
Equity. The Company issued 450,738 shares of Common Stock in 1998. In
addition, during May 1998, the Company issued to certain directors, executive
officers and agents of the Company 2,100 shares of Series C Preferred Stock for
total consideration of $210,000. On August 21, 1998, the Company paid $800,835
and issued 36,110 shares of Common Stock in connection with the acquisition of
Fiduciary, creating goodwill of $1,564,802.
On April 25, 1998, the Company utilized $1,706,900 of the proceeds
from the Private Placement to redeem the outstanding shares of Series A and
Series B Preferred Stock. Pending usage, the Company invested the
remaining net proceeds from the Private Placement in its own no-load mutual
fund portfolios. The Private Placement should have a positive effect on
the Company by assisting further development, marketing, expansion and
support of the Company's products and services, some of which are
proprietary, promoting an aggressive advertising and publicity program for
the Company's niche
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<PAGE>
<PAGE>
products and services, especially the V.O.I.C.E.(TM) program, and the
Company's vision for the financial services industry and expansion of the
Company's internet investment activities.
YEAR 2000 COMPLIANCE
The year 2000 issue is the result of computer programs being written
using two digits rather than four digits to define the applicable year.
These programs treat years as occurring between 1900 and the end of 1999
and do not self-convert to reflect the upcoming change in the century. If
not corrected, computer applications could create erroneous results by or
at the Year 2000.
The Company has undertaken a program to understand the nature and
extent of the work required to make its computer systems Year 2000
compliant. This program encompasses evaluation and correction of operating
systems, information systems and facilities systems. The program also
involves an evaluation of the Company's products and the Year 2000
compliance of the Company's vendors. The program consists of the
following phases: awareness and inventory; triage; detailed assessment and
resolution; testing; deployment; and contingency plan development.
AWARENESS PHASE. In this phase, the Company informs employees and
management of the Year 2000 problem and how it affects the Company. The
Company explains its Year 2000 project to employees and management and
provides routine updates on the project's status.
INVENTORY PHASE. This phase focuses on the identification of all
products that are not Year 2000 Compliant.
TRIAGE PHASE. In this phase, the Company, based on an evaluation of
technical and business risks, determines which non-compliant computer
systems should be retired and which should be maintained. Those systems
critical to the business of the Company are placed in the detailed
assessment phase.
DETAILED ASSESSMENT PHASE. In this phase, efforts are focused on
the identification of Year 2000 problems within each specific system
and identification of appropriate solutions to such problems.
RESOLUTION PHASE. Efforts in this phase are focused on repair,
replacement or retirement of systems that have been identified as non-
compliant.
TESTING PHASE. In this phase, the Company tests its systems to
determine the effectiveness of the solutions developed in the resolution
phase.
DEPLOYMENT PHASE. The Company makes the Year 2000 systems
operational in this phase.
The Company's objective was to be Year 2000 compliant with its
critical systems by the end of the fourth quarter of 1998, allowing
substantial time for further testing, verification and conversion of less
important activities and systems. The Company has achieved this goal in
over 90% of the mission critical systems. The remaining 10% of the critical
systems is scheduled to be compliant by April 30, 1999. The Company is
utilizing both internal and external resources to identify, correct or
reprogram, and test its internal systems for Year 2000 compliance. The
Company has gathered information from its suppliers and vendors to
determine the status of their Year 2000 compliance and the extent to which
the Company's operations may be affected by such third-parties' non-
compliance. The Company is
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<PAGE>
<PAGE>
monitoring the progress of each vendor and is developing contingency plans
in the event vendors experience Year 2000 problems and cannot deliver products
and services necessary to the Company's operations. Further analysis or
testing of the vendors' systems will continue throughout 1999. However, there
can be no assurance that the systems and products of third-parties on which the
Company relies will be compliant.
The following chart identifies the status of each phase in the critical
systems compliance project:
<TABLE>
<CAPTION>
PHASE PROJECTED PERIOD OF PHASE PRESENT STATUS
----- ------------------------- --------------
<S> <C> <C>
Awareness Plan Ongoing through 01/2000 100%
Inventory Plan 100% completed by 9/1998 100%
Triage Plan 100% completed by 9/1998 100%
Assessment Plan 100% completed by 10/1998 100%
Resolution Plan 100% completed by 12/1998 100%
Testing Plan 100% completed by 12/1999 90%
Deployment Plan 100% completed by 12/1999 90%
</TABLE>
The total cost of the Year 2000 project to date has not been
material. Based on the results of the program to date, the Company does
not expect that future costs of modifications will have a material adverse
effect on the Company's financial position or results of operations. An
estimated $40,000 will be spent in 1999 on hardware and software to
complete the Year 2000 project. Because the Company expects that its
internal systems will become Year 2000 compliant in a timely manner, the
Company believes that the most likely worst case scenario would result from
the failure of vendors or other third parties to achieve Year 2000
compliance. Depending upon the number of non-compliant third parties, the
nature and extent of their relationship with the Company and the nature of
the non-compliance, the Year 2000 issue could have a material adverse
effect on the Company's financial position or results of operations.
However, the Company is developing contingency plans, which are expected to
be completed during the second half of 1999, should any critical problems
occur in any of the assessment areas noted above. Accordingly, the Company
does not expect Year 2000 problems to result in any material adverse
effects on the Company's financial position or results of operations.
- 21 -
<PAGE>
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
--------------------
To the Board of Directors and
Stockholders of Unified Financial Services, Inc.
INDEPENDENT AUDITORS' REPORT
----------------------------
We have audited the accompanying consolidated statements of financial
condition of Unified Financial Services, Inc. and subsidiaries at
December 31, 1998 and 1997, and the related consolidated statements of
operations, comprehensive income, changes in stockholders' equity, and cash
flows for the years then ended. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Unified Financial
Services, Inc. and subsidiaries at December 31, 1998 and 1997, and the
results of its operations, and its cash flows for the years then ended
in conformity with generally accepted accounting principles.
/s/ Larry E. Nunn & Associates, LLC
Columbus, Indiana
February 12, 1999
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<PAGE>
<PAGE>
<TABLE>
UNIFIED FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1998 AND 1997
--------------------------
<CAPTION>
ASSETS
------
1998 1997
---- ----
<S> <C> <C>
Current Assets
Cash and cash equivalents $10,342,501 $ 2,566,394
Investment in affiliated mutual funds 231,728 707,936
Investment in securities and non-affiliated
mutual funds 494,403 150,218
Accounts receivable (net of allowance for
doubtful accounts of $38,326 for 1998
and $2,041 for 1997) 8,873,903 6,437,944
Prepaid assets and deposit 230,006 132,125
----------- -----------
Total current assets 20,172,541 9,994,617
----------- -----------
Fixed Assets, at cost
Equipment and furniture (net of accumulated
depreciation of $2,913,498 for 1998 and
$2,472,022 for 1997) 1,542,251 1,465,360
----------- -----------
Total fixed assets 1,542,251 1,465,360
----------- -----------
Non-Current Assets
Investment in debt securities 994,211 958,604
Equity investment in affiliates 565,566 751,418
Notes receivable (net of current maturity) - 8,090
Organization cost (net of accumulated
amortization of $254,230 for 1998 and
$6,900 for 1997) 898,027 2,100
Goodwill (net of accumulated amortization of
$34,773 for 1998 and $24,844 for 1997) 1,902,691 347,818
Other non-current assets 620,649 672,335
----------- -----------
Total non-current assets 4,981,144 2,740,365
----------- -----------
TOTAL ASSETS $26,695,936 $14,200,342
=========== ===========
<CAPTION>
See accompanying notes and independent auditors' report.
- 23 -
<PAGE>
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
1998 1997
---- ----
<S> <C> <C>
Current Liabilities
Current portion of capital lease obligations $ 52,735 $ -
Current portion of bank line-of-credit 3,886,612 1,291,846
Accounts payable and accrued expenses 1,860,544 1,292,768
Accrued compensation and benefits 338,779 151,979
Payable to insurance companies 6,456,511 4,787,147
Payable to broker-dealers 596,509 524,688
Income taxes payable, current 1,857 23,122
Income taxes payable, deferred 90,318 183,924
Other liabilities 1,218,855 1,008,970
----------- -----------
Total current liabilities 14,502,720 9,264,444
----------- -----------
Long-Term Liabilities
Long-term portion of capital lease obligation 37,122 79,102
Long-term portion of bank line-of-credit 2,024,579 1,282,112
Other long-term liabilities 385,886 714,611
Deferred income taxes 33,361 17,705
----------- -----------
Total long-term liabilities 2,480,948 2,093,530
----------- -----------
Total liabilities 16,983,668 11,357,974
----------- -----------
Commitments and Contingencies - -
Stockholders' Equity
Common stock, par value $.01 per share 27,174 21,728
Preferred stock Series A - 8,486
Preferred stock Series B - 8,583
Preferred stock Series C 1,672 -
Additional paid-in capital 8,234,123 2,199,921
Retained earnings 1,449,299 603,749
Accumulated other comprehensive income - (99)
----------- -----------
Total stockholders' equity 9,712,268 2,842,368
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $26,695,936 $14,200,342
=========== ===========
See accompanying notes and independent auditors' report.
</TABLE>
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<PAGE>
<PAGE>
<TABLE>
UNIFIED FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
----------------------------------------------
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
REVENUE
Brokerage $ 4,736,631 $ 2,874,489
Financial services administration 4,467,866 3,836,221
Investment advisory 3,564,760 2,004,866
Insurance brokerage 9,516,704 9,832,068
Software and programming services 25,353 131,788
Other income 660,522 569,785
----------- -----------
Total revenue 22,971,836 19,249,217
----------- -----------
COST OF SALES
Brokerage revenue changes 3,072,222 2,007,894
Financial services administration 732,370 554,174
Insurance commissions 4,588,723 4,741,726
Investment fees 95,473 66,327
----------- -----------
Total cost of sales 8,488,788 7,370,121
----------- -----------
Gross Profit 14,483,048 11,879,096
----------- -----------
EXPENSES
Employee compensation and benefits 6,698,826 7,618,268
Brokerage operating charges 537,879 363,330
Investment administration expenses 415,665 235,561
Occupancy 704,977 474,854
Telephone 253,188 181,376
Depreciation and amortization 598,022 802,173
Mail and courier 491,562 336,675
Equipment rental and maintenance 364,480 292,694
Travel and entertainment 368,217 94,305
Business development cost 586,052 611,358
All other 2,268,827 1,886,035
----------- -----------
Total expenses 13,287,695 12,896,629
----------- -----------
Income from operations 1,195,353 (1,017,533)
OTHER INCOME (LOSS)
Unrealized gain on securities 23,946 46,825
Realized gain on securities 13,495 29,233
Equity in results of affiliates 59,197 295,525
Gain (loss) on sale/disposal of fixed assets (8,752) (8,836)
----------- -----------
Income before income taxes 1,283,239 (654,786)
Income taxes 150,458 (376,853)
----------- -----------
NET INCOME $ 1,132,781 $ (277,933)
=========== ===========
Per share earnings
Net income - basic $ 0.47 $ (0.24)
Basic common shares outstanding 2,267,449 1,758,931
Net income - fully diluted $ 0.42 $ (0.23)
Fully diluted common shares outstanding 2,530,695 1,765,731
See accompanying notes and independent auditors' report.
</TABLE>
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<PAGE>
<PAGE>
<TABLE>
UNIFIED FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
----------------------------------------------
<S> <C>
1997
- ----
Net income $ (277,933)
Other comprehensive income, net of tax:
Unrealized gain on securities,
net of reclassification adjustment 4,873
----------
Comprehensive income $ (273,060)
==========
1998
- ----
Net income $1,132,781
Other comprehensive income, net of tax:
Unrealized gain on securities,
net of reclassification adjustment 99
----------
Comprehensive income $1,132,880
==========
See accompanying notes and independent auditors' report.
</TABLE>
- 26 -
<PAGE>
<PAGE>
<TABLE>
UNIFIED FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
--------------------------------------
<CAPTION>
Accumulated
Preferred Preferred Preferred Additional Other
Common Class A Class B Class C Paid-In Retained Comprehensive
Stock Stock Stock Stock Capital Earnings Income Total
----- ----- ----- ----- ------- -------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $12,599 $ 8,486 $ 8,583 $ - $ 2,125,431 $1,367,568 $(4,972) $ 3,517,695
1997 net income (277,933) (277,933)
Other comprehensive income 4,873 4,873
Common stock issued 97 2,456 2,553
Common stock issued-MER 5,728 69,534 75,262
Adjustment to stated capital 3,304 (3,304) -
Additional paid-in-capital EUG 2,500 2,500
Distribution to CPFC and
AmeriPrime stockholders (135,570) (135,570)
Dividends to AmeriPrime and
Health Financial stockholders (210,460) (210,460)
Dividends on preferred stock (136,552) (136,552)
------- ------- ------- ------ ----------- ---------- ------- -----------
Balance at December 31, 1997 21,728 8,486 8,583 - 2,199,921 603,749 (99) 2,842,368
1998 net income 1,132,781 1,132,781
Other comprehensive income 99 99
Comprehensive income
Redemption of Preferred
A and B shares (8,486) (8,583) (1,689,831) (1,706,900)
Issuance of 2,100 Preferred
C shares 2,100 207,900 210,000
Issuance of common stock 4,507 10,218,128 10,222,635
Conversion of 428 Preferred C
to 57,780 common stock shares 578 (428) (150) -
Acquisition of Advisers (683,210) (31,387) (714,597)
Acquisition of Fiduciary Counsel 361 902,389 902,750
Repurchase of common shares
at EUG (2,921,024) (2,921,024)
Dividends to CPFC and
AmeriPrime stockholders (190,000) (190,000)
Dividends on preferred stock (65,844) (65,844)
------- ------- ------- ------ ----------- ---------- ------- -----------
Balance at December 31, 1998 $27,174 $ - $ - $1,672 $ 8,234,123 $1,449,299 $ - $ 9,712,268
======= ======= ======= ====== =========== ========== ======= ===========
See accompanying notes and independent auditors' report.
</TABLE>
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<PAGE>
<PAGE>
<TABLE>
UNIFIED FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
----------------------------------------------
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 1,132,781 $ (277,933)
Adjustments to reconcile net income to cash
provided by (used) in operating activities:
Deferred income taxes 125,343 (401,929)
Provision for depreciation and amortization 598,022 802,173
Unrealized gain on investments (23,946) (40,657)
Results of affiliated company (59,197) (295,524)
(Gain) loss on disposal of fixed assets 8,752 52,720
Cash value of officers' life insurance (12,500) (6,273)
Deferred startup cost (643,169) -
(Increase) decrease in operating assets
Receivables (2,321,952) (1,759,462)
Prepaid and sundry assets 28,824 (11,559)
Increase (decrease) in operating liabilities
Accounts payable and accrued expenses 1,055,473 2,233,526
Other liabilities (235,541) 559,754
Accrued income taxes 47,789 17,302
----------- -----------
Net cash provided (used) by operating activities (299,321) 872,138
----------- -----------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of equipment (499,152) (1,203,039)
Proceeds from sale of fixed assets 9,220 128,701
Equity in affiliate - (21,367)
Investment in securities and mutual funds 224,634 (31,726)
Investment in debt securities (110,699) (154,801)
Repayment of note receivable 4,502 28,783
Intangible assets - 270,338
Appreciation of debt securities (531) (833)
Proceeds from sale of marketable securities 89,665 -
----------- -----------
Net cash provided (used) by investing activities (282,361) (983,944)
----------- -----------
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 10,222,635 77,815
Proceeds from issuance of Preferred C stock 210,000 -
Redemption of Preferred A and B stock (1,706,900) -
Dividend on preferred stock (65,844) (136,552)
Dividends on CPFC and AmeriPrime common stock (190,000) -
Dividends on AmeriPrime and Health Financial
common stock - (233,072)
Purchase of common stock at EUG (2,921,024) 2,500
Acquisition of Fiduciary Counsel and Advisers (413,026) -
Proceeds from borrowings 3,373,770 1,676,463
Repayment of borrowings (81,537) (1,423,857)
Repayment of capital lease obligations (70,285) (44,072)
----------- -----------
Net cash provided (used) by financing activities 8,357,789 (80,775)
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 7,776,107 (192,581)
CASH AND CASH EQUIVALENTS - Beginning of the year 2,566,394 2,758,975
----------- -----------
CASH AND CASH EQUIVALENTS - End of the year $10,342,501 $ 2,566,394
=========== ===========
See accompanying notes and independent auditors' report.
</TABLE>
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<PAGE>
<PAGE>
UNIFIED FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
--------------------------
Note 1 - NATURE OF OPERATIONS
The consolidated financial statements include the accounts
of Unified Financial Services, Inc. (the "Company" or
"Unified"), a Delaware corporation, and its wholly owned
subsidiaries, Unified Management Corporation, Unified Fund
Services, Inc., Health Financial, Inc, First Lexington Trust
Company, Resource Benefit Planners, Inc., Unified Investment
Advisers, Inc., Unified Internet Services, Inc., EMCO Estate
Management Company, Inc., Fiduciary Counsel, Inc., Equity
Underwriting Group, Inc., Commonwealth Premium Finance
Corporation, Strategic Fund Services, Inc. and AmeriPrime
Financial Services, Inc.
Unified Management Corporation, an Indiana corporation
("Management") is a registered broker-dealer under the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and is a member of the National Association of
Securities Dealers, Inc. ("NASD"). Management specializes
in mutual fund distribution and shareholders servicing
liaison providing such services as: mutual fund
distribution; distribution services and support; mutual fund
conversion support for broker-dealer requirements; mutual
fund trades; individual retirement account ("IRA") custodial
services; 12b-1 maintenance; accounting and marketing
support; securities (stock and bond) brokerage; brokerage
clearing and execution services; consolidated brokerage
statement processing; mutual fund and brokerage software
development; asset allocation and performance measurement
services and statement processing; and retirement account
record keeping. Management, as the Company's broker-dealer
subsidiary, functions as the distributor of the Unified
Funds, a family of no-load mutual funds sponsored by Unified
Investment Advisers, Inc., and also provides specialty
services for certain customers of the Unified Funds in
addition to its discount brokerage activities. The
brokerage subsidiary clears, on a fully disclosed basis,
through U.S. Clearing, a division of Fleet Securities, Inc.
and Pershing, a division of Donaldson, Lufkin & Jenrette
Securities Corporation.
Unified Fund Services, Inc., an Indiana corporation
("Services"), is a registered transfer agent and mutual fund
services company, and provides transfer agency, fund
accounting, administrative and start-up services for mutual
funds. Services' primary services include: mutual fund
transfer agency and shareholder recordkeeping; compliance;
asset allocation services; statement processing; retirement
plan services; and fulfillment. Services also provides all
of the mutual fund services for the Unified Funds
portfolios, and performs other clerical functions for the
Unified Funds in addition to typical mutual fund services.
- 29 -
<PAGE>
<PAGE>
UNIFIED FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
--------------------------
Note 1 - NATURE OF OPERATIONS (continued)
Health Financial, Inc., a Kentucky corporation ("Health
Financial"), is a registered investment adviser formed in
1986. As of December 31, 1998, Health Financial managed
approximately $360 million in assets for both individuals
and institutions, principally private pension plans and
foundations. Health Financial specializes in an investment
management philosophy that features a balanced discipline of
asset allocation utilizing no-load index funds over six
asset classes, including an S&P 500 index, a small cap U.S.
bond index, an international stock index, a REIT index and
cash.
First Lexington Trust Company, a Kentucky corporation
("Lexington"), is a non-bank trust company specializing in
retirement plans. As of December 31, 1998, First Lexington
maintained approximately $96 million in assets under
management. Directed by its trust investment committee, the
Lexington based Kentucky trust company provides the same
investment philosophy as its sister company, Health
Financial, while providing trust powers and retirement plan
services to it customer base. Chartered in 1994, Lexington
is regulated by the Kentucky Commissioner of Banking under
the Department of Financial Institutions, Commonwealth of
Kentucky.
On March 10, 1998, the Company acquired Resource Benefit
Planners, Inc. ("Benefit Planners"). Benefit Planners, a
Kentucky corporation, is a professional services firm that
provides consulting, recordkeeping and trust accounting
services for qualified retirement and cafeteria plans. The
acquisition is accounted for under the pooling-of-interests
method of accounting. In connection with such acquisition,
the Company issued 12,000 shares of common stock, $0.01 par
value, of the Company (the "Common Stock") in exchange for
all the outstanding capital stock of Benefit Planners. As
of March 10, 1998, Benefit Planners reported total assets of
$282,724 and shareholder's equity of $37,543.
On March 31, 1998, Unified Investment Advisers, Inc., a
Delaware corporation ("Advisers"), became a wholly owned
subsidiary of the Company upon surrender to Advisers by all
stockholders of Advisers (other than the Company) of their
capital stock of Advisers. The stock surrender occurred
upon approval by the shareholders of the Unified family of
mutual funds and upon receipt of the required regulatory
approval. Advisers, formerly knows as Vintage Advisers,
Inc., provides mutual fund advisory services for the Unified
Funds, the Company's no-load mutual fund family, and is an
important component in the tax-free reorganization strategy
for consolidating small mutual fund assets. Advisers also
retains the exclusive rights to the proprietary V.O.I.C.E.
product (Vision for Ongoing Investment in Charity and
- - - -
Education), which Unified believes is a significant and
-
valuable asset for the future gathering of mutual fund
assets. As of March 31, 1998, Advisers reported total
assets of $617,773 and shareholders' equity of $(469,548).
- 30 -
<PAGE>
<PAGE>
UNIFIED FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
--------------------------
Note 1 - NATURE OF OPERATIONS (continued)
During February 1998, the Company formed Unified Internet
Services, Inc., an Indiana corporation ("Unified Internet
Services"), to develop the Company's website, website
television programming and its proprietary search engine for
the financial services industry. It currently is
anticipated that Unified Internet Services will develop the
Company's other industry-related internet products,
including an interactive "switch" that will allow consumers
access to the Company's products via their television, cable
and satellite stations. The Company anticipates development
of such products to be completed by the end of 1999.
On August 21, 1998, the Company acquired Fiduciary Counsel,
Inc. ("Fiduciary Counsel"). Fiduciary Counsel, a Delaware
corporation that is based in New York City, was founded in
1931 and provides professional investment management to
individuals and institutions on a customized basis. This
acquisition is accounted for under the purchase method of
accounting. In connection with the acquisition, the Company
issued 36,110 shares of Common Stock and paid $800,835 in
cash in exchange for all the capital stock of Fiduciary
Counsel. The excess of cost over fair value of net assets
acquired was $1,564,802. Goodwill will be amortized on a
straight-line method over 15 years. As of August 21, 1998,
Fiduciary Counsel reported total assets of $738,157 and
total stockholders' equity of $234,783.
On August 21, 1998, the Company completed the acquisition of
all of the assets and certain of the liabilities of EMCO
Estate Management Company, Inc. ("EMCO"). Such assets and
liabilities were acquired by a wholly owned subsidiary of
the Company that, upon consummation of the transaction, was
renamed EMCO Estate Management Company, Inc. EMCO, a
Delaware corporation, is a wealth management firm based in
New York City. Since 1921, EMCO professionals have assisted
clients in a variety of disciplines, including the
following: financial, tax and estate planning; family office
services such as budgeting, bill paying and payroll
administration; trust administration; and income tax return
preparation and filing for individuals, trusts, partnerships
and small businesses. The acquisition is accounted for
under the pooling-of-interests method of accounting. In
connection with such transaction, the Company issued 11,000
shares of Common Stock in exchange for all of the assets and
certain of the liabilities of EMCO. As of August 21, 1998,
EMCO reported total assets of $67,230 and stockholder's
equity of $(110,212).
On December 17, 1998, the Company acquired Equity Underwriting
Group, Inc., a Kentucky corporation headquartered in Lexington,
Kentucky ("Equity Underwriting"). Equity Underwriting, a holding
company for Equity Insurance Managers, Inc., Equity Insurance
Managers of Illinois, LLC, 21st Century Claims Service, Inc., and
Equity Insurance Administrators, Inc., provides, through its
subsidiaries, specialty insurance products as a general agent or
as a broker and currently provides services in the States of
Kentucky, Tennessee, West Virginia, Ohio, Indiana and Illinois.
Equity Underwriting
- 31 -
<PAGE>
<PAGE>
UNIFIED FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
--------------------------
Note 1 - NATURE OF OPERATIONS (continued)
writes insurance products for primarily niche areas in the
insurance marketplace that are considered more "non-
standard," representing a higher risk of insured. The
acquisition is accounted for under the pooling-of-interests
method of accounting. In connection with the acquisition,
the Company issued 241,745 shares of Common Stock in
exchange for all of the capital stock of Equity
Underwriting. Equity Insurance Managers, Inc. ("EIM") and
Equity Insurance Managers, Inc. of Illinois ("EIM of Ill")
are licensed Managing General Agencies operating as a
wholesaler/broker of property and casualty insurance
products in Kentucky, Illinois, Tennessee, Virginia, West
Virginia, Ohio and Indiana. EIM and EIM of Ill operate as
managing general agents between a number of admitted as well
as Excess and Surplus Line insurance companies with over
2,200 independent producers. 21st Century Claims Service,
Inc., a Kentucky Corporation ("21st Century") conducts
business as a claim adjusting service company operating as a
third party administrator for various insurance companies in
the private passenger and commercial trucking lines. Equity
Insurance Administrators, Inc., a Kentucky Corporation
("EIA"), was incorporated in 1997 for the purpose of
performing administrative services on a contractual basis
for property and casualty insurance carriers.
Effective December 17, 1998, the Company acquired
Commonwealth Premium Finance Corporation, a Kentucky
corporation headquartered in Lexington, Kentucky ("CPFC").
CPFC is a premium finance company as governed by the laws
under Subtitle 30 of the Commonwealth of Kentucky Insurance
Code. CPFC is licensed under applicable governing
regulations in the states of Kentucky, Tennessee, Illinois
and Ohio and conducts business in West Virginia and Indiana,
which do not require licensing of premium finance companies.
CPFC provides financing for the payment of premiums on
insurance coverage placed by Equity Underwriting. The
acquisition was accounted for under the pooling-of-interests
method of accounting. In connection with the acquisition,
the Company issued 12,800 shares of Common Stock in exchange
for all of the capital stock of CPFC.
Effective December 22, 1998, the Company acquired Strategic
Fund Services, Inc., a Delaware corporation headquartered in
New York, New York ("Strategic"). Strategic provides mutual
fund administration services to smaller mutual funds and
fund complexes, utilizing a proprietary database. The
acquisition is accounted for under the pooling-of-interests
method of accounting. In connection with the acquisition,
the Company issued 7,500 shares of Common Stock in exchange
for all of the capital stock of Strategic.
- 32 -
<PAGE>
<PAGE>
UNIFIED FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
--------------------------
Note 1 - NATURE OF OPERATIONS (continued)
Effective December 31, 1998, the Company acquired AmeriPrime
Financial Services, Inc. ("AmeriPrime") and its subsidiary,
AmeriPrime Financial Securities, Inc. ("AFSI"), each a Texas
corporation headquartered in Southlake, Texas. AmeriPrime
provides administrative, regulatory, compliance and start-up
support services to investment advisors, banks and other
money managers in their proprietary mutual fund efforts.
AmeriPrime provides mutual fund support through AFSI, a NASD
broker-dealer registered in all 50 states. As of
December 31, 1998, AmeriPrime serviced 35 mutual funds
consisting of over $500 million in assets. The acquisition
is accounted for under the pooling-of-interests method of
accounting. In connection with the acquisition, the Company
issued 410,000 shares of Common Stock in exchange for all of
the capital stock of AmeriPrime.
Effective in January 1998, Unified Holdings, Inc. name was
changed to Unified Financial Services, Inc.; Unified
Advisers, Inc. name was changed to Unified Fund Services,
Inc.; and Vintage Advisers Inc. name was changed to Unified
Investment Advisers, Inc.
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
---------------------
The consolidated financial statements include the accounts
of the Company, Management, Services, Health Financial,
Lexington, Benefit Resources, Advisers, Unified Internet
Services, EMCO, Fiduciary Counsel, Equity Insurance, CPFC,
Strategic and AmeriPrime. All significant intercompany
transactions and balance between the Company and its
subsidiaries have been eliminated.
Effective March 31, 1998, Advisers became a wholly owned
subsidiary of the Company upon surrender to Advisers of all
the capital stock of Advisers by all stockholders of
Advisers (other than the Company). Prior to the surrender
of the capital stock to Advisers, the Company accounted for
its 33.3% ownership in Advisers pursuant to the equity
method of accounting. Advisers reported gross revenue for
the four months (Advisers' fiscal year end was November 30)
ended March 31, 1998 of $146,519 and loss for the period of
$195,967. Advisers reported total assets as of March 31,
1998 of $617,773 and shareholders' equity of $(469,548).
Effective March 10, 1998, the Company acquired Benefit
Planners in a transaction accounted for under the pooling-
of-interests method of accounting. In connection with such
acquisition, the Company issued 12,000 shares of Common
Stock.
- 33 -
<PAGE>
<PAGE>
UNIFIED FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
--------------------------
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Effective August 21, 1998, the Company acquired EMCO in a
transaction accounted for under the pooling-of-interests
method of accounting. In connection with such acquisition,
the Company issued 11,000 shares of Common Stock.
Effective August 21, 1998, the Company acquired Fiduciary
Counsel in a transaction accounted for under the purchase
method of accounting. In connection with such acquisition,
the Company issued 36,110 shares of Common Stock and paid
$800,835 in cash. The results of operations of Fiduciary
Counsel have been included in the Company's consolidated
financial statements since its date of acquisition.
Effective December 17, 1998, the Company acquired Equity
Underwriting in a transaction accounted for under the
pooling-of-interests method of accounting. In connection
with such acquisition, the Company issued 241,745 shares of
Common Stock.
Effective December 17, 1998, the Company acquired CPFC in a
transaction accounted for under the pooling-of-interests
method of accounting. In connection with such acquisition,
the Company issued 12,800 shares of Common Stock.
Effective December 22, 1998, the Company acquired Strategic
in a transaction accounted for under the pooling-of-
interests method of accounting. In connection with such
acquisition, the Company issued 7,500 shares of Common
Stock.
Effective December 31, 1998, the Company acquired AmeriPrime
in a transaction accounted for under the pooling-of-
interests method of accounting. In connection with such
acquisition, the Company issued 410,000 shares of Common
Stock.
The Consolidated Financial Statements give retroactive
effect to the pooling-of-interests transactions and, as a
result, the Consolidated Statements of Financial Condition,
Statements of Operations, Statements of Comprehensive
Income, Statements of Changes in Stockholders' Equity and
Statements of Cash Flows are presented as if the combining
companies have been consolidated for all periods presented.
As required by generally accepted accounting principles, the
Consolidated Financial Statements become the historical
consolidated financial statements upon issuance of the
financial statements for the periods that include the date
of the transaction. The Consolidated Statements of Changes
in Stockholders' Equity reflect the accounts for the Company
as if the Common Stock issued in the pooling-of-interests
transactions had been outstanding during all periods
presented. The Consolidated Financial Statements, including
the notes thereto, should be read in conjunction with the
historical consolidated financial statements of the Company.
- 34 -
<PAGE>
<PAGE>
UNIFIED FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
--------------------------
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Fees and Commissions
--------------------
The Company records revenue on the accrual basis of
accounting. For the brokerage operations, commissions and
clearing revenue are recorded on the settlement date of the
related security transactions. This does not materially
differ from recording commissions based upon trade date.
The investment administration business revenue, as well as
the investment adviser fees earned by third party advisers,
is recorded on the accrual basis. The fees earned by the
operation and paid to the sub-advisers are based on
established fee schedules and contracts. Generally, fees
may be collected from the invested assets. Thus, collection
of the fees is reasonably certain. The financial services
portion of the investment administration operation provides
administrative services to investment companies and separate
accounts. Revenue is recorded as it is earned each month
based upon accounts and account balances. In connection
with this, the Company earns income on the accounts
established to transfer these funds for customers. For the
insurance operations, commission income and expense are
recorded on the effective date of each policy; return
commissions are recorded when a policy cancellation occurs.
All other revenue is recorded as earned.
Property and Equipment
----------------------
Property and equipment is stated at cost. Depreciation,
including the depreciation of capital leased equipment, is
provided on the straight-line or accelerated methods over
the estimated useful life of the assets for financial
statement purposes.
Investments and Investment in Debt Securities
---------------------------------------------
Investments, which consists primarily of an investment in
mutual funds (affiliated or non-affiliated), are recorded
and adjusted to the fair market value as of the date of the
financial statements and reported on the Statements of
Operations as unrealized gain or loss on securities.
Investment in debt securities are recorded at cost and
amortized over the period to maturity for the premium or
discount from par value under generally accepted accounting
principles. Lexington is required by the Kentucky
Department of Financial Institutions to maintain a minimum
of $800,000 of capital as long as trust assets under
management do not exceed $100,000,000. When trust assets
under management exceed $100,000,000, the capital
requirement will be increased by $350,000. Currently,
Lexington has approximately $96,000,000 of trust assets
under management.
Income Taxes
------------
The Company files consolidated federal and state income tax
returns with its subsidiaries. Subsequent to its
acquisition by the Company, each of Benefit Planners, EMCO,
Strategic, Equity Insurance, CPFC and AmeriPrime will be
included in the consolidated tax returns of the Company,
which uses the accrual method of tax and accounting
reporting.
- 35 -
<PAGE>
<PAGE>
UNIFIED FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
--------------------------
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The Company has adopted Statement of Financial Accounting
Standards No. 109 accounting for income taxes ("SFAS 109").
SFAS 109 requires use of the liability method of accounting
for deferred income taxes.
Other Non-Current Assets
------------------------
Included in other non-current assets are intangible assets
for non-compete covenants, the value of acquired companies'
names and the present value of building leases below fair
market value. For financial reporting basis, these assets
are amortized on a straight-line basis over a three-, eight-
or fifteen-year period.
Goodwill
--------
The Company in acquiring certain businesses acquired
goodwill. The Company has determined the value of the
goodwill. The value of the goodwill is amortized over the
estimated economic lives on a straight-line basis over a
period of 10 to 15 years for financial reporting basis. For
tax purposes, goodwill is amortized on a straight-line basis
over 15 years.
Organization Cost
-----------------
Cost related to the organization of the various operations
have been capitalized and amortized over a sixty-month
period on a straight-line basis.
Use of Estimates
----------------
The presentation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could
differ from those estimates.
Statement of Cash Flows
-----------------------
For purposes of the Statements of Cash Flows, the Company
considers all liquid investments with an original maturity
of three months or less to be cash equivalents. The Company
maintains money market investments that are not insured by
the Federal Deposit Insurance Corporation (the "FDIC") and
bank accounts that periodically exceed the FDIC insurance
limit during the year.
Financial Statement Presentation
--------------------------------
Certain amounts in the 1997 financial statements have been
reclassified to conform to the 1998 presentation.
- 36 -
<PAGE>
<PAGE>
UNIFIED FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
--------------------------
Note 3 - PROPOSED ACQUISITIONS
On October 16, 1998, Unified entered into an agreement to
acquire Commonwealth Investment Services, Inc., a Kentucky
corporation that is headquartered in Lexington, Kentucky
("Commonwealth Investment"). Commonwealth Investment
provides investment services to individuals, businesses and
institutions throughout the State of Kentucky and
surrounding areas through its network of independent agents,
primarily certified public accountants ("CPAs"). In
connection with the acquisition, Unified will issue 27,500
shares of Common Stock in exchange for all of the capital
stock of Commonwealth Investment. The acquisition is
intended to be accounted for under the pooling-of-interests
method of accounting. As of December 31, 1998, Commonwealth
Investment reported total assets of $61,696 and
shareholder's equity of $39,157.
On October 12, 1998, Unified executed a letter of intent
with Fully Armed Productions, Inc. a Kentucky corporation
("Fully Armed Productions"), to acquire all of the capital
stock of Fully Armed Productions in exchange for 18,182
shares of Common Stock. Fully Armed Productions provides
creative and technological services for the television,
radio and internet industries through its specialty
production capabilities. Fully Armed Productions performs
videography, programming and production services for NBC,
ESPN and numerous cable, satellite and television stations,
including services for the past two Olympic games. The
acquisition is intended to be accounted for pursuant to the
pooling-of-interests method of accounting.
On January 1, 1999, Unified and M. Wilson & Associates,
Inc., a Kentucky corporation headquartered in Lexington,
Kentucky ("M. Wilson & Associates"), agreed to the terms of
a transaction whereby Equity Underwriting Group, Inc., a
wholly owned subsidiary of Unified, would acquire all of the
capital stock of M. Wilson & Associates in exchange for
3,636 shares of Common Stock. M. Wilson & Associates is a
claim processing and management company that has experience
in handling liability, property and workers compensation
claims for a self-insured trust fund. M. Wilson &
Associates processes claims for an occupational accident
program for independent truckers. M. Wilson & Associates
does statewide property adjusting for Kentucky risk and
insurance service division and property adjusting for the
Fair Plan of Louisville, Kentucky. The acquisition is
intended to be accounted for pursuant to the pooling-of-
interests method of accounting. As of December 31, 1998,
M. Wilson & Associates reported total assets of $3,308 and
shareholder's equity of $3,308.
- 37 -
<PAGE>
<PAGE>
UNIFIED FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
--------------------------
Note 3 - PROPOSED ACQUISITIONS (continued)
The Company has filed the required applications with the
Office of Thrift Supervision with respect to the organization
by the Company of a federal savings bank (the "Savings Bank")
which would be headquartered in Lexington, Kentucky. The
Company expects to commence operations of the Savings Bank
during the third quarter of 1999, subject to the receipt of
the required regulatory approvals and the issuance of a charter.
Note 4 - OPTIONS
On May 20, 1998, the stockholders of the Company adopted the
Unified Financial Services, Inc. 1998 Stock Incentive Plan
(the "Plan") which provides for the granting of stock
options and other stock-based awards. The total number of
shares of Common Stock issuable under the Plan is not to
exceed 1,500,000 shares, subject to adjustment in the event
of any change in the outstanding shares of such stock by
reason of a stock dividend, stock split, capitalization,
merger, consolidation or other similar changes generally
affecting stockholders of the Company. Of these 1,500,000
shares of stock, no more than 250,000 shares may be issued
to participants in the Plan in any plan year.
Under the terms of the Plan, employees, directors, advisors
and consultants of the Company and its subsidiaries will be
eligible to receive the following: (a) Incentive Stock
Options; (b) Nonqualified Stock Options; (c) Stock
Appreciation Rights ("SAR"); (d) Restricted Stock;
(e) Restricted Stock Units; and (f) Performance Awards.
As of December 31, 1998, the Board of Directors of the
Company had granted options to acquire 37,526 shares of
Common Stock to certain employees, directors and advisers of
the Company. Such options were fully vested on the date of
the grant and have an exercise price as follows:
(a) 6,800 shares at $25 per share
(b) 20,051 shares at $27.50 per share
(c) 10,675 shares at $40 per share
Of such options, 36,226 are intended to qualify as incentive
stock options pursuant to Section 422 of the Internal
Revenue Code of 1986, as amended.
Note 5 - FINANCING AND CAPITAL LEASES OBLIGATIONS
Unified and subsidiaries have obtained financing via
borrowings from banks and former owners of companies
acquired via line of credit and asset-based financing
including capitalized leases obligations. The Company has
obtained bank financing totaling a maximum borrowing
capacity of Five Hundred Thousand Dollars ($500,000) for the
- 38 -
<PAGE>
<PAGE>
UNIFIED FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
--------------------------
Note 5 - FINANCING AND CAPITAL LEASES OBLIGATIONS (continued)
purpose of purchasing various communication and computer
hardware and software to support operating needs. As of
December 31, 1998, the amount outstanding under this credit
facility was $321,576, of which $30,719 is the current
portion. The financing converts to a four-year term loan
payable in equal monthly principal payments plus interest at
0.5% above the bank's prime rate. Property, supplies,
inventory and intangible assets of the Company are security
for this financing. Fiduciary Counsel leases both computer
and office equipment under capital leases. The economic
substance of the leases is that Fiduciary Counsel is
financing the acquisition through the leases and, according,
Fiduciary Counsel recorded the assets and liabilities. The
current portion of the long-term capital lease obligations
is $35,452 and the long-term portion is $35,409. CPFC has a
bank note payable consisting of a revolving line of credit
with a bank in the amount of $2,000,000 of which $1,350,000
was drawn, leaving $650,000 at December 31, 1998. The
interest at prime on the loan is payable monthly. The loan
is secured by contracts receivable and guaranteed and due
June 18, 1999. EIM has a $400,000 revolving line of credit
with a bank, which was fully drawn as of December 31, 1998
and 1997. Interest is at prime. The loan is secured by all
company assets and is payable on June 30, 1999. Equity
Underwriting has a $1,250,000 bank loan with a maturity date
of January 20, 2001. The interest at prime on the loan is
payable monthly. Equity Underwriting has a $1,800,000 bank
loan with a maturity date of January 30, 1999 that was
extended to June 30, 1999. The interest on the loan is at
prime. 21st Century has a $200,000 revolving line of credit
with a bank, $160,004 was outstanding as of December 31,
1998 and it was fully drawn at December 31, 1997.
The loan is a five-year loan payable in equal monthly
installments with interest at prime and a balloon payment
due January 31, 1999, which was extended until June 30, 1999
to allow refinancing. The loan is secured by all assets of
21st Century and is guaranteed by EIM. EIM of Ill has a
note payable due to the former owner of the agency, which
was purchased by Equity Underwriting on December 31, 1996.
The note is payable in six annual installments of $150,952
beginning January 1, 1998. The interest rate is prime plus
1% (9.25%) as of the purchase date. In addition, EIM of Ill
has a $50,000 line of credit. The long-term debt maturity
follows:
<TABLE>
<CAPTION>
Year ended December 31, Amount
----------------------- ------
<S> <C>
1999 $ 95,889
2000 104,998
2001 114,973
2002 125,896
2003 137,855
--------
Total $579,611
========
</TABLE>
- 39 -
<PAGE>
<PAGE>
UNIFIED FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
--------------------------
Note 5 - FINANCING AND CAPITAL LEASES OBLIGATIONS (continued)
The Company's capitalized lease obligations are payable over
a 36-month period. The following is a summary of future
minimum lease payments under capitalized lease obligations
as of December 31, 1998:
<TABLE>
<CAPTION>
For the years ended December 31, Amount
-------------------------------- ------
<S> <C>
1999 $62,112
2000 30,021
2001 7,632
-------
Subtotal 99,765
Less: amount representing interest 9,908
-------
Net present value $89,857
=======
</TABLE>
The Company acquired equipment through capital lease
obligations in the amount of $0 and $139,929 during the
years ended December 31, 1998 and 1997, respectively.
Note 6 - COMMITMENTS AND CONTINGENCIES
The Company through its subsidiary, Management, leases its
corporate headquarters and administrative office facilities
located at 429-431 N. Pennsylvania Street, Indianapolis,
Indiana, which facility has approximately 10,820 square
feet, and is leased pursuant to an operating lease expiring
in 2007 for office facilities and equipment. The lease
includes provisions for adjustment of operating costs and
real estate taxes.
Such obligations are allocated between Services and
Management based on estimated usage. The Company also
maintains administrative offices at the corporate offices of
Lexington, Health Financial and Benefit Planners, each of
which is located at 2353 Alexandria Drive, Suite 100,
Lexington, Kentucky.
The aggregate minimum rental commitments required under
operating leases for office space and equipment at
December 31, 1998 for all operations were as follows:
<TABLE>
<CAPTION>
For the years ended December 31, Lease commitments
-------------------------------- -----------------
<S> <C>
1999 $ 898,925
2000 859,306
2001 858,513
2002 629,291
Thereafter 1,227,224
----------
Total $4,473,259
==========
</TABLE>
Total rental expense was $704,977 and $474,854 for the years
ended December 31, 1998 and 1997, respectively.
- 40 -
<PAGE>
<PAGE>
UNIFIED FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
--------------------------
Note 6 - COMMITMENTS AND CONTINGENCIES (continued)
The Company is a party to various lawsuits, claims and other
legal actions arising in the ordinary course of business.
In the opinion of management, all such matters are without
merit or are of such kind, or involve such amounts, that
unfavorable disposition would not have a material adverse
effect on the Company's financial position or results of its
operations for the years ended December 31, 1998 and 1997.
Note 7 - EMPLOYEE BENEFIT PLANS
Unified and subsidiaries provide a defined contribution
retirement plan which covers substantially all employees.
The Board of Directors determines contributions to the plan.
For 1998, the Board of Directors made contributions to the
plan in the amount of $10,851.
The Company also maintains a 401(k) plan as part of the
defined contribution retirement plan. The plan includes a
matching for funds contributed into the Unified family of
mutual funds. The Company will match the employee's
contribution up to fifty percent of the first six percent of
the employee's pre-tax contribution.
Note 8 - CASH SEGREGATED UNDER FEDERAL REGULATION AND
NET CAPITAL REQUIREMENTS FOR MANAGEMENT AND AFSI
Management and AFSI are subject to the Securities and
Exchange Commission's (the "SEC") Uniform Net Capital Rule
("Rule 15c3-1"), which requires the maintenance of minimum
net capital, as defined, of 6-2/3% of aggregate indebtedness
or $50,000 for Management and $5,000 for AFSI, whichever is
greater, and a ratio of aggregate indebtedness to net
capital of not more than 15 to 1. At December 31, 1998,
Management had net capital of $548,703, which was $498,703
in excess of its required net capital of $50,000 and a ratio
of aggregate indebtedness to net capital of 0.51 to 1. At
December 31, 1998, AFSI had net capital of $160,895, which
was $155,895 in excess of its required net capital of
$5,000, and a ratio of aggregate indebtedness to net capital
of 0 to 1.
Pursuant to Rule 15c3-3 as promulgated by the SEC,
Management and AFSI calculate their reserve requirement and
segregate cash and/or securities for the exclusive benefit
of their customers on a periodic basis. The reserve
requirement calculated by Management and AFSI were $0 at
December 31, 1998. Balances segregated in excess of reserve
requirements are not restricted.
- 41 -
<PAGE>
<PAGE>
UNIFIED FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
--------------------------
Note 9 - COMMON AND PREFERRED STOCK
Common Stock:
Acquisitions
------------
The Company has 10,000,000 authorized shares of Common
Stock. In connection with the acquisitions consummated
during 1998, the Company issued shares of Common Stock, as
reflected in Note 1 of the notes to the consolidated
financial statements. The shares issued by acquisition
follow:
Company acquired Date Shares issued
---------------- -------------- -------------
Benefit Planners March 10, 1998 12,000
EMCO August 21, 1998 11,000
Fiduciary Counsel August 21, 1998 36,110
Equity Insurance December 17, 1998 241,745
CPFC December 17, 1998 12,800
Strategic December 22, 1998 7,500
AmeriPrime December 31, 1998 410,000
Private Placement Offerings:
----------------------------
Effective January 22, 1998, the Company commenced a private
placement offering to sell a maximum of 600,000 shares of
Common Stock. The first 400,000 shares offered were offered
at a price of $25.00 per share and, upon acceptance by the
Company of subscriptions for such 400,000 shares, the
remaining 200,000 shares in the private placement were
offered at a price of $27.50 per share. All shares of
Common Stock offered were sold by the Company on a best
efforts basis. There is no public market for any securities
of the Company and there can be no assurance that a market
will develop in the future. The offering terminated on
June 30, 1998. As of December 31, 1998, the Company issued
440,738 shares of Common Stock pursuant to such offering.
Brokerage fees of $772,000 were paid to Unified Management
Corporation in connection with the private placement offering,
which amount is inclusive of $140,000 paid to external brokerage
firms. The securities offered and sold in this private
placement will not be and have not been registered under the
Securities Act of 1933, as amended, and may not be offered
or sold in the United States absent registration or an
applicable exemption from registration requirements.
Effective December 10, 1998, the Company commenced a private
placement offering to sell a maximum of 1,750,000 shares of
Common Stock. The first 1,250,000 shares are being offered
at a price of $40.00 per share and, upon acceptance by the
Company of subscriptions for such 1,250,000 shares, the
remaining 500,000 shares will be offered at a price of
$50.00 per share. All shares of Common Stock are being
offered by the Company on a best efforts basis. There is no
public market for any securities of the Company. There can
be no assurance that a market will develop in the future.
The offering will terminate on the earlier occurrence of
(1) subscription for 1,750,000 shares have been accepted; or
(2) September 31, 1999; provided, however, the Company
- 42 -
<PAGE>
<PAGE>
UNIFIED FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
--------------------------
Note 9 - COMMON AND PREFERRED STOCK (continued)
reserves the right either to extend the offering or to
terminate it at any time, without notice, but in no event
may the term of the offering be extended beyond December 31,
1999. The securities offered and sold in this private
placement will not be and have not been registered under the
Securities Act of 1933, as amended, and may not be offered
or sold in the United States absent registration or an
applicable exemption from registration requirements.
Preferred Stock:
----------------
As of December 31, 1998, the total preferred shares
authorized for the Company was 1,000,000 with a par value of
$.01 per share of which 102,100 shares were designated at
December 31, 1998 as follows:
<TABLE>
<CAPTION>
SHARES SHARES SHARES STATED PAR
DESIGNATED ISSUED OUTSTANDING VALUE VALUE
---------- ------ ----------- ------ -----
<S> <C> <C> <C> <C>
Preferred Stock Series C:
2,100 2,100 1,672 $100 $0.01
Preferred Stock Series D:
100,000 -0- -0- 200 0.01
</TABLE>
Series C Preferred Stock Issuance:
----------------------------------
In May 1998, the Company issued 2,100 shares of Series C
6.75% Cumulative Convertible Preferred Stock to certain
directors, executive officers and agents of the Company for
total consideration of $210,000. Each share of Series C
Preferred Stock is convertible, at any time at the option of
the holder thereof and without the payment of any additional
consideration with respect thereto, into 135 shares of
Common Stock. As of December 31, 1998, 428 Series C
Preferred Stock had been converted into 57,780 shares of
Common Stock.
Series D Preferred Stock Authorized:
------------------------------------
In July 1998, the Company authorized 100,000 shares of
Series D Convertible Junior Participating Preferred Stock.
The Company has reserved all of the shares of Series D
Preferred Stock for issuance under a Rights Agreement dated
August 26, 1998 between the Company and Services, as rights
agent. On August 26, 1998, the Board of Directors of
Unified declared a dividend distribution of one Preferred
Stock Purchase Right (collectively, the "Rights") for each
outstanding share of Common Stock. The dividend
distribution was payable to the stockholders of record at
the close of business on August 26, 1998. Generally, each
Right, when exercisable, entitles the registered holder to
purchase from the Company one one-hundredth of a share of
Series D Preferred Stock at a price of $200.00 per one one-
hundredth of a share.
- 43 -
<PAGE>
<PAGE>
UNIFIED FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
--------------------------
Note 9 - COMMON AND PREFERRED STOCK (continued)
Series A and Series B Preferred Stock Redemption:
-------------------------------------------------
On April 25, 1998, the Company redeemed the outstanding
Series A and Series B Preferred Stock of the Company. Total
consideration of $1,738,326, consisting of principal and
accrued interest, was paid to the holders of the Series A
and Series B Preferred Stock in connection with the
redemption of such shares.
Note 10 - RELATED PARTY TRANSACTIONS
CPFC employees are paid through the EIM payroll system,
which serves as a common paymaster. CPFC's employees are
eligible for all benefits that EIM offers, although these
benefits are paid for by CPFC. As of December 31, 1998,
CPFC's balance in unfunded contracts payable of $448,040 was
owed to EIM for the amount due on the insurance policy
premiums that EIM and EIM of Ill sold and CPFC financed. At
December 31, 1998 and 1997, EUG had $421,992 and $201,132,
respectively, receivable from CPFC. CPFC also owed EIM
$21,911 and $32,823 for various expenses paid by EIM in 1998
and 1997, respectively. EUG paid various expenditures on
behalf of 21st Century throughout 1998 and 1997. EUG had
$318,129 and $147,333 due from 21st Century as of
December 31, 1998 and 1997, respectively. EUG paid various
expenditures on behalf of EIA throughout 1998 and 1997. EUG
had $202,728 and $108,897 due from EIA as of December 31,
1998 and 1997, respectively.
Note 11 - INCOME TAXES
Consolidated net operating loss carryforwards at
December 31, 1998 amounted to approximately $13,100,000,
expiring through 2008.
Consolidated State of Indiana net operating loss
carryforwards at December 31, 1998 amounted to approximately
$12,100,000, expiring through 2008.
The Company utilized approximately $800,000 and $790,000 of
net operating loss carryforwards during 1998 and 1997,
respectively, to reduce current consolidated income tax
expense to zero.
The Company records deferred income taxes in accordance with
Financial Accounting Standard ("FAS") No. 109. The deferred
tax liability in the consolidated financial statements as of
December 31, 1998 and 1997 were as follows:
1998 1997
---- ----
Deferred tax assets $(51,062) $(35,700)
Deferred tax liability 90,318 183,924
-------- --------
Net deferred tax liability $ 39,256 $148,224
======== ========
- 44 -
<PAGE>
<PAGE>
UNIFIED FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
--------------------------
Note 11 - INCOME TAXES (continued)
The components of income tax expense for the year ended
December 31 were as follows:
1998 1997
---- ----
Current income tax
Federal $ 62,848 $ 35,708
State and local 7,433 10,976
-------- ---------
Total current 70,281 46,684
-------- ---------
Deferred income tax
Federal 19,080 (426,237)
State and local 61,097 2,700
-------- ---------
Total deferred 80,177 (423,537)
-------- ---------
Total income tax $150,458 $(376,853)
======== =========
Note 12 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and
estimated fair value of the Company's financial instruments
at December 31, 1998 and 1997. FAS No. 107, Disclosures
about Fair Value of Financial Instruments, defines the fair
value of a financial instrument as the amount at which the
instrument could be exchanged in a current transaction
between willing parties.
<TABLE>
<CAPTION>
1998 1997
--------------------- -------------------
CARRYING FAIR CARRYING FAIR
($ IN THOUSANDS) AMOUNT VALUE AMOUNT VALUE
------ ----- ------ -----
<S> <C> <C> <C> <C>
Financial assets
Cash and cash
equivalents $10,342.5 $10,342.5 $2,566.4 $2,566.4
Investment in:
Debt securities 494.4 494.4 150.2 150.2
Mutual funds 231.7 231.7 707.9 707.9
Affiliates 565.6 565.6 751.4 751.4
Notes receivable - - 8.1 8.1
Receivables (trade) 8,873.9 8,873.9 6,437.9 6,437.9
Prepaid and sundry 230.0 230.0 132.1 132.1
Financial assets
Current liabilities 14,502.7 14,502.7 9,264.4 9,264.4
Capital lease obligation 37.1 37.1 79.1 79.1
Long-term debt 2,024.6 2,024.6 1,282.1 1,282.1
</TABLE>
- 45 -
<PAGE>
<PAGE>
UNIFIED FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
--------------------------
Note 13 - DISCLOSURES ABOUT REPORTING SEGMENTS
The Company has five reportable segments: brokerage,
financial services administration, investment advisory,
insurance brokerage, and all other. The brokerage segment
provides services of a broker-dealer. The financial
services administration provides transfer agency, fund
accounting, administrative and start-up services for mutual
funds. In addition, it provides retirement plan consultation
and plan administration to pension plans. Investment advisory
provides asset management services to pension plans, foundations
and mutual funds. Insurance brokerage provides specialty insurance
products. All other represents activities not categorized as a
separate segment.
The accounting policies of the segments are the same as
those described in the summary of significant accounting
policies. The Company evaluates performance based on profit
or loss from operations before income taxes not including
recurring gains and losses.
The Company's reportable segments are strategic business
units that offer different products and services. They are
managed separately because each business requires different
technology and marketing strategies. Most of the businesses
were acquired as a unit and the management at the time of
the acquisition was retained. Reportable Segment Profit of
Loss, Segment Assets are as follows for the years ended
December 31, 1998 and 1997:
<TABLE>
<CAPTION>
($ IN THOUSANDS) 1998 1997
---- ----
<S> <C> <C>
Revenues
Brokerage $ 4,736.6 $ 2,874.5
Financial services administration 4,467.9 3,836.2
Investment advisory 3,564.8 2,004.9
Insurance brokerage 9,516.7 9,832.1
Other 685.9 701.5
--------- ---------
Total $22,971.9 $19,249.2
========= =========
Gross Margin
Brokerage $ 1,647.5 $ 1,001.1
Financial services administration 3,725.6 3,265.1
Investment advisory 3,492.7 1,949.7
Insurance brokerage 4,931.4 5,090.3
Other 685.9 572.8
--------- ---------
Total $14,483.1 $11,879.0
========= =========
Total Assets
Brokerage $ 1,250.1 $ 942.7
Financial services administration 4,923.4 4,413.2
Investment advisory 4,134.2 1,050.9
Insurance brokerage 9,144.5 6,783.0
Other 7,243.7 1,010.6
--------- ---------
Total $26,695.9 $14,200.4
========= =========
- 46 -
<PAGE>
<PAGE>
<CAPTION>
UNIFIED FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
--------------------------
Note 13 - DISCLOSURES ABOUT REPORTING SEGMENTS (continued)
<S> <C> <C>
Capital expenditures
Brokerage $ 38.5 $ 140.0
Financial services administration 190.9 708.0
Investment advisory 69.1 71.8
Insurance brokerage 145.1 343.5
Other 55.6 (60.3)
--------- ---------
Total $ 499.2 $ 1,203.0
========= =========
Depreciation and amortization
Brokerage $ 23.9 $ 4.6
Financial services administration 230.7 336.0
Investment advisory 146.3 19.3
Insurance brokerage 199.9 296.6
Other (2.9) 145.7
--------- ---------
Total $ 597.9 $ 802.2
========= =========
</TABLE>
- 47 -
<PAGE>
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
Not applicable.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
-------------------------------------------------------------
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
-------------------------------------------------
Information regarding the Company's directors is contained in the
Company's Proxy Statement for the 1999 Annual Meeting of Stockholders under
the caption "Proposal 1: Election of Directors" and is incorporated herein
by reference. Information regarding the Company's executive officers is
contained in this report under Item 4A--"Executive Officers of the
Registrant" and is incorporated herein by reference.
Information regarding compliance with Section 16(a) of the
Securities Exchange Act of 1934, as amended, is included in the Company's
Proxy Statement for the 1999 Annual Meeting of Stockholders under the
caption "Section 16(a) Beneficial Ownership Reporting Compliance," and is
incorporated herein by reference.
ITEM 10. EXECUTIVE COMPENSATION
----------------------
Information regarding executive compensation is contained in the
Company's Proxy Statement for the 1999 Annual Meeting of Stockholders under
the captions "Board of Directors and Committees" and "Compensation of
Executive Officers," and is incorporated herein by reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
Information regarding security ownership of certain beneficial
owners and management is contained in the Company's Proxy Statement for the
1999 Annual Meeting of Stockholders under the caption "Security Ownership
of Certain Beneficial Owners and Management," and is incorporated herein by
reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
Information regarding certain relationships and related transactions
is contained in the Company's Proxy Statement for the 1999 Annual Meeting
of Stockholders under the captions "Certain Relationships and Related
Transactions" and "Board of Directors and Committees," and is incorporated
herein by reference.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits:
See Exhibit Index on pages 52-56 hereto.
- 48 -
<PAGE>
<PAGE>
(b) Reports on Form 8-K.
During the three months ended December 31, 1998, the Company filed
the following Current Reports on Form 8-K:
(i) Current Report on Form 8-K, dated October 16, 1998 and filed
on November 5, 1998, reported items 5 and 7; and
(ii) Current Report on Form 8-K, dated December 17, 1998 and filed
on December 23, 1998, reported items 2 and 7. An amendment to
this Form 8-K/A was filed on February 19, 1999 to file the
following financial statements: (A) for each of Equity
Underwriting Group, Inc. and AmeriPrime Financial Services,
Inc.: Audited Consolidated Statements of Financial Condition
as of December 31, 1997 and 1996, Audited Consolidated
Statements of Operations, Audited Consolidated Statements of
Cash Flows and Audited Consolidated Statements of Changes in
Stockholders' Equity, each for the years ended December 31,
1997 and 1996, Unaudited Consolidated Balance Sheet as of
September 30, 1998, Unaudited Consolidated Statements of
Operations and Unaudited Consolidated Statements of Cash
Flows, each for the nine months ended September 30, 1998 and
1997; and (B) pro forma financial information for the Company,
including: Pro Forma Consolidating Balance Sheet as of
September 30, 1998, Pro Forma Consolidating Statements of
Income for the nine months ended September 30, 1998 and 1997
and for the years ended December 31, 1997 and 1996.
- 49 -
<PAGE>
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized as of the 25th day
of March 1999.
UNIFIED FINANCIAL SERVICES, INC.
(Registrant)
By /s/ Timothy L. Ashburn
-------------------------------------------
Timothy L. Ashburn, Chairman of the Board,
President and Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned officers and directors of Unified Financial
Services, Inc., hereby severally and individually constitute and appoint
Timothy L. Ashburn and Thomas G. Napurano, and each of them, the true and
lawful attorneys and agents of each of us to execute in the name, place and
stead of each of us (individually and in any capacity stated below) any and
all amendments to this Annual Report on Form 10-KSB and all instruments
necessary or advisable in connection therewith and to file the same with
the Securities and Exchange Commission, each of said attorneys and agents
to have the power to act with or without the others and to have full power
and authority to do and perform in the name and on behalf of each of the
undersigned every act whatsoever necessary or advisable to be done in the
premises as fully and to all intents and purposes as any of the undersigned
might or could do in person, and we hereby ratify and confirm our
signatures as they may be signed by our said attorneys and agents or each
of them to any and all such amendments and instruments.
In accordance with the Securities Exchange Act of 1934, as amended,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<C> <S> <C>
/s/ Timothy L. Ashburn Chairman of the Board, President March 25, 1999
- -------------------------- and Chief Executive Officer
Timothy L. Ashburn
/s/ Lynn E. Wood Director March 25, 1999
- --------------------------
Lynn E. Wood
/s/ Thomas G. Napurano Executive Vice President, March 25, 1999
- -------------------------- Chief Financial Officer
Thomas G. Napurano and Director
- 50 -
<PAGE>
<PAGE>
/s/ Weaver H. Gaines Director March 25, 1999
- --------------------------
Weaver H. Gaines
/s/ Jack R. Orben Director March 25, 1999
- --------------------------
Jack R. Orben
/s/ Dr. Gregory W. Kasten Director March 25, 1999
- --------------------------
Dr. Gregory W. Kasten
/s/ John R. Owens Director March 25, 1999
- --------------------------
John R. Owens
</TABLE>
- 51 -
<PAGE>
<PAGE>
EXHIBIT INDEX
Ex. No. Description
- ------- -----------
3.1 Amended and Restated Certificate of Incorporation of the
Company, filed as Exhibit 4.1(a) to the Company's
Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1997, is incorporated herein by reference.
3.2 By-laws of the Company, filed as Exhibit 4.2 to the
Company's Quarterly Report on Form 10-QSB for the quarter
ended September 30, 1997, is incorporated herein by
reference.
4.1 Certificate of Designations, Preferences, and Relative
Rights, Qualifications and Restrictions of the Series C
6.75% Cumulative Convertible Preferred Stock of the
Company, filed as Exhibit 4.1(d) to the Company's
Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1997, is incorporated herein by reference.
4.2 Certificate of Designations, Preferences and Rights of
Series D Junior Participating Preferred Stock of the
Company, filed as Exhibit 4.2 to the Company's Quarterly
Report on Form 10-QSB for the quarter ended September 30,
1998, is incorporated herein by reference.
4.3 Rights Agreement, dated as of August 26, 1998, between
the Company and Unified Fund Services, Inc., filed as
Exhibit 1 to the Company's Registration Statement on Form
8-A dated September 3, 1998, is incorporated herein by
reference.
10.1 Agreement and Plan of Merger dated April 25, 1997 by and
among the Company, HFI Acquisition Corporation, Health
Financial, Inc. and Dr. Gregory W. Kasten, filed as
Exhibit 2.1 to the Company's Registration Statement on
Form 10-SB, is incorporated herein by reference.
10.2 Amended and Restated Agreement and Plan of Merger dated
as of April 25, 1997 by and among the Company, FLTC
Acquisition Corporation, First Lexington Trust Company
and Dr. Gregory W. Kasten, filed as Exhibit 2.2 to the
Company's Registration Statement on Form 10-SB, is
incorporated herein by reference.
10.3 Agreement and Plan of Merger dated as of May 8, 1997 by
and among the Company, VAI Acquisition Corporation,
Vintage Advisers, Inc. and Timothy L. Ashburn, filed as
Exhibit 2.3 to the Company's Registration Statement on
Form 10-SB, is incorporated herein by reference.
10.4 First Amendment to Agreement and Plan of Merger dated as
of May 31, 1997 by and among the Company, HFI Acquisition
Corporation, Health Financial, Inc. and Dr. Gregory W.
Kasten, filed as Exhibit 2.4 to Amendment No. 1 to the
Company's Registration Statement on Form 10-SB, is
incorporated herein by reference.
- 52 -
<PAGE>
<PAGE>
10.5 Termination Agreement dated as of December 1, 1997 by and
among the Company, VAI Acquisition Corporation, Vintage
Advisers, Inc. and Timothy L. Ashburn, filed as Exhibit
2.5 to Amendment No. 1 to the Company's Registration
Statement on Form 10-SB, is incorporated herein by
reference.
10.6 Release and Surrender Agreement dated as of December 1,
1997 by and among the Company, Vintage Advisers, Inc.,
Timothy L. Ashburn and Jack R. Orben, filed as Exhibit
2.6 to Amendment No. 1 to the Company's Registration
Statement on Form 10-SB, is incorporated herein by
reference.
10.7 Employment Agreement dated as of June 1, 1997 by and
between Health Financial, Inc. and Dr. Gregory W. Kasten,
filed as Exhibit 10.1 to Amendment No. 1 to the Company's
Registration Statement on Form 10-SB, is incorporated
herein by reference.<F*>
10.8 Employment Agreement dated as of December 16, 1998 by and
between Equity Underwriting Group, Inc. and John R.
Owens.<F*>
10.9 Business Loan Agreement dated as of September 10, 1997 by
and between the Company and Bank One, Indiana, N.A.,
filed as Exhibit 10.2 to Amendment No. 1 to the Company's
Registration Statement on Form 10-SB, is incorporated
herein by reference.
10.10 Commercial Security Agreement dated as of September 10,
1997 by and between the Company and Bank One, Indiana,
N.A., filed as Exhibit 10.3 to Amendment No. 1 to the
Company's Registration Statement on Form 10-SB, is
incorporated herein by reference.
10.11 Promissory Note dated as of September 10, 1997 issued by
the Company in favor of Bank One, Indiana, N.A., filed as
Exhibit 10.4 to Amendment No. 1 to the Company's
Registration Statement on Form 10-SB, is incorporated
herein by reference.
10.12 Agreement and Plan of Merger, dated as of July 10, 1998,
by and among the Company, Fiduciary Acquisition
Corporation, Fiduciary Counsel, Inc., Associated Family
Services, Inc., Intellectronic Management Systems, Inc.,
Jack R. Orben, Andrew E. Beer and Charles C. Hickox,
filed as Exhibit 2 to the Company's Current Report on
Form 8-K dated August 21, 1998, is incorporated herein by
reference.
10.13 Agreement and Plan of Merger, dated as of October 16,
1998, by and among the Company, AmeriPrime Acquisition
Corporation, AmeriPrime Financial Services, Inc. and
Kenneth D. Trumpfheller, filed as Exhibit 2.1 to the
Company's Current Report on Form 8-K dated October 16,
1998, is incorporated herein by reference.
- 53 -
<PAGE>
<PAGE>
10.14 Agreement and Plan of Merger, dated as of October 16,
1998, by and among the Company, Equity Acquisition
Corporation, Equity Underwriting Group, Inc., John R.
Owens and D. Richard Meyer, filed as Exhibit 2.2 to the
Company's Current Report on Form 8-K dated October 16,
1998, is incorporated herein by reference.
10.15 First Amendment to Agreement and Plan of Merger, dated
as of December 14, 1998, by and among the Company, Equity
Acquisition Corporation, Equity Underwriting Group, Inc.,
John R. Owens and D. Richard Meyer, filed as Exhibit
2.2 to the Company's Current Report on Form 8-K dated
December 17, 1998, is incorporated herein by reference.
10.16 Unified Financial Services, Inc. 1998 Stock Incentive
Plan, filed as Annex A to the Company's Proxy Statement
for the Company's 1998 Annual Meeting, is incorporated
herein by reference.<F*>
10.17 Loan Agreement, dated as of October 18, 1996, by and
among Commonwealth Premium Finance Corporation, John R.
Owens, William W. Davis, Jr., D. Richard Meyer and Bank
One, Kentucky, NA.
10.18 Security Agreement, dated as of October 18, 1996, by and
between Commonwealth Premium Finance Corporation and Bank
One, Kentucky, NA.
10.19 First Amendment to Loan Agreement, dated as of December
17, 1996, by and among Commonwealth Premium Finance
Corporation, John R. Owens, William W. Davis, Jr., D.
Richard Meyer and Bank One, Kentucky, NA.
10.20 Second Amendment to Loan Agreement, dated as of August 4,
1997, by and between Commonwealth Premium Finance
Corporation, John R. Owens, William W. Davis, Jr., D. Richard
Meyer and Bank One, Kentucky, NA.
10.21 Third Amendment to Loan Agreement, dated as of July 23,
1998, by and among Commonwealth Premium Finance
Corporation, John R. Owens, D. Richard Meyer and Bank
One, Kentucky, NA.
10.22 Renewed Revolving Credit Note, dated as of June 18, 1998,
issued by Commonwealth Premium Finance Corporation in
favor of Bank One, Kentucky, NA.
10.23 Fourth Amendment to Loan Agreement, dated as of February
25, 1999, by and among Commonwealth Premium Finance
Corporation, the Company and Bank One, Kentucky, NA.
10.24 Guaranty of Payment and Performance, dated February 25, 1999,
by the Company.
- 54 -
<PAGE>
<PAGE>
10.25 Stock Pledge and Security Agreement, dated as of February
25, 1999, by and among the Company and Bank One,
Kentucky, NA.
10.26 Loan Agreement, dated as of January 20, 1998, by and
among Equity Underwriting Group, Inc., Equity Insurance
Managers, Inc., 21st Century Claim Service, Inc., John R.
Owens, D. Richard Meyer and Bank One, Kentucky, NA.
10.27 Guaranty of Payment and Performance, dated as of December 30,
1997, by Equity Insurance Managers, Inc.
10.28 Security Agreement, dated as of January 20, 1998, by and
between Equity Underwriting Group, Inc. and Bank One,
Kentucky, NA.
10.29 Security Agreement, dated as of January 20, 1998, by and
between Equity Insurance Managers, Inc. and Bank One,
Kentucky, NA.
10.30 Security Agreement, dated as of December 30, 1997, by and
between 21st Century Claim Service, Inc. and Bank One,
Kentucky, NA.
10.31 First Amendment to Loan Agreement, dated as of July 23,
1998, by and among Equity Underwriting Group, Inc.,
Equity Insurance Managers, Inc., 21st Century Claim Service,
Inc., John R. Owens, D. Richard Meyer and Bank One,
Kentucky, NA.
10.32 Amended and Restated Revolving Credit Note, dated as of
July 23, 1998, issued by Equity Insurance Managers, Inc. in
favor of Bank One, Kentucky, NA.
10.33 Second Amendment to Loan Agreement, dated as of February
25, 1999, by and among Equity Underwriting Group, Inc.,
Equity Insurance Managers, Inc., 21st Century Claim
Service, Inc., the Company and Bank One, Kentucky, NA.
10.34 Amended and Restated Term Note, dated as of February 25,
1999, issued by Equity Underwriting Group, Inc. and
Equity Insurance Managers, Inc. in favor of Bank One,
Kentucky, NA.
10.35 Term Note, dated as of February 25, 1999, issued by
Equity Underwriting Group, Inc. and Equity Insurance
Managers, Inc. in favor of Bank One, Kentucky, NA.
10.36 Renewal Term Note, dated as of January 30, 1999, issued
by 21st Century Claim Service, Inc. in favor of Bank One,
Kentucky, NA.
10.37 429 Pennsylvania Building Office Lease, dated as of
November 7, 1997, by and between 429 Penn Partners and
the Company.
10.38 First Addendum to Lease, dated as of June 25, 1998, by
and between 429 Penn Partners and the Company.
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10.39 Office Lease Agreement, dated as of November 4, 1996, by
and between MIF Realty L.P. and Equity Insurance Mangers,
Inc.
10.40 Addendum, dated as of November 4, 1996, by and between
MIF Realty L.P. and Equity Insurance Managers, Inc.
10.41 Amendment and Extension of Lease, dated as of March 1,
1999, by and between Equity Insurance Managers, Inc. and
Nashville Mini Storage, L.P.
21.1 List of Subsidiaries.
23.1 Consent of Larry E. Nunn & Associates, LLC with respect to
its report dated February 12, 1999 regarding the consolidated
financial statements of the Company as of and for the years
ended December 31, 1998 and 1997.
24.1 Power of Attorney (included on signature page hereto).
27.1 Financial Data Schedule (December 31, 1998).
27.2 Restated Financial Data Schedule (December 31, 1997).
[FN]
-------------------
<F*> Management contract or compensatory plan or arrangement.
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EXHIBIT 10.8
EXECUTIVE EMPLOYMENT AGREEMENT
This agreement ("Agreement") has been entered into this 16th day
of December, 1998, by and between Equity Underwriting Group, Inc., a
Kentucky corporation ("Subsidiary"), and John R. Owens, an individual
("Executive"), in connection with and as further mutual consideration
for the sale of Subsidiary by Executive to Unified Financial Services,
Inc., a Delaware corporation ("Company"), pursuant to that certain
Agreement and Plan of Merger between Company and Equity Acquisition
Corporation, a Kentucky corporation, as Buyers, and Subsidiary and
Executive, as Sellers, dated October 16, 1998, as amended by that
certain First Amendment to Agreement and Plan of Merger, dated December
14, 1998 (collectively, the "Agreement and Plan of Merger").
RECITALS
The Board of Directors of Subsidiary (the "Board") has determined
that it is in the best interests of Subsidiary and its stockholder to
reinforce and encourage the continued attention and dedication of the
Executive to Subsidiary as a member of Subsidiary"s management and to
assure that Subsidiary will have the continued dedication of the
Executive. The Board desires to provide for the continued employment of
the Executive on the terms hereof, and the Executive is willing to
commit himself to continue to serve Subsidiary. Additionally, the Board
believes it is imperative to encourage the Executive's full attention
and dedication to Subsidiary currently and to provide the Executive with
compensation and benefits arrangements upon certain breaches of this
Agreement by Subsidiary, which ensures that the compensation and
benefits expectations of the Executive will be satisfied. Because of
the Executive's high position at the Subsidiary and his access to
information pertaining to the business of the Company (as conducted by
its other affiliates), Company and the Subsidiary believe it is
imperative that the Executive neither compete against the Company, the
Subsidiary and any affiliates or subsidiaries of either nor share
certain confidential information of either during the Executive's
employment and for the three-year period thereafter, as provided below.
Therefore, in order to accomplish these objectives, the Board has caused
Subsidiary to enter into this Agreement. Executive acknowledges that
his assent to, and fulfillment of, the terms and conditions of this
Agreement is an indispensable element of the consideration provided by
Executive pursuant to the Agreement and Plan of Merger. Therefore, in
exchange for the mutual promises and covenants set forth herein, and in
order to accomplish these objectives, the Board has caused Subsidiary to
enter into this Agreement with the Executive, whereupon
IT IS AGREED AS FOLLOWS:
Section 1: Definitions and Construction.
1.1 Definitions. For purposes of this Agreement, the following
words and phrases, whether or not capitalized, shall have the meanings
specified below, unless the context plainly requires a different
meaning. Terms not set forth in this Section 1.1 but defined elsewhere
in this Agreement shall for all purposes of this Agreement have such
defined meaning, whether or not capitalized, unless the context plainly
requires a different result.
1.1(a) "Board" means the Board of Directors of
Subsidiary.
1.1(b) "Code" shall mean the Internal Revenue Code of
1986, as amended, including all regulations
proposed or promulgated thereunder, and
administrative
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interpretations and judicial precedents relating
thereto. All citations to the Code shall include
any amendments or any substitute or successor
provisions thereto.
1.1(c) "Company" shall mean Unified Financial Services,
Inc., a Delaware corporation and the sole
stockholder of Subsidiary.
1.1(d) "Customer" shall mean any Person from which or
from dealings with which any member of the Unified
Group is earning or has earned revenue in the
ordinary course of its business. Dealings shall
include, for example and without limitation,
distribution arrangements, revenue or income
sharing arrangements, commission arrangements and
any other arrangement or contract.
1.1(e) "Effective Date" shall mean December 16, 1998.
1.1(f) "Employment Period" means the period that begins
on the Effective Date and ends on the earlier of:
(i) the close of business on December 31 of the
calendar year that includes the fifth anniversary
of the Effective Date; or (ii) the Date of
Termination as defined in Section 3.6.
1.1(g) "Person" shall include an individual, firm, trust,
estate, association, joint venture, partnership,
corporation, limited liability company,
organization or other entity.
1.1(h) "Subsidiary" means Equity Underwriting Group,
Inc., a Kentucky corporation.
1.1(i) "Unified Group" means, jointly and severally, the
Company and any Person more than twenty percent
(20%) of which (by value and not by voting power)
is directly or indirectly owned by the Company at
any time during the Employment Period, and any
successors or assigns of the Company or any other
Person included in the Unified Group. For example
and without limitation, after the closing of the
transactions contemplated in the Agreement and
Plan of Merger, the Unified Group would include
(i) Subsidiary, as well as any corporation wholly
owned by Subsidiary, (ii) a corporation forty-five
percent (45%) of which (by value) is owned by a
wholly-owned subsidiary of the Company, and (iii)
a corporation (or a partnership) thirty percent
(30%) of which (by value) is owned by the
Subsidiary and thirty percent (30%) of which (by
value) is owned by a wholly-owned subsidiary of
the Company.
1.2 Gender and Number. When appropriate, pronouns in this
Agreement used in the masculine gender include the feminine gender,
words in the singular include the plural, and words in the plural
include the singular.
1.3 Headings. All headings in this Agreement are included
solely for ease of reference and do not bear on the interpretation of
the text. Accordingly, as used in this Agreement, the terms "Article"
and "Section" mean the text that accompanies the specified Article or
Section of this Agreement.
1.4 Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth, without
reference to its conflict of law principles.
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Section 2: Terms and Conditions of Employment.
2.1 Period of Employment. Throughout the Employment Period, the
Executive shall serve in the employ of Subsidiary in accordance with the
terms and provisions of this Agreement.
2.2 Positions and Duties.
2.2(a) Throughout the Employment Period, the Executive
shall be the President of Subsidiary. The Executive shall render
administrative and management services as are customarily
performed by persons situated in similar executive capacities,
including presidents of other subsidiaries of the Company, shall
render such other services as he has rendered in the past to
Subsidiary, and may have such other powers and duties as may from
time to time be prescribed by the Board.
2.2(b) Throughout the Employment Period (but excluding
any periods of vacation and sick leave to which he is entitled),
the Executive shall devote his full professional attention and
time to the business and affairs of Subsidiary, shall not render
professional services to or for the benefit of Persons not members
of the Unified Group, and shall use his reasonable best efforts to
perform faithfully and efficiently such responsibilities as are
assigned to him under or in accordance with this Agreement;
provided that, it shall not be a violation of this paragraph for
the Executive to (i) serve on corporate, civic or charitable
boards or committees, (ii) deliver lectures or fulfill speaking
engagements, or (iii) manage personal investments for the
Executive's own account or those of family members, so long as
such activities do not interfere with the performance of the
Executive's responsibilities as a senior executive officer of the
Subsidiary in accordance with this Agreement.
2.3 Compensation. The Executive's annual compensation and other
benefits described in this Section 2.3 shall be provided by Subsidiary.
2.3(a) Annual Base Salary. For the first two-year period
within the Employment Period, the Executive shall receive an
annual base salary of $180,000.00 (the "Initial Base Salary"),
which shall be due and paid in equal or substantially equal
installments, to be paid at the same frequency as other employees
of Subsidiary but no less often than monthly. Thereafter, during
the Employment Period, the annual base salary payable to the
Executive shall be reviewed at least annually beginning upon the
second anniversary of the Effective Date and upon each anniversary
date thereafter, but need not be adjusted upward as a result of
such review and shall not be reduced below the Initial Base
Salary. "Annual Base Salary" as used herein shall mean the annual
base salary for a then current year.
2.3(b) Welfare Benefit Plans. Throughout the Employment
Period, the Executive and/or the Executive's family, as the case
may be, shall be eligible for participation in all welfare benefit
plans, practices, policies and programs provided by Subsidiary
(including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life,
accidental death and travel accident insurance plans and programs)
to the extent generally available to other senior executive
officers of the Subsidiary.
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2.3(c) Expenses. Throughout the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for
all reasonable expenses incurred by the Executive in accordance
with the most favorable policies, practices and procedures
generally applicable to other peer executives of the Company's
operating subsidiaries; provided, however, that all reimbursements
must satisfy the record keeping policies of the Company.
2.3(d) Vacation. Throughout the Employment Period, the
Executive shall be entitled to four (4) weeks paid vacation.
2.3(e) Executive's Rights Nonassignable. The right to
receive Initial Base Salary, the Annual Base Salary and other
benefits hereunder shall be a personal right of the Executive and
shall not be extinguished by the death of the Executive. Such
right shall not be transferable by the Executive other than
pursuant to the laws of descent and distribution.
2.4 Indemnification. The Company and Subsidiary
desire to have Executive serve as an officer and employee of
Subsidiary, free from undue concern for unpredictable,
inappropriate or unreasonable legal risks and personal liabilities
by reason of his acting in good faith in the performance of his
duties to Subsidiary and will, therefore indemnify Executive
against any and all claims of insurance agencies against Executive
for Executive's liability (primary, secondary or as guarantor)
under any agency agreements between third party insurance
companies and Subsidiary or Executive, but only to the extent such
claims arise from the Subsidiary's failure to pay over premiums
received after the Effective Date. Executive desires to serve as
an officer and employee of Subsidiary, as long as he is furnished
with the indemnity set forth herein.
Section 3: Termination of Employment.
3.1 Death. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period.
3.2 Disability. If Subsidiary determines in good faith that the
Disability of the Executive has occurred during the Employment Period
(pursuant to the definition of Disability set forth below), it may give
to the Executive written notice in accordance with Section 8.3 of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with Subsidiary shall terminate effective on the
thirtieth (30th) day after receipt of such notice by the Executive (the
"Disability Effective Date"), provided that, within the thirty (30) days
after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean that the Executive has been unable to perform
the services required of the Executive hereunder on a full-time basis
for a period of one hundred eighty (180) consecutive days by reason of a
physical and/or mental condition. "Disability" shall be deemed to exist
when certified by a physician selected by the Company or its insurers
and acceptable to the Executive or the Executive's legal representative
(such agreement as to acceptability not to be withheld unreasonably).
The Executive will submit to such examinations and tests as such
physician deems necessary to make any such Disability determination.
3.3 Termination for Cause. Subsidiary may terminate the
Executive's employment during the Employment Period for "Cause," which
for the purposes of this Agreement shall mean termination based upon:
(i) the Executive's continued failure to perform substantially his
duties with Subsidiary (other than as a result of incapacity due to
physical or mental condition), after a demand for substantial
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performance is delivered to him by the Chairman of the Board or the
President of the Subsidiary or the Chairman of the Board of the Company,
which specifically identifies the manner in which the Executive has not
substantially performed his duties; (ii) the Executive's commission of
misconduct that is materially injurious to Subsidiary, monetarily or
otherwise; or (iii) the Executive's material breach of any provision of
this Agreement. Notwithstanding the foregoing, the Executive shall not
be deemed to have been terminated for Cause unless and until (i) he is
given a Notice of Termination (as defined in Section 3.5) from the
Chairman of the Board or the President of the Subsidiary or the Chairman
of the Board of Directors of the Company, (ii) he is given the
opportunity to be heard before the Board of Directors of the Company,
and (iii) the Board of Directors of the Company finds, in its good faith
opinion and at its sole discretion, that the Executive was guilty of the
conduct set forth in the Notice of Termination.
3.4 Good Reason. The Executive may terminate his employment with
Subsidiary for "Good Reason," which shall mean termination based upon,
and only upon:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's
position (including status, offices, titles and
reporting requirements), authority, duties or
responsibilities as contemplated by Section 2.2 or any
other action by Subsidiary that results in a material
diminution in such position, authority, duties or
responsibilities, excluding for this purpose any
action not taken in bad faith; or
(ii) (a) the failure by Subsidiary to provide benefits
commensurate with any welfare benefit plan, practice,
policy or program, including any life insurance plan,
health and accident plan or disability plan, to which
the Executive is entitled as specified in Section
2.3(b), (b) the taking of any action by Subsidiary
that would adversely affect the Executive's
participation in, or materially reduce the Executive's
benefits under, any plans described in Section 2.3(b),
or (c) the failure by Subsidiary to provide the
Executive with the number of paid vacation days to
which the Executive is entitled as described in
Section 2.3(d).
Termination for Good Reason may be effected by, and only by, written
notice to the Company stating with particularity each action or
condition constituting the Good Reason, sufficient in detail such that
the corrective measures necessary to cure such action(s) or condition(s)
may be readily inferred from the face of the notice. During the ninety-
day period following receipt of such notice by the Company, the
Executive shall use his best efforts to cooperate with the Company and
Subsidiary to cure the action(s) or condition(s) set forth in the
Executive's notice. If a cure is commercially reasonable and neither
the Company nor Subsidiary takes sufficient steps within such ninety-day
period to effectuate a cure, then and only then may the Executive
terminate his employment for Good Cause. Failure of Executive to set
forth in such notice any fact or circumstance that contributes to a
showing of Good Cause shall waive any right of the Executive to assert
such fact or circumstance in enforcing the Executive's rights under this
Agreement.
3.5 Notice of Termination. Any termination by Subsidiary or by
the Executive (including terminations in breach of this Agreement) shall
be communicated by Notice of Termination to the other party. For
purposes of this Agreement, a "Notice of Termination" means a written
notice given in accordance with Section 8.3 that (i) indicates the
specific termination provision in this Agreement relied upon, (ii) to
the extent applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated, and
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(iii) if the Date of Termination (as defined below) is other than the
date such notice is given, specifies the termination date (which date
shall be not more than thirty (30) days after the giving of such
notice). The failure by the Executive or Subsidiary to set forth in the
Notice of Termination any fact or circumstance that contributes to a
showing of Good Reason or Cause shall waive any right of the Executive
or Subsidiary to assert such fact or circumstance in enforcing the
Executive's or Subsidiary's rights hereunder.
3.6 Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by Subsidiary for Cause, or by the
Executive for Good Reason, the Date of Termination shall be the date the
Notice of Termination is given or any later date (within the thirty-day
limit provided in Section 3.5) specified therein, as the case may be,
(ii) if the Executive's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of the
Executive or the Disability Effective Date, as the case may be, (iii) if
the Executive's employment is terminated by Subsidiary other than for
Cause, death or Disability, the Date of Termination shall be the date
the Notice of Termination is given or any later date (within the thirty-
day limit provided in Section 3.5) specified therein, as the case may
be, or (iv) if the Executive shall terminate employment with Subsidiary
for any reason other than for Good Reason, the Date of Termination shall
be the date the Executive shall terminate his employment with Subsidiary
or, if not more than thirty (30) days later, the date specified in the
Notice of Termination.
Section 4: Certain Benefits Upon Termination.
4.1 Termination Without Cause or Termination for Good Reason.
If during the Employment Period (i) Subsidiary shall terminate the
Executive's employment without Cause, or (ii) the Executive shall
terminate employment with Subsidiary for Good Reason, the Executive
shall be entitled to the benefits provided below:
4.1(a) "Accrued Obligations": On or before the
ninetieth (90th) day following the Date of
Termination, Subsidiary shall pay to the Executive
the sum of (1) the Executive's Annual Base Salary
through the Date of Termination to the extent not
previously paid, (2) any compensation previously
deferred by the Executive (other than pursuant to
the terms of this Agreement) together with any
accrued interest or earnings thereon, and (3) any
accrued vacation pay; in each case to the extent
not previously paid.
4.1(b) "Annual Base Salary Continuation": For the
remainder of the period described in Section 1.1
(f)(i) (which period ends on December 31 of the
fifth full calendar year succeeding the Effective
Date) that occurs after the Date of Termination, if
any, Subsidiary shall pay to the Executive, the
Executive's then-current Annual Base Salary as
would have been paid to the Executive had the
Executive remained in Subsidiary's employ at such
salary during the remainder of such period.
Subsidiary at any time may elect to pay the balance
of such payments then remaining in a lump sum, in
which case the total of such payments shall be
discounted to present value as determined according
to Code Section 280G(d)(4).
4.2 Death. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this
Agreement shall terminate without further obligations to the
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Executive's legal representatives under this Agreement, other than for
timely payment of Accrued Obligations (as defined in Section 4.1(a)).
4.3 Disability. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive,
other than for timely payment of Accrued Obligations (as defined in
Section 4.1(a)).
4.4 Termination for Cause; Termination Other Than for Good
Reason. If the Executive's employment shall be terminated for Cause
during the Employment Period, this Agreement shall terminate without
further obligations to the Executive other than for timely payment of
Accrued Obligations (as defined in Section 4.1(a)). If the Executive
terminates employment with Subsidiary during the Employment Period
(excluding a termination for Good Reason), this Agreement shall
terminate without further obligations to the Executive, other than for
timely payment of Accrued Obligations (as defined in Section 4.1(a)).
4.5 Non-Exclusivity of Rights. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in
any plan, program, policy or practice provided by Subsidiary and for
which the Executive may qualify, nor shall anything herein limit or
otherwise affect such rights as the Executive may have under any other
contract or agreement with Subsidiary. Vested benefits which the
Executive is otherwise entitled to receive under any plan, policy,
practice or program of, or any contract or agreement with, Subsidiary at
or subsequent to the Date of Termination, shall be payable in accordance
with such plan, policy, practice or program or contract or agreement
except as explicitly modified by this Agreement.
4.6 Full Settlement; Executive Has No Duty of Mitigation. The
payments and arrangements set forth in this Section 4 are in full
settlement of any and all claims of the Executive under this Agreement,
and neither the Subsidiary, the Company nor any other member of the
Unified Group shall have any other obligation to Executive after
Executive's Date of Termination. The Executive shall not be required to
mitigate the amount of any payment provided for in this Section by
seeking other employment or otherwise, nor shall the amount of any
payment provided for in this Section be reduced by any compensation
earned by the Executive as the result of employment by another employer
after the Date of Termination, or otherwise. The payments and
arrangements in this Section 4 constitute further consideration for the
Executive's covenants set forth in Section 5, and the Executive agrees
that he shall abide by the terms of Section 5 in their entirety and
acknowledges that Section 5 continues to apply after any termination of
employment (other than a termination described in Section 4.2).
Section 5: Non-Competition.
5.1 Non-Compete Agreement. It is agreed that during the
Employment Period and until the later of (i) the date five (5) years
after the date hereof or (ii) the date three (3) years after the Date of
Termination (such period of time, the "Restricted Period"), the
Executive shall not, directly or indirectly, render services of any
nature within the Relevant Market Area (as defined herein) as an
employee, agent, representative, consultant, partner or otherwise, to or
for the direct or indirect benefit of any business that competes with
any member of the Unified Group. The Relevant Market Area is the area
within the fifty-mile radius of (i) each office maintained by the
Subsidiary at any time during the Employment Period, and (ii) each
office maintained by the Company at any time during the Employment
Period, and (iii) each office maintained by any other member of the
Unified Group during the Employment Period. In addition, during the
Restricted Period, the Executive shall not, directly or indirectly,
either as an
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individual, partner or a joint venturer, or in any other capacity,
invest in, own or have any arrangement to acquire (whether by option or
otherwise) an interest in any Person or business that is competitive
with any member of the Unified Group, excluding any interest in a
publicly traded company which constitutes not more than one per cent
(1%) by value of the equity securities of such company. For the
purposes of this Section 5.1, the noncompete obligations of Executive
shall not apply to the resort, entertainment or aviation industries.
5.2 Non-Solicitation of Employees. It is agreed that during the
Restricted Period, Executive shall not, either directly or indirectly,
approach or solicit (i) any Person employed by the Subsidiary at any
time during the Employment Period, (ii) any Person employed by the
Company at any time during the Employment Period, and (iii) any Person
employed by any other member of the Unified Group at any time during the
Employment Period, with a view towards enticing such Person to work for
the Executive or any other Person.
5.3 Non-Solicitation of Customers. It is agreed that during the
Restricted Period, Executive shall not, either directly or indirectly,
approach or solicit (i) any Person who was a Customer of the Subsidiary
at any time during the Employment Period, (ii) any Person who was a
Customer of the Company at any time during the Employment Period and in
respect of which the Executive had direct or indirect contact or gained
Confidential Information (as defined in Section 5.4) during such period,
and (iii) any Person who was a Customer of any other member of the
Unified Group at any time during the Employment Period and in respect of
which the Executive had direct or indirect contact or gained
Confidential Information during such period, if such direct or indirect
approach or solicitation (x) is made with a view towards diverting or
attempting to divert business from the Company, the Subsidiary or any
other member of the Unified Group, or (y) consists of any action or
communication that disparages or depreciates, or tends to disparage or
depreciate, the reputation, business practices, future business
prospects, policies or personnel (including officers, directors and
employees) of any member of the Unified Group.
5.4 Confidential Information. For purposes of this Agreement,
"Confidential Information" shall mean any communication disclosed to the
Executive or known by the Executive as a consequence of or through his
past, present or prospective employment or business relationship with
the Unified Group, not generally known and available in the Unified
Group's industries, which constitutes the Unified Group's (including
Company's and Subsidiary's) proprietary and non-public method(s) of
doing business, including, but not limited to, any information related
to trade secrets, pricing formulas, know-how, test data, Customer lists,
vendor lists, training and operating manuals, software and reporting
systems. The Subsidiary and the Executive acknowledge that during the
Executive's period of employment by Subsidiary, the Unified Group will
furnish the Executive with Confidential Information. The Executive
agrees both during his employment with the Subsidiary, whether under
this Agreement or otherwise, and at all times thereafter, that the
Executive, his officers, directors, partners, employees, affiliates,
agents, representatives or assigns (collectively "Representatives")
shall keep all Confidential Information in the strictest confidence and
shall not discuss, publish, communicate, transmit, reproduce or
otherwise disclose such Confidential Information, in any manner
whatsoever, in whole or in part, without the prior written consent of
the Company, unless and until such time as the Confidential Information
becomes generally known in the Unified Group's industries other than
through breach of this Agreement. Any written consent by the Company to
the Executive's disclosure of Confidential Information, if given, shall
in no way operate as a waiver of the Executive's obligation to maintain
the confidential nature of the material disclosed or to protect and
preserve that Confidential Information from disclosures so that it will
receive confidential treatment thereafter. The Executive agrees to
reimburse
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Company for any damages sustained and costs and expenses, including
attorneys' fees, incurred in connection with an unauthorized disclosure
of Confidential Information by the executive, his Representatives or any
other person or persons to whom the Executive or his Representatives
previously had disclosed Confidential Information.
5.5 Reasonableness of Covenants. The Executive acknowledges and
agrees that the covenants and agreements contained in this Section 5 are
reasonable, and the Executive agrees he shall not raise any issue of
their reasonableness in any proceeding to enforce such covenants and
agreements.
5.6 Blue Pencilling. In the event any court or other body having
appropriate jurisdiction (including any panel of arbitrators) shall
determine that the area where competition is prohibited, the time period
during which competition is prohibited, the nature or duration of
prohibitions on solicitation of Customers or employees, or any other
term of this Section 5 is overbroad, then the area or time or other term
shall be reduced appropriately as the court or other body may determine
is necessary to make this Section 5 enforceable. The parties
acknowledge that the purpose of this Section 5 is to protect the
goodwill and going concern value of the Subsidiary and the Unified
Group, including those Customer relationships, goodwill and going
concern value purchased in connection with the Agreement and Plan of
Merger, and the parties intend that this Section 5 shall be enforced to
the maximum extent allowed by law.
5.7 Specific Enforcement. The Executive agrees that any
violation or breach by the Executive and/or his Representatives of any
provision of this Section 5 would cause immediate and irreparable harm
to the Unified Group, the exact amount of which will be impossible to
ascertain, and for that reason further agrees that the Unified Group
shall be entitled, as a matter of right, to an injunction out of the
appropriate court of competent jurisdiction (as set forth below),
restraining any further violation or breach of this Agreement by
Executive and/or his Representatives, either directly or indirectly,
such right to an injunction being cumulative and in addition to whatever
remedies the Unified Group may have under applicable law and/or this
Agreement. The Unified Group and the Executive hereby irrevocably
consent to the jurisdiction of the Circuit Court of Fayette County,
Kentucky or, if there is federal jurisdiction, the United States
District Court for the Eastern District of Kentucky. The Unified Group
and the Executive waive any defense of an inconvenient forum to the
maintenance of any action or proceeding brought in such courts in
connection with this Agreement, any objection to venue with respect to
any such action, and any right of jurisdiction on account of the place
of residence or domicile of any party to such action. The remedies of
the Unified Group under this Section 5.7 are not exclusive, and shall
not prejudice any other rights under this Agreement or otherwise. To
the extent required to be enforceable by applicable law, the cessation
of Subsidiary's obligation to make payments or continue benefits under
this Agreement shall be deemed to be in the nature of liquidated damages
and not a penalty.
Section 6: Ownership of Papers and Intellectual Property Rights.
6.1 Papers and Property. Executive acknowledges the Unified
Group's (including Company's and Subsidiary's) exclusive right to
ownership, possession and title to all papers, documents, tapes,
drawings, notebooks, formulas, Customer lists, software, hardware,
trademarks, trade names, service marks, processes, data, intellectual
property, or other records, information or products prepared by the
Executive during employment (past, present and future) with Subsidiary
or provided by Subsidiary, or which otherwise come into the Executive's
possession by reason of employment with Subsidiary. Executive agrees
not to make or permit to be made, except in pursuit of Executive's
duties
9
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hereunder, any copies of such items. Executive further agrees to
deliver to the Company upon request all such items in Executive's
possession and without request to immediately deliver such items upon
the termination, voluntarily or involuntarily, of Executive's
employment.
6.2 Inventions. The term "Inventions" means all ideas,
inventions and discoveries, whether patentable, copyrightable or not,
made or conceived by the Executive, whether or not during the hours of
his or her employment or with the use of Unified Group's facilities,
materials or personnel, either solely or jointly with others, during the
term of his employment (past, present or future) with any member of the
Unified Group that relates to any present or prospective business of the
Subsidiary or any other member of the Unified Group, including, but not
limited to, software, algorithms, designs, devices, processes, methods,
formulae, techniques, data storage systems, networks, servers and any
improvements to the foregoing.
6.2(a) Report. Executive agrees to promptly disclose all
Inventions to the Company. Executive shall inform the Company
promptly and fully of such Inventions by a written report, setting
forth in detail the structures, procedures and methodology
employed and the results achieved. A report also shall be
submitted by the Executive upon completion of any study or
research project undertaken on behalf of the Subsidiary or any
other member of the Unified Group, whether or not in the
Executive's opinion a given study or project has resulted in an
Invention.
6.2(b) Assignment and Patent. Executive hereby assigns and
agrees to assign to the Subsidiary all of his rights to such
Inventions and to all proprietary rights therein, based thereon or
related thereto, including, but not limited to, applications for
United States and foreign letters patent and resulting letters
patent. Upon the request of the Company or the Subsidiary request
and at the Subsidiary's expense, the Executive shall execute such
documents and provide such assistance as may be deemed necessary
by the Subsidiary to apply for, defend or enforce any United
States and foreign letters patent based on or related to such
Inventions. The Executive agrees to execute all documents
reasonably requested by Company or the Subsidiary to assist the
Subsidiary in perfecting or protecting any or all of its rights in
the Inventions.
6.2(c) Copyright. Executive acknowledges that all
copyrightable Inventions are "works made for hire" and
consequently that the Subsidiary owns all copyrights thereto,
including, but not limited to, 17 U.S.C. Sections 101 and 210.
The Company, the Subsidiary and their successors and assigns shall
have the sole and exclusive right to register the copyright(s) in
all such work in its name as the owner and author of such work and
shall have the exclusive rights conveyed under 17 U.S.C. Sections
106 and 106A, including, but not limited to, the right to make all
uses of the works in which attribution or integrity rights may be
implicated. Additionally, without in any way limiting the
foregoing, the Executive hereby assigns, transfers and conveys to
the Subsidiary, and its successors and assigns, all right, title
or interest that Executive may now have, or may acquire in the
future, to the work including, but not limited to, all ownership,
patent (United States and foreign letters patent), trade secret,
trade names and trademarks, copyright moral, attribution and/or
integrity rights. The Executive hereby expressly and forever
waives any and all rights that Executive may have arising under 17
U.S.C. Section 106A, and any rights arising under any federal,
state, territorial or foreign laws that convey rights which are
similar in nature to those conveyed under 17 U.S.C. Section 106A.
Notwithstanding any provision of the Copyright Act, any and all
copyrightable works constituting Inventions or prepared either in
10
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whole or in part by the Executive in connection with his
employment are, shall be, or shall become, owned by the
Subsidiary.
Section 7: Arbitration. Notwithstanding any other provision of this
Agreement or the Agreement and Plan of Merger to the contrary, and
excluding the rights of the Unified Group to pursue injunctive relief
pursuant to Section 5.7, any controversy or claim regarding, arising
under or pertaining to this Agreement which cannot be resolved among the
parties themselves shall be resolved solely by binding arbitration in
Lexington, Kentucky. The arbitration panel shall consist of three
arbitrators selected from list(s) of candidates provided by the American
Arbitration Association. The Company shall be entitled to appoint one
arbitrator and the Executive shall be entitled to appoint one
arbitrator. The third arbitrator, who shall be an attorney in good
standing who is licensed to practice law in the Commonwealth of Kentucky
and devotes more than one-half of his or her professional time to the
practice of employment law, shall be chosen by the two arbitrators so
appointed. If any person fails to appoint its arbitrator or to notify
the other person of such appointment within thirty (30) days after the
institution of arbitration proceedings, such other person may request
the President of the American Arbitration Association to appoint such
arbitrator on behalf of the person who so failed. If the two
arbitrators appointed by (or on behalf of) the parties fail to appoint
such third arbitrator, or fail to notify the parties to such proceedings
of such appointment, within thirty (30) days after the appointment of
the later of such two arbitrators to be appointed by (or on behalf of)
the parties, any party may request such President to appoint such third
arbitrator. The President of the American Arbitration Association shall
appoint such arbitrator or such third arbitrator, as the case may be,
within thirty (30) days after the making of such request. The
arbitration shall be conducted in accordance with the Commercial
Arbitration Rules of the American Arbitration Association (which rules
may be modified by a majority of the arbitrators serving) and the
arbitration award, decree and/or order may grant any remedy or relief
deemed by the arbitrators to be just and equitable, including the
reasonable costs and expenses of such arbitration (including, but not
limited to, reasonable attorneys' fees and expenses, which fees and
expenses the parties expect will be awarded to the Person who prevails).
No awards of punitive damages shall be made. The arbitration award,
decree and/or order shall be final and binding on all parties to such
arbitration. Judgment and/or decree shall be entered (in conformity
with such award, decree and/or order) in the Circuit Court of Fayette
County, Kentucky or, if there is federal jurisdiction, the United States
District Court for the Eastern District of Kentucky. The Executive and
each member of the Unified Group irrevocably submit to the exclusive
jurisdiction of the Circuit Court of Fayette County, Kentucky or, if
there is federal jurisdiction, the United States District Court for the
Eastern District of Kentucky, for the purpose of (a) entry of any such
judgment and/or decree, or (b) entry of an order to proceed with
arbitration. Any such judgment, decree and/or order entered by the
Circuit Court of Fayette County, Kentucky, or the United States District
Court for the Eastern District of Kentucky and any related order(s) of
such court, may be endorsed as any other judgment, decree or order of
such court.
Section 8: Miscellaneous.
8.1 Ability To Perform. The Executive warrants that the
executive's execution and performance of this Agreement is not
restricted or prohibited by any agreement to which the Executive is
subject.
8.2 Time Periods. Any period of time measured under this
Agreement by days shall refer to calendar days and not business days.
If the last day of any such period falls on a Saturday, Sunday or
holiday observed by commercial banks in the city of Lexington, Kentucky,
the last day of such period, for all purposes of this Agreement
(including the determination of the first day of each succeeding period
11
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of time measured by days), shall be deemed to be the next succeeding
business day after such Saturday, Sunday or holiday. Any period of time
measured under this Agreement shall end at midnight, Lexington, Kentucky
time, on the last day of such period.
8.3 Notice. For all purposes of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing
and shall be deemed to have been duly given and received when (i)
delivered or (ii) mailed by certified or registered mail, return receipt
requested, postage prepaid, addressed to the respective addresses as set
forth below, or to such other address as may have been furnished to the
other in writing in accordance herewith, except that notice of change of
address shall be effective only upon receipt.
Notice to Executive:
-------------------
John R. Owens
Equity Insurance Managers
220 Lexington Green Circle
Lexington, Kentucky 40503
Notice to Subsidiary or to Company:
----------------------------------
Equity Underwriting Group, Inc.
c/o Unified Financial Services, Inc.
1104 Buttonwood Court
Lexington, Kentucky 40515
Attention: President and Chief Executive Officer
With a copy to:
Charles H. Binger
Thompson Coburn
One Mercantile Center
St. Louis, Missouri 63101
8.4 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
8.5 Withholding. Subsidiary may withhold from any amounts
payable under this Agreement such federal, state or local taxes as shall
be required to be withheld pursuant to any applicable law or regulation.
8.6 Waiver. The Executive's or Subsidiary's failure to insist
upon strict compliance with any provision hereof or any other provision
of this Agreement or the failure to assert any right the Executive or
Subsidiary may have hereunder, including, without limitation, the right
of the Executive to terminate employment for Good Reason pursuant to
Section 3.4 shall not be deemed to be a waiver of such provision or
right or any other provision or right of this Agreement.
8.7 Entire Agreement. All prior negotiations and agreements
between the parties hereto are superseded by this Agreement, and there
are no representations, warranties, understandings or
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agreements other than those expressly set forth herein, except as
modified in writing concurrently herewith or subsequent hereto.
8.8 Amendment. This Agreement may be amended or modified in
whole or in part only by an agreement in writing executed by all parties
hereto and making specific reference to this Agreement.
8.9 Priority of Agreement. In case of any conflict or ambiguity
in connection with or between this Agreement and any policy manuals,
including, but not limited to, any employee manuals, employment
applications, management instructions or promises, etc., this Agreement
shall control.
8.10 Costs. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the party who
substantially prevails shall be entitled to reasonable attorneys' fees,
costs and necessary disbursements in addition to any other relief to
which he or it may be entitled.
8.11 Assignment. Subsidiary shall have the right to assign this
Agreement to its successors or assigns (collectively, "Permitted
Assignees"). The terms "successors" and "assigns" shall include for all
purposes of this Agreement any Person that acquires all or substantially
all of Subsidiary's assets or all of its stock, or with which Subsidiary
merges or consolidates. The rights, duties and benefits to the
Executive hereunder are personal to him, and no such right or benefit
may be assigned by him.
8.12 Intended Beneficiaries. This Agreement shall be binding
upon the Executive, the Subsidiary and their respective successors and
assigns, and shall inure to the benefit of the Executive, the
Subsidiary, each member of the Unified Group, their respective
successors and assigns and Permitted Assignees. Nothing herein
expressed or implied is intended to confer upon any Person not named or
described in the preceding sentence any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
8.13 Mutual Contribution. The parties to this Agreement and
their counsel have mutually contributed to its drafting. Consequently,
no provision of this Agreement shall be construed against any party on
the ground that such party drafted the provision or caused it to be
drafted or the provision contains a covenant of such party.
8.14 Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one
instrument.
[Remainder of This Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the Executive and Subsidiary, pursuant to the
authorization from its Board, have executed or caused this Agreement to
be executed in its name, all as of the day and year first above written.
THIS CONTRACT IS GOVERNED BY KENTUCKY LAW AND CONTAINS A BINDING
ARBITRATION PROVISION. ALL DISPUTES ARISING IN CONNECTION WITH THIS
AGREEMENT ARE SUBJECT TO BINDING ARBITRATION IN LEXINGTON, KENTUCKY.
THE EXECUTIVE HAS REVIEWED THESE AND THE OTHER PROVISIONS OF THIS
AGREEMENT WITH LEGAL COUNSEL OF HIS OWN CHOOSING.
"EXECUTIVE"
/s/ John R. Owens
-----------------------------------
John R. Owens
"SUBSIDIARY"
Equity Underwriting Group, Inc.
By: /s/ John R. Owens
-----------------------------------
Name: John R. Owens
Title: President
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EXHIBIT 10.17
LOAN AGREEMENT
--------------
Dated as of October 18, 1996
by and among
COMMONWEALTH PREMIUM FINANCE CORPORATION
and
JOHN ROBERT OWENS, WILLIAM W. DAVIS, JR.
and D. RICHARD MEYER
and
BANK ONE, KENTUCKY, NA
<PAGE>
<PAGE>
LOAN AGREEMENT
--------------
THIS LOAN AGREEMENT (the "Agreement") dated as of October 18, 1996
between COMMONWEALTH PREMIUM FINANCE CORPORATION, a Kentucky corporation
(referred to herein as "Borrower"); JOHN ROBERT OWENS, WILLIAM W. DAVIS,
JR. and D. RICHARD MEYER, individuals (referred to herein as the
"Guarantors or individually as a "Guarantor") and BANK ONE, KENTUCKY,
NA, a national banking association (referred to herein as "Bank").
R E C I T A L S:
WHEREAS, Borrower has applied to Bank for a "Revolving Credit
Loan," as hereinafter defined, in an amount not to exceed the maximum
principal sum of One Million Dollars ($1,000,000.00), outstanding at any
one time, which Revolving Credit Loan shall be secured by certain of the
assets of Borrower and guaranteed by each of the Guarantors;
WHEREAS, one of the conditions to the Bank's making the Revolving
Credit Loan is that Borrower and Guarantors must enter into this
Agreement setting forth the terms and conditions of the Revolving Credit
Loan and other terms and conditions binding upon Borrower and
Guarantors, all of which terms and conditions Borrower and Guarantors
acknowledge are supported by good, valuable and sufficient
consideration.
NOW, THEREFORE, in consideration of their mutual covenants, the
financial accommodations extended to Borrower herein and for other good
and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties do hereby agree to and affirm the
foregoing recitals and further agree as follows:
ARTICLE I
----------
DEFINITIONS
-----------
Section 1.01 Defined Terms
As used in this Agreement the following terms have the following
meanings (terms defined in the singular to have the same meaning when
used in the plural and vice versa):
"Advance" means any disbursement of funds to Borrower under the
Revolving Credit Note pursuant to Section 2.01 hereof.
"Agreement" means this Loan Agreement, as amended, supplemented or
modified from time to time.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in Lexington, Kentucky, are
authorized or required to close under the laws of the Commonwealth of
Kentucky or of the United States.
"Borrowing Base" means the computation of Eligible Bank One Net
Premiums as calculated in the Borrowing Base Certificate and Draw
Request which is attached hereto as Exhibit 1.
"Collateral" means all property which is subject to, becomes
subject to, or is to be subject to the Liens granted by the Security
Agreement or which otherwise becomes security for the Loan.
<PAGE>
<PAGE>
"Debt" means any and all (i) indebtedness or liability for
borrowed money, or for the deferred purchase price of property or
services (excluding trade obligations incurred in the ordinary course of
business); (ii) obligations under letters of credit issued for the
account of any Person; (iii) guarantees, endorsements (other than for
collection or deposit in the ordinary course of business), and other
contingent obligations to purchase, to provide funds for payment, to
supply funds to invest in any Person, or otherwise to assure a creditor
against loss.
"Default" means any of the events specified in Section 7.01,
whether or not any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"Event of Default" means any of the events specified in
Section 7.01, provided that any requirement for the giving of notice,
the lapse of time, or both, or any other condition, has been satisfied.
"GAAP" means generally accepted accounting principles in the
United States.
"Guaranty" means each of the personal guaranties of the Note
executed by each of the Guarantors.
"Interest Coverage Ratio" means the earnings before interest
expenses and taxes divided by interest expense.
"Insurance Premium Financing Agreement ("IPFA")" means the
contract among the Borrower, the insurance agent and the
insured/borrower in which the insured/borrower grants to the Borrower
herein a security interest in all unearned premiums which may be payable
under the insurance policies.
"Lexington Head Office" means the office of Bank at 201 East Main
Street, Lexington, Kentucky 40507, or the principal office of any
subsequent holder of the Revolving Credit Note.
"Lien" means any pledge, security interest, hypothecation,
conditional assignment, deposit arrangement, encumbrance, lien
(statutory or other), or other security agreement, or encumbrance of any
kind or nature whatsoever (including, without limitation, any lien on
unearned premiums and the filing of any financing statement under the
Uniform Commercial Code or comparable law of any jurisdiction to
evidence any of the foregoing).
"Loan" means the Revolving Credit Loan.
"Loan Documents" means this Agreement, the Note, the Security
Agreement, the UCC-1's, the Guaranties, and any additional documents
required to be delivered by Borrower, Guarantors, or any of them, under
this Agreement, or otherwise evidencing, securing and/or relating to the
Loan.
"Loan Obligations" means the obligations of Borrower and
Guarantors to Bank under the Loan Documents.
"Maturity Date" means October 20, 1997, at which time all
obligations of Borrower under the Note are due and payable in full.
"Net Premiums" shall mean total premiums on IPFA less all initial
premium payments made by insured/borrower thereunder.
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"Note" means the Revolving Credit Note.
"Others" shall mean any Person as defined herein other than Bank
or its affiliates.
"Person" means any individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint
venture, governmental authority, or other entity of whatever nature.
"Prime Rate" means a variable rate of interest announced from time
to time by Bank as its prime rate whether or not such rate is otherwise
published, which rate may not be Bank's lowest or best rate.
"Revolving Credit Loan" shall have the meaning assigned to such
term in Section 2.01.
"Revolving Credit Note" shall have the meaning assigned to such
term in Section 2.02.
"Security Agreement" means the Security Agreement to be delivered
by Borrower under the terms of this Agreement granting Bank a first
priority security interest in all rights, interests, accounts,
contractual rights and proceeds thereof of Borrower in connection with
any and all IPFA's entered into between the Borrower and other parties
which have been pledged or assigned to Bank.
"Stockholders Equity" means (a) the book value of all assets of
the Borrower taken on a consolidated basis, as determined in accordance
with GAAP minus (b) all current and long term liabilities and other
obligations of the Borrower on a consolidated basis, as determined in
accordance with GAAP.
"Security Documents" means the Security Agreement, the UCC-1's,
and such other instruments or documents executed and/or delivered in
connection herewith and by which a lien is granted to Bank or by which
the Loan is otherwise secured.
"UCC-1's" means all filings under the Uniform Commercial Code as
adopted in the various states in which filings may be made by Bank now
or at any time in the future for purposes of perfecting any security
interest granted by the Security Agreement.
"Unearned Discount" means the difference, if any, between the
principal amount of each Installment Contract and the amount paid by the
Borrower to purchase the Installment Contract, which difference is
amortized over the life of the Installment Contract.
Section 1.02 Accounting Terms
All accounting terms not specifically defined herein shall be
construed in accordance with GAAP consistent with that applied in the
preparation of the financial statements referred to in Section 5.08, and
all financial data submitted pursuant to this Agreement shall be
prepared in accordance with such principles.
3
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ARTICLE II
----------
AMOUNT AND TERMS OF THE LOAN
----------------------------
Section 2.01 Revolving Credit Loan
Bank agrees, subject to the terms and conditions of this Agreement
and the other Loan Documents to make Advances to Borrower from time to
time during the period from the date when Borrower first qualifies for
the initial Advance pursuant to Section 3.01 hereof, up to, but not
including, the Maturity Date in an aggregate principal amount
outstanding not to exceed at any time One Million Dollars
($1,000,000.00) (the "Revolving Credit Loan"). Subject to the terms and
conditions of this Agreement and of the other Loan Documents, Borrower
may borrow, prepay pursuant to Section 2.05, and reborrow under this
Section 2.01.
Section 2.02 Note
The Revolving Credit Loan and Advances thereunder shall be
evidenced by, and repaid with interest in accordance with, a single
promissory note of Borrower in form and content acceptable to Bank, in
the original principal amount of One Million Dollars (U.S.
$1,000,000.00), which Note shall be payable to Bank, and shall mature
and shall be due and payable in full on the Maturity Date, which is one
(1) year from the date hereof or October 20, 1997 (the "Revolving Credit
Note").
Section 2.03 Notice and Manner of Borrowing
On the last day of each calendar month and on each such Business
Day the Borrower requests a Draw, Borrower shall submit to Bank a
Borrowing Base Certificate and Draw Request. Provided (a) all of the
applicable conditions set forth in Article III hereof have been
fulfilled to Bank's satisfaction, and (b) Borrower has provided Bank
with the Borrower's Base Certificate and Draw Request by 10:00 a.m.,
Bank will make Advances under the Revolving Credit Loan available to
Borrower in immediately available funds by crediting the amount thereof
to Borrower's account with Bank on the same day.
Section 2.04 Interest
Borrower shall pay interest to Bank on the outstanding and unpaid
principal amount of the Revolving Credit Note at a per annum rate equal
to the Bank's Prime Rate. Interest shall be calculated for the actual
number of days elapsed on the basis of an assumed year of three hundred
sixty (360) days. All accrued interest on the Revolving Credit Loan
shall be paid in immediately available funds on the 18th day of each
month at the Lexington Head Office. Upon an Event of Default consisting
of Borrower's failure to pay any interest or principal payment due under
the Note within ten (10) business days of the due date thereof, at
maturity, by acceleration or otherwise, the outstanding principal
balance shall thereafter bear interest until paid at a rate which shall
be equal to the lesser of five percent (5%) per annum in excess of the
rate set forth in the first sentence of this Section 2.04 or the maximum
effective rate of interest which Bank or the then current holder of the
Note is permitted by law to contract for and charge from time to time.
In no event shall the amount of interest due or payable under the
Note exceed the maximum lawful rate of interest allowed by applicable
law, and in the event that any such excess payment is made by Borrower
or received by Bank, then such excess sums shall be credited as a
payment of the principal, unless Borrower shall notify Bank, in writing,
that it has elected to have such excess sums returned to it.
4
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Section 2.05 No Prepayment Premium
Borrower may prepay the Note, in whole or in part, at any time
without incurring any premium or penalty. Any partial prepayment shall
not change the amount or dates of payments due from Borrower under the
Note.
Section 2.06 Method of Payment
Borrower shall make each payment under this Agreement and under
the Note in lawful money of the United States, to Bank at the Lexington
Head Office, in immediately available funds. Whenever any payment to be
made under this Agreement or under the Note shall be stated to be due on
a Saturday, Sunday or a public holiday or banking holiday, such payment
shall be made on the next succeeding Business Day, and such extension of
time shall in such case be included in the computation of the payment of
interest.
Section 2.07 Use of Loan Proceeds
Advances under the Revolving Credit Loan shall be used by Borrower
solely for the financing and/or the acquisition of IPFA's or repayment
of any Loans from EIM.
Section 2.08 Fees
In consideration of Bank's agreement enter into the Revolving
Credit Loan pursuant to the terms hereof, Borrowers agree to pay to Bank
a fee in the amount of One Thousand Dollars ($1,000.00), such fee shall
be deemed fully earned upon execution of this Agreement and shall be due
and payable at the closing.
Section 2.09 Guaranty by Guarantors
Each of the Guarantors shall guarantee to Bank the payment and
performance of Borrower's Loan Obligations pursuant to separate
Guaranties dated this date.
ARTICLE III
-----------
CONDITIONS PRECEDENT
--------------------
Section 3.01 Conditions Precedent to Initial Advance Under
Revolving Credit Loan
The obligation of Bank to make the initial Advance under the
Revolving Credit Loan is subject to the condition precedent that Bank
shall have received and approved on or before disbursement of the
initial Advance under the Revolving Credit Loan each of the following,
in form and substance reasonably satisfactory to Bank and its counsel:
a. Note and Agreement. The Revolving Credit Note and this
------------------
Agreement duly executed and delivered by Borrower and Guarantors.
b. Security Agreement. A Security Agreement or agreements
------------------
duly executed and delivered by Borrower and granting to Bank a first and
prior security interest in and to all of the Collateral to secure
payment of the Loan Obligations.
c. Insurance. Certificates of insurance coverage satisfying
---------
all requirements as provided in Section 5.05.
5
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d. Guaranties. A Guaranty executed by each of the Guarantors
----------
in which they each guarantee to Bank the payment and performance of
Borrower's Loan Obligations.
e. UCC-1's and Lien Opinion. Borrower shall have executed
------------------------
all UCC-1's, and shall have provided to Bank prior to the initial
Advance, (i) acknowledgment copies for all UCC-1's duly filed under the
Uniform Commercial Code in the appropriate offices in all jurisdictions
necessary or, in the opinion of Bank, desirable to perfect the security
interests created by the Security Agreement; and (ii) an opinion of
counsel acceptable to Bank identifying all of the financing statements
on file with respect to Borrower in all jurisdictions referred to under
(i), including the UCC-1's filed by Bank against Borrower, which opinion
shall reflect no prior filings against any of the Collateral except for
such Liens as are to be paid in full and released prior to or in
connection with the initial Advance.
f. Evidence of Existence and Good Standing of Borrower.
---------------------------------------------------
Certified copies of Borrower's Articles and By-Laws, Certificate of Good
Standing of Borrower issued by the Secretary of State of Kentucky and
certificates of authority from each state in which qualification of
Borrower is necessary or appropriate.
g. Evidence of all Corporate Action by Borrower. Certified
--------------------------------------------
(as of the date of this Agreement) copies of all corporate action taken
by Borrower, including resolutions of Borrower's Board of Directors,
authorizing the execution, delivery, and performance of the Loan
Documents to which its and Signature Certificate of Borrower. A
certificate (dated as of the date of the initial Advance under the
Revolving Credit Loan) of the Secretary of Borrower certifying the names
and true signatures of the officers of Borrower authorized to sign the
Loan Documents to which it is a party and the other documents to be
delivered by Borrower under this Agreement.
h. Certificate of No Adverse Changes in Borrower's or
--------------------------------------------------
Guarantors' Condition. A certificate of Borrower and Guarantors
- ---------------------
stating that there has been no adverse change in the financial condition
of any such parties since the last submission of financial information
to the Bank.
i. Compliance Certificate for the Initial Advance in the Form
----------------------------------------------------------
Described in Section 3.02b. A certificate in the form described in
- --------------------------
Section 3.02b hereof properly certified on behalf of the Borrower.
j. Compliance with Laws Applicable to Borrower. The IPFA's
-------------------------------------------
are in form and substance satisfactory to Bank, are valid and
enforceable, and comply with all applicable laws, including state
insurance regulations.
k. Other Documents. Such other approvals, opinions, or
---------------
documents as Bank may reasonably request.
Section 3.02 Further Conditions Precedent to All Advances Under the
Revolving Credit Loan
The obligation of Bank to make any Advances under the Revolving
Credit Loan is further subject to the Bank having received from Borrower
a request for an Advance as provided for in Section 2.03 hereof.
Section 3.03 Authorized Representative
Borrower does hereby authorize and empower John Robert Owens,
William W. Davis, Jr., and D. Richard Meyer or either of them acting
alone, or such other individuals who are designated in writing by
Borrower, to request Advances, direct or authorize Bank as to such
account(s) or such parties into which
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or to whom Advances are to be made (including the accounts of or to such
authorized representatives), sign such instruments or documents as may
be required from or on behalf of Borrower in connection with any such
Advances, and any Advances made by Bank to, at the request of, or at the
direction of either such authorized representative(s) shall be deemed to
have been received by Borrower and used for the benefit of Borrower,
evidenced by the Note, and entitled to the benefit and security of the
Security Documents, irrespective of the ultimate use of such funds.
Such designation shall remain in full force and effect and Bank may rely
thereon until written notice of any change in the individuals designated
has been provided to Bank accompanied by resolutions of Borrower
effecting any such change and a current incumbency certificate.
ARTICLE IV
-----------
REPRESENTATIONS AND WARRANTIES
------------------------------
Borrower and each of the Guarantors (where applicable) represent
and warrant to Bank as of the date hereof, which representations and
warranties shall be deemed remade by Borrower and each of the Guarantors
(where applicable) as of the date of each Advance hereunder, that:
Section 4.01 Incorporation, Good Standing and Due Qualification of Borrower
Borrower is a corporation duly incorporated, validly existing, and
in good standing under the laws of the State of Kentucky; has the
corporate power and authority to own its assets and to transact the
business in which it is now engaged or proposed to be engaged; and is
duly qualified as a foreign corporation and in good standing under the
laws of each other jurisdiction in which such qualification is required
by law or under this Agreement.
Section 4.02 Corporate Power and Authority of Borrower
The execution, delivery, and performance by Borrower of the Loan
Documents have been duly authorized by all necessary corporate action
and do not and will not (i) require any consent or approval of the
stockholders of Borrower; (ii) contravene any provision of Borrower's
Articles or By-Laws; (iii) violate any provision of any law, regulation,
writ, judgment, injunction, decree or determination presently in effect
having applicability to Borrower, other than the Liens to be granted in
favor of Bank; (iv) result in a breach of or constitute a default under
(whether with the giving of notice, passage of time, or both) any
indenture or loan or credit agreement or any other agreement, lease, or
instrument to which Borrower is a party or by which it or its properties
may be bound or affected; (v) result in, or require, the creation or
imposition of any Lien, upon or with respect to any of the properties
now owned or hereafter acquired by Borrower; or (vi) cause Borrower to
be in default under any law, rule, regulation, order, writ, judgment,
injunction, decree, determination, or award or any such indenture,
agreement, lease, or instrument.
Section 4.03 Legally Enforceable Agreement
This Agreement is, and each of the other Loan Documents executed
and/or delivered in connection with this Agreement are, legal, valid and
binding obligations of Borrower and each of the Guarantors, as
applicable, enforceable in accordance with their respective terms,
except to the extent that such enforcement may be limited by applicable
bankruptcy, insolvency, and other similar laws affecting creditors'
rights generally.
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Section 4.04 Other Agreements
Borrower is not a party to any indenture, loan, or credit
agreement, or to any lease or other agreement or instrument, or subject
to any charter or corporate restriction or partnership restriction,
which could have a material adverse effect on the business, properties,
assets, operations or conditions, financial or otherwise, of Borrower or
the ability of Borrower to carry out its respective obligations under
the Loan Documents to which it is a party. Borrower is not in default
in any respect in the performance, observance, or fulfillment of any of
the obligations, covenants, or conditions contained in any agreement or
instrument material to its business to which it is a party.
Section 4.05 Litigation
There is no pending or threatened action or proceeding against or
affecting Borrower before any court, governmental agency or arbitrator,
which may, in any one case or in the aggregate, materially and adversely
affect the respective financial condition, operation, properties, or
business of Borrower or the ability of Borrower to perform its
respective obligations under the Loan Documents to which it is a party.
Section 4.06 No Liens Upon Collateral
There are no liens on any of the Collateral nor has Borrower
previously assigned any of its rights to any of the Collateral,
including the unearned premiums under the insurance policies subject to
the Insurance Premium Financing Agreement.
Section 4.07 Operation of Business
Except as may have been disclosed in writing to and approved by
Bank, Borrower has made application for or otherwise possesses all
licenses, permits, franchises, patents, copyrights, trademarks and trade
names, or rights thereto, to conduct its businesses substantially as now
conducted and as presently proposed to be conducted, and Borrower is not
in violation of any of the foregoing or any valid rights of others with
respect to any of the foregoing.
Section 4.08 Taxes and Reports
Borrower has filed, in a timely fashion and will in the future
file in a timely fashion, all tax returns or reports (federal, state and
local) required to be filed and has paid, and will pay in the future,
all taxes, assessments, fees and governmental charges and levies shown
or required to be shown thereon to be due, including interest and
penalties, and has paid, and will pay in the future, all real estate and
personal property taxes, license fees and/or assessments due with
respect to its assets.
Section 4.09 Accuracy of Information
All factual information heretofore or contemporaneously furnished
by Borrower or Guarantors in writing to Bank for purposes of, or in
connection with, this Agreement or any transaction contemplated hereby
is, and all other such factual information hereafter furnished by
Borrower and Guarantors to Bank will be, true and accurate in every
material respect on the date as of which such information is certified
and as of the date of execution and delivery of this Agreement by Bank,
and such information is not, or shall not be, as the case may be,
incomplete or omit to state any material fact necessary to make such
information not misleading.
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Section 4.10 No Adverse Change
No material adverse change has occurred in Borrower's business,
operating or Borrower's or either Guarantor's financial condition since
the date of the most current financial statements provided by Borrower
and each Guarantor to Bank.
Section 4.11 Registered Agent
Borrower's registered agent is Richard E. Vimont, who is located
at 155 E. Main Street, Suite 300, Lexington, Kentucky 40507. Borrower
shall give written notice within thirty (30) days of any change in the
name or location of its registered agent.
ARTICLE V
----------
AFFIRMATIVE COVENANTS
---------------------
So long as any portion of the Note shall remain unpaid or Bank
shall have any obligation under this Agreement, Borrower and Guarantors
(where applicable) each covenant as follows:
Section 5.01 Maintenance of Existence
Borrower will preserve and maintain its corporate existence and
good standing in the jurisdiction of its incorporation, shall qualify
and remain qualified as a foreign corporation in each jurisdiction in
which such qualification is required, and shall not enter into any
merger, consolidation or other arrangement whereby Borrower, or a
controlling interest in Borrower, shall be acquired by any other Person
unless, as a part thereof, the Loan is to be paid in full and this
Agreement and the Revolving Credit Loan shall be terminated.
Section 5.02 Maintenance of Records
Borrower will keep adequate, consolidated records and books of
account in which complete entries will be made in accordance with GAAP
consistently applied, reflecting all financial transactions.
Section 5.03 Maintenance of Properties
Borrower will maintain, keep, and preserve all of its properties
necessary or useful in the proper conduct of its business in good
working order and condition, ordinary wear and tear and insured casualty
damage or taking through the power of eminent domain excepted.
Section 5.04 Conduct of Business
Borrower will continue to engage in an efficient and economical
manner in a business of the same general type as conducted by it on the
date of this Agreement.
Section 5.05 Maintenance of Insurance
Borrower will maintain insurance with financially sound and
reputable insurance companies or associations, reasonably acceptable to
Bank, in such amounts and covering such risks as are usually carried by
companies engaged in the same or a similar business and similarly
situated. Specifically, Borrower will maintain, with respect to its
property:
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a. Casualty. Insurance against loss or damage to all the
--------
improvements to the Premises by fire and any of the risks covered by
insurance of the type now known as "fire and extended coverage".
b. Liability. Comprehensive public liability insurance on an
---------
"occurrence basis" against claims for "personal injury," including,
without limitation, bodily injury, death or property damage occurring on
Borrower's properties; such insurance to afford immediate minimum
protection to a limit of not less than that reasonably required by Bank
with respect to personal injury or death to any one or more persons or
damages to property.
All policies of insurance shall be issued by companies and in
amounts in each company reasonably satisfactory to Bank. Borrower shall
furnish Bank with an original certificate of insurance and a copy of all
policies of required insurance. Prior to the expiration of each such
policy, Borrower shall furnish Bank with evidence satisfactory to Bank
of the payment of premium and the reissuance of a policy continuing
insurance in force as required by this Agreement. Borrower shall give
Bank notice of any cancellations or material amendments or alterations
of said policies.
Section 5.06 Compliance with Laws
Borrower has at all times heretofore and will hereafter comply in
all material respects with all applicable laws, rules, regulations and
orders, including, without limitation, all applicable covenants and
restrictions of record and all valid laws, statutes, codes, acts,
ordinances, orders, judgments, decrees, injunctions, rules, regulations,
certificates, franchises, permits, licenses, authorizations, directions
and requirements, including, without limitation, the Americans With
Disabilities Act and regulations thereunder and all laws, ordinances,
rules and regulations of all federal, state, county, municipal and other
governments, departments, commissions, boards, courts, authorities,
officials and officers.
Section 5.07 Right of Inspection & Audit by Bank
At any reasonable time and from time to time, Borrower will permit
Bank or any agent or representative thereof to examine and make copies
of and abstracts from Borrower's records and books of account, and visit
its properties and to discuss its affairs, finances, and accounts with
any of its respective officers and directors and its independent
accountants. Without limiting the foregoing rights of Bank, Borrower
agrees that without any prior notice to Borrower and not more frequently
than two (2) times per calendar year, Bank and its agents and employees
may at Borrower's expense conduct an audit of Borrower's records and
books to determine Borrower's compliance with this Agreement and the
other Loan Documents.
Section 5.08 Reporting Requirements
Borrower shall furnish to Bank:
a. Monthly Reporting.
-----------------
(i) As soon as available and in any event within forty-
five (45) days after the end of each fiscal month, balance sheets as of
the end of each month, statements of income and retained earnings as of
the end of such fiscal month, and properly completed calculations
necessary to test compliance with all of the financial covenants set
forth herein, in form and content reasonably acceptable to Bank, and all
in reasonable detail, and all such financial statements shall be
prepared in accordance with GAAP consistently applied and certified as
correct by Borrower's chief financial officer. Provided, however,
Borrower shall not be obligated to deliver the Borrower's internally
prepared balance sheet and income statement for the last month of
Borrower's fiscal year.
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(ii) Within fifteen (15) days after the end of the month or
upon reasonable request of Bank, Borrower shall provide to Bank the
following company prepared monthly reports, Balance Sheet and Income
Statement, Income Analysis Reports, Schedule of Cash Receivables from
Contracts, Company Activity Summary, Agent Activity Summary, and
Schedule of Accounts Past Due.
b. Annual Financial Statements. As soon as available and in
---------------------------
any event within one hundred twenty (120) days after the end of
Borrower's 1996 fiscal year, and for all fiscal years thereafter so long
as any Indebtedness remains unpaid, a complete, unqualified, annual
audit report of Borrower. The audited report shall consist of balance
sheet, statement of profit and loss, application of funds, change in
financial position and the like, prepared and certified by a firm of
independent public accountants of recognized standing acceptable to the
Bank. All of the foregoing shall be in reasonable detail and stating in
comparative form the respective figures for the corresponding date and
period in the prior fiscal year and all such financial statements shall
be prepared in accordance with GAAP consistently applied and certified
as correct by Borrower's chief financial officer.
c. Notice of Litigation. Promptly after the commencement
--------------------
thereof, notice of all actions, suits, and proceedings before any court
or governmental department, commission, board, bureau, agency, or
instrumentality, domestic or foreign, affecting Borrower or either
Guarantor which, if determined adversely, could have a material, adverse
effect on Borrower's or a Guarantor's financial condition, properties,
or operations.
d. Notice of Defaults and Events of Default. As soon as
----------------------------------------
possible and in any event within ten (10) days after the occurrence of
each Default or Event of Default, a written notice setting forth the
details of such Default or Event of Default and the action which is
proposed to be taken with respect thereto.
e. Tax Returns. Copies of Borrower's federal and state
-----------
income tax returns, and any amendments and extensions no later than the
earlier of the date filed or one hundred twenty (120) days after the end
of Borrower's fiscal year for so long as any portion of the Loan shall
remain unpaid or Bank has any obligations hereunder. In the event
Borrower files for an extension with the Internal Revenue Service,
Borrower shall provide to Bank copies of the federal income tax return
prior to the expiration of such extension period.
f. Guarantors' Financial Statements and Tax Returns. On or
------------------------------------------------
before June 10, 1997, copies of each Guarantor's federal and state
income tax returns, amendments and schedules, and a financial statement
of assets, liabilities and net worth for each Guarantor, in form and
content reasonably acceptable to Bank, and all in reasonable detail.
g. Annual Reporting on Equity Insurance Managers, Inc.
----------------------------------------------------
("EIM"). As soon as available and in any event within one hundred
- -------
twenty (120) days after EIM's 1996 fiscal year, a complete, unqualified,
annual audit report of EIM in such detail as required under
Section 5.08(b).
h. Quarterly Reporting on EIM. No later than forty-five days
--------------------------
after the end of the calendar quarter, balance sheets and statements of
income and retained earnings in such detail as required under
Section 5.08(a)(i).
i. General Information. Such other information respecting
-------------------
the condition or operations, financial or otherwise, of Borrower or any
Guarantor, as Bank may from time to time reasonably request.
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Section 5.09 Financial Covenants to Be Maintained by Borrower
a. Stockholders' Equity. Borrower shall not permit its
--------------------
Stockholders' Equity to be less $60,000.00 at all times while any of the
Loan remains unpaid and outstanding.
b. Interest Coverage Ratio. While any of the Loan remains
-----------------------
unpaid and outstanding, the Borrower shall not permit the ratio of
(i) its calendar quarterly earnings before interest expenses and taxes
to (ii) calendar quarterly interest expenses to be less than 2.00 to
1.00, which shall be reported on a calendar quarterly basis.
Section 5.10 Further Assurances
Borrower and Guarantors shall, upon request by Bank, promptly cure
any defects in the creation, issuance and delivery of the Note and the
execution and delivery of the other Loan Documents, including this
Agreement. Borrower and Guarantors, at their expense, promptly will
execute and deliver to Bank, upon request, all such other and further
documents, agreements and instruments reasonably required to ensure
compliance with or the accomplishment of the covenants and agreements of
Borrower and Guarantors in the Loan Documents, including this Agreement,
or to evidence further and to describe more fully any Collateral or
other property intended as security for the Loan or to correct any
omissions in the Loan Documents, or to state more fully the obligations
set out in this Agreement or in any of the other Loan Documents, or to
perfect, protect or preserve any Liens created pursuant to any of the
Loan Documents, or to make any recordings, to file any notices or to
obtain any consents, all as may be necessary or determined by Bank in
good faith to be reasonably appropriate in connection therewith.
Section 5.11 Taxes and Other Payment Obligations.
Borrower shall pay and discharge, or cause to be paid and
discharged, before any of them becomes in arrears:
a. all taxes, assessments, governmental charges, levies, and
claims for labor, materials or supplies which if unpaid might become a
lien or charge upon any of Borrower's property, and
b. all of Borrower's other debts, obligations and liabilities
as and when same become due.
Provided, however, Borrower may refrain from paying any amount it
would be required to pay pursuant to this section only if the validity
or amount thereof is being contested in good faith by appropriate
proceedings timely instituted which shall operate to prevent the
collection or enforcement of the obligation contested, and provided that
Borrower shall have set aside on its books appropriate reserves with
respect thereto.
Section 5.12 Notice of Documents.
Not later than forty-five (45) days from the date hereof, Borrower
shall have added a notation to all IPFA's stating in form and substance
satisfactory to Bank that a security interest in such documents has been
granted by Borrower to Bank and that no transfer of such documents may
be made by Borrower without the Bank's prior written consent. Borrower
shall continue to add the notation on all IPFA's which are assigned to
Bank in the future.
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Section 5.13 Perfection and Assignment of Borrower's Security
Interests in Unearned Premiums Securing Obligations to
Borrower Under Insurance Premium Financing Agreements.
Borrower shall properly perfect and maintain the perfection of a
first priority security in all unearned premiums securing the
obligations of Borrower's debtors under the terms of the agreements
which is part of the Collateral. All IPFA's in favor of Borrower which
have been designated as Collateral shall be assigned to Bank by
Borrower.
Section 5.14 Subordination of Borrower's Debt to Guarantors.
Borrower and Guarantors hereby agree that any loans of Borrower to
Guarantors or any one of them, whether now existing or hereafter
created, shall be, and hereby are, fully subordinated as to priority and
payment to all Loan Obligations of Borrower to Bank. Provided, however,
notwithstanding the foregoing, Borrower is authorized to make regularly
scheduled payments to Guarantors on any debt to Guarantors until an
Event of Default occurs, after which no such payments shall be made by
Borrower.
Section 5.15 Notification to Insurance Company
Borrower shall send a Notice of Acceptance to EIM or such other
insurance company as notification of Borrower's collateral assignment of
such security interest to Bank. In the Event of Default as provided in
Section 7.01 herein, Borrower shall instruct EIM or such other insurance
company to (a) inform Bank of any defaults or notices of cancellation of
such insurance contracts and (b) pay directly to Bank any unearned
premiums.
ARTICLE VI
-----------
NEGATIVE COVENANTS
------------------
So long as any portion of the Note shall remain unpaid or Bank
shall have any obligation under this Agreement, Borrower and Guarantors
shall comply with the following negative covenants:
Section 6.01 Liens on or Assignments of Collateral
a. Liens. Borrower will not create, incur, assume or suffer
-----
to exist any Lien upon or with respect to any of the Collateral now
owned or hereafter acquired, except:
(i) Liens in favor of Bank;
(ii) Liens for taxes or assessments or other government
charges or levies if not yet due and payable or, if due and payable, if
they are being contested in good faith by appropriate proceedings and
for which appropriate reserves are maintained;
(iii) Liens imposed by law, such as mechanics, materialmen,
landlords, warehousemen and carrier Liens, and other similar Liens,
securing obligations incurred in the ordinary course of business which
are not past due or which are being contested in good faith by
appropriate proceedings and for which appropriate reserves have been
established;
(iv) Liens under worker's compensation, unemployment
insurance, social security, or similar legislation for sums which are
not past due;
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(v) Liens, deposits, or pledges to secure the performance
of public or statutory obligations, surety, stay, appeal, indemnity,
performance or other similar bonds, or other similar obligations arising
in the ordinary course of business;
b. Assignments. Borrower shall not assign or transfer its
-----------
rights to the unearned premiums which are pledged as Collateral to Bank
to any other third party.
Section 6.02 Mergers, Etc.
Borrower will not merge, engage in a share exchange, or
consolidate with any other entity, or sell, assign, lease, or otherwise
dispose of (whether in one transaction or in a series of transactions)
all or substantially all of its assets at any time hereafter owned by
Borrower to any Person, or acquire all or substantially all of the
assets or the business of any Person, other than acquisition of
automobile financing chattel paper in the ordinary course of business.
ARTICLE VII
-----------
EVENTS OF DEFAULT AND REMEDIES OF BANK
--------------------------------------
Section 7.01 Events of Default
Each of the following shall be an Event of Default under this
Agreement:
a. Payment Default. Borrower fails to pay any installment of
---------------
principal or interest on the Note within ten (10) days following its due
date without notice from Bank.
b. Other Defaults. The occurrence of a default under any
--------------
other obligation or agreement of Borrower or either of Guarantors to or
with Bank, whether now or hereafter arising and such default shall
continue for a period of thirty (30) days after notice to Borrower or
Guarantors from Bank describing the nature of the default.
c. Breach of Warranty, Etc. Any representation or warranty
-----------------------
made or deemed made by Borrower or either of Guarantors in this
Agreement, the Loan Documents, any Compliance Certificate or in any
other certificate, document, opinion, or financial or other statement
furnished at any time under or in connection with any Loan Document
shall prove to have been incorrect in any material respect on or as of
the date made or deemed made.
d. Breach of Covenant. Either Borrower or a Guarantor shall
------------------
fail to perform or observe any term, covenant or agreement on their part
to be performed or observed contained in any Loan Document (other than a
failure to pay any sum to Bank when due) to which any of them is a party
and such failure shall continue for a period of thirty (30) days after
notice to Borrower or Guarantors from Bank describing the nature of the
failure.
e. Bankruptcy/Insolvency. Either Borrower or a Guarantor
---------------------
(i) shall be unable to, or shall admit in writing its inability to, pay
its debts as such debts become due; or (ii) shall make an assignment for
the benefit of creditors, petition or apply to any tribunal for the
appointment of a custodian, receiver or trustee for it or a substantial
part of its assets; or (iii) shall commence any proceeding under any
bankruptcy, reorganization effect; or (iv) shall have any such petition
or application filed or any such proceeding commenced against it in
which an order for relief is entered or adjudication or appointment is
made and which remains undismissed for a period of sixty (60) days or
more; or (v) by any act or omission shall indicate its consent to,
approval of, or acquiescence in any such petition, application, or
proceeding, or order for relief, or the appointment of a custodian,
receiver, or trustee for all or any
14
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substantial part of its properties; or (vi) shall suffer any such
custodianship, receivership, or trusteeship to continue undischarged for
a period of sixty (60) days or more.
f. Termination of Borrower. If Borrower or any Person
-----------------------
affiliated with it takes any action that is intended to result in the
termination, dissolution or liquidation of Borrower.
Section 7.02 Remedies of Bank in the Event of Default
a. Acceleration, etc. Upon the occurrence of any Event of
-----------------
Default set forth in section 7.01 hereof, Bank may, by notice to
Borrower: (i) declare its obligation to make Advances under this
Agreement and the Revolving Credit Note terminated, whereupon the same
shall forthwith terminate; (ii) declare the outstanding principal
balance owing under the Revolving Credit Note, all interest thereon, and
all other amounts payable under this Agreement or any Loan Document, or
otherwise to be forthwith due and payable, whereupon the Revolving
Credit Note, all such interest, and all such amounts shall become and be
forthwith due and payable, without presentment, demand, protest, or
further notice of any kind, all of which are hereby expressly waived by
Borrower, without any action on the part of Bank; (iii) avail itself of
any and all remedies available to it in any of the Loan Documents,
including, without limitation, appointment of receivers for the
Collateral; and (iv) avail itself of any and all other or additional
remedies available by law or in equity.
b. File Action. Upon the occurrence of any Event of Default,
-----------
Bank shall have the right to proceed to protect and enforce its rights
by suit in equity, action at law and/or other appropriate proceedings
either for specific performance of any covenant or condition contained
in this Agreement or in any of the other Loan Documents, or in aid of
the exercise of any power granted in this Agreement or any of the other
Loan Documents.
c. Use of Collateral. Upon the occurrence of any Event of
-----------------
Default, Borrower's rights to use, sell, substitute, exchange or
exercise any other rights relating to the Collateral and all proceeds
thereof and income therefrom shall automatically terminate without
notice and Bank shall thereafter be entitled to take possession of,
receive, sell, and collect same.
d. Waiver of Marshaling of Assets. Borrower waives any
------------------------------
requirement of marshaling of assets and all other legal or equitable
doctrines which might otherwise require Bank to proceed against any
Persons or any Collateral or any other property or with respect to any
other rights in any particular order.
e. Sale of Collateral. Upon the occurrence of any Event of
------------------
Default, Bank shall have the right to sell the Collateral at public or
private sale, and shall have the right to bid upon and purchase the
Collateral at any sale. Bank shall have the right to deliver the
Collateral to the buyer at any public or private sale.
f. No Waiver. Upon the occurrence of any Event of Default,
---------
Bank may choose to exercise and enforce any of its rights or remedies,
or decline to exercise and enforce any of its rights or remedies, at
Bank's sole discretion. The failure of Bank to exercise and enforce any
rights or remedies shall not prevent Bank from thereafter exercising or
enforcing any such rights or remedies, nor shall such failure release
any Person or property with respect to which Bank has any rights or
remedies, or in any way limit or diminish Bank's rights with respect to
any such property or Person.
g. Cumulative Rights. All of Bank's rights and remedies
-----------------
shall be cumulative to the greatest extent permitted by law, may be
exercised successively or concurrently, from time to time, and shall be
in addition to all of those rights and remedies afforded Bank at law, or
in equity, or in bankruptcy. Any
15
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exercise of any right or remedy shall not be deemed to be an election of
that right or remedy to the exclusion of any other right or remedy.
h. Recovery. Bank shall be entitled to recover from the
--------
cumulative exercise of all remedies the sum of:
(i) the outstanding principal amount of the Loan;
(ii) all accrued but unpaid interest with respect to the
principal amount of the Loan;
(iii) any other amounts that Borrower or Guarantors are
required by this Agreement or the Loan Documents to pay to Bank (for
example, and without limitation, the reimbursement of reasonable
expenses and legal fees, and late charges); and
(iv) any costs, expenses or damages which Bank is otherwise
permitted to recover by the terms of this Agreement, the other Loan
Documents, or at law or equity.
i. Direct Payment. Until the occurrence of an Event of
--------------
Default, Borrower shall have the right to collect all of the Collateral
consisting of accounts and uneaower, and Bank shall have the right to
notify all of insurance companies to send all payments on such debts,
accounts and unearned premiums directly to Bank.
j. Application of Payments. All payments from Borrower to
-----------------------
Bank under the Note or any of the other Loan Documents, and payments to
Bank from the sale or other disposition of Collateral, shall all be
applied by the Bank as follows:
(i) to the payment of the costs and expenses of the Bank
and the reasonable fees and expenses of its counsel in connection with
the administration or enforcement of the Bank's rights and remedies
against Borrower, any Guarantor, and the Collateral and sale or
collection thereof;
(ii) to the payment in full of all indebtedness referred to
hereunder and under the Loan Documents, applying such amounts first to
accrued interest and then to principal; and
(iii) the balance, if any, to Borrower or to any third party
entitled thereto.
k. Appointment of Bank as Attorney-In-Fact. Borrower hereby
---------------------------------------
appoints Bank as Borrower's attorney-in-fact upon the occurrence of any
Event of Default for the purpose of dealing with the Collateral,
including the collection and disposition of same. The powers vested in
said attorney are, and shall be deemed to be, coupled with an interest
and cannot be revoked.
ARTICLE VIII
------------
MISCELLANEOUS
-------------
Section 8.01 Amendments, Etc.
No amendment, modification, termination, or waiver of any
provision of any Loan Document, nor consent to any departure by Borrower
or Guarantors from any Loan Document to which any of them is a party,
shall in any event be effective unless the same shall be in writing and
signed by Bank, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
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Section 8.02 Notices, Etc.
All notices required or provided for in this Agreement or under
any of the other Loan Documents shall be made in writing and delivered
either (i) personally, (ii) via certified mail with return receipt
requested, (iii) by Federal Express or other nationally recognized,
overnight courier service, or (iv) by facsimile, with the original by
United States, first class, postage prepaid mail, to the party to whom
directed at the addresses and facsimile numbers set forth below, or to
such other addresses and numbers as may be designated by any party by
the giving of notice of a change in its address or facsimile number as
provided for herein. All notices given as provided for herein, other
than by way of certified mail, shall be deemed effective upon personal
delivery, the next business day after delivery to the overnight courier
service or upon being faxed, as applicable. Notice given by way of
certified mail shall be deemed effective upon receipt or refusal of
receipt thereof. The addresses and facsimile numbers for notice to the
parties hereto are as follows:
If to Borrower: Commonwealth Premium Finance
Corporation
3201 Nicholasville Road
Lexington, KY 40512-4032
If to John Robert Owens: 1905 Lakes Edge Drive
Lexington, KY 40502
If to William W. Davis, Jr.: 407 Adair Road
Lexington, KY 40502
If to D. Richard Meyer: 3362 Tisdale Drive
Lexington, KY 40512
with a copy to Borrower's
and Guarantors' counsel: Robert M. Beck, Jr., Esq.
Stites & Harbison
2300 Lexington Financial Center
Lexington, Kentucky 40507
If to Bank: William H. Poche
Bank One, Kentucky, NA
201 East Main Street
Lexington, Kentucky 40507-2002
Facsimile: (606) 231-2732
with a copy to Bank's
counsel at: Harvie B. Wilkinson
STOLL, KEENON & PARK, LLP
201 East Main Street, Suite 1000
Lexington, Kentucky 40507-1380
Facsimile: (606) 253-1093
Section 8.03 No Waiver; Remedies
No failure on the part of Bank to exercise, and no delay in
exercising, any right, power, or remedy under any Loan Documents shall
operate as a waiver thereof; nor shall any single or partial
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exercise of any right under any Loan Documents preclude any other or
further exercise thereof or the exercise of any other right. The
remedies provided in the Loan Documents are cumulative and not exclusive
of any remedies provided by law or in equity.
Section 8.04 Successor and Assigns
This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, except
that neither Borrower nor either Guarantor may assign or transfer any of
their rights under any Loan Document to which they are a party without
the prior written consent of Bank.
Section 8.05 Costs, Expenses and Taxes
Borrower agrees to pay on demand all reasonable costs and expenses
in connection with the preparation, execution, delivery, filing,
recording and administration of any and all of the Loan Documents,
including, without limitation, the reasonable fees and out-of-pocket
expenses of counsel for Bank and local counsel who may be retained by
said counsel, with respect thereto and with respect to advising Bank as
to its rights and responsibilities under any of the Loan Documents, and
all costs and expenses, if any, in connection with the enforcement of
any of the Loan Documents. In addition, Borrower shall pay any and all
fees payable or determined to be payable in connection with the
execution, delivery, filing, and recording of any of the Loan Documents
and the other documents to be delivered under any such Loan Documents.
Borrower shall further pay all of the foregoing reasonable costs,
including reasonable attorney fees, associated with modification of the
Loan Documents, and preparation and recording of additional Loan
Documents.
Section 8.06 Right of Set Off
Upon the occurrence and during the continuance of any Event of
Default, Bank is hereby authorized at any time and from time to time,
without notice to Borrower (any such notice being expressly waived), to
set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other indebtedness at
any time owing by Bank to or for the credit or the account of Borrower
against any and all of the obligations of Borrower, now or hereafter
existing under this Agreement or the Note or any other Loan Document,
irrespective of whether or not Bank shall have made any demand under
this Agreement or the Note or such other Loan Document and although such
obligations may be unmatured. Bank agrees promptly to notify Borrower
after any such set off and application, provided that the failure to
give such notice shall not affect the validity of such set off and
application. The rights of Bank under this Section 8.06 are in addition
to other rights and remedies (including, without limitation, other
rights of set off) which Bank may have.
Section 8.07 Waiver of Jury Trial
BANK, BORROWER AND GUARANTORS HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE
OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR
ACTIONS OF BANK, BORROWER OR GUARANTORS. BORROWER AND GUARANTORS
ACKNOWLEDGE AND AGREE THAT THEY HAVE RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR BANK ENTERING INTO THIS AGREEMENT AND EACH SUCH OTHER
LOAN DOCUMENT.
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Section 8.08 Governing Law; Entire Agreement; Interpretation and Counterparts
The substantive laws of the Commonwealth of Kentucky (without
regard to provisions governing conflicts of laws) shall govern the
construction of this Agreement, the Note and each other Loan Document
and the rights and remedies of the parties thereto, except to the extent
that the laws of any applicable state shall govern the creation or
perfection of the lien or security interest in Collateral located in
such applicable state, the enforcement of Bank's rights to such property
and/or the realization of Bank's rights in such property as security for
the Loan Obligations. Except as otherwise provided herein, this
Agreement, the Note and the other Loan Documents constitute the entire
understanding among the parties hereto with respect to the subject
matter hereof and supersede any prior agreements, written or oral, with
respect thereto. This Agreement may be executed in one or more
counterparts, each of which shall be a duplicate original, but all of
which shall constitute the same agreement. In the event of any conflict
between any other Loan Document and the terms of this Agreement, the
terms of this Agreement shall be deemed to govern any such conflict. To
the extent any other Loan Document is not directly in conflict with the
provisions hereof or can be reasonably construed in such a way as to be
consistent with the terms of this Agreement, the terms of such other
instrument or document shall govern.
Section 8.09 Severability of Provisions
Any provision of any Loan Document which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provisions of such Loan Document or
affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 8.10 Headings
Article and Section headings in the Loan Documents are included in
such Loan Documents for the convenience of reference only and shall not
constitute a part of the applicable Loan Documents for any other
purpose.
Section 8.11 Jurisdiction and Venue
The parties agree that the sole proper venue for the determination
of any litigation commenced by either Borrower or Guarantors against
Bank on any basis shall be in a court of competent jurisdiction which is
located in Fayette County, Kentucky, and the parties hereby expressly
declare that any other venue shall be improper and Borrower and
Guarantors expressly waive any right to a determination of any such
litigation against Bank by a court in any other venue. Borrower and
each Guarantor further agrees that service of process by any judicial
officer or by registered or certified U.S. mail, as specified in
Section 8.02 on Notices, shall establish personal jurisdiction over
Borrower and Guarantors, and Borrower and Guarantors waive any rights
under the laws of any state to object to jurisdiction within the
Commonwealth of Kentucky. Borrower and each Guarantor acknowledges that
this Agreement was negotiated, executed and delivered in the
Commonwealth of Kentucky and shall be governed and construed in
accordance with the laws thereof. Provided, however, nothing contained
in this Section 8.11 shall prevent Bank from bringing any action or
exercising any rights against any security or against Borrower or either
Guarantor personally, and any of their property, within any other state.
Initiating such proceedings or taking such action in any other state
shall in no event constitute a waiver of the agreement contained herein
that the laws of the Commonwealth of Kentucky shall govern the rights
and obligations of the parties hereunder or of the submission herein
made by each Borrower and Guarantors to personal jurisdiction within the
Commonwealth of Kentucky. The aforesaid means of obtaining personal
jurisdiction and perfecting service of process are not intended to be
exclusive, but are cumulative and in
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addition to all other means of obtaining personal jurisdiction and
perfecting service of the laws of the Commonwealth of Kentucky or by any
other state in an action brought by Bank in such state.
Section 8.12 No Third Party Beneficiaries
All conditions on the obligations of any party hereunder,
including the obligation of Bank to make Advances, are imposed solely
and exclusively for the benefit of the other parties thereto and Bank's
successors and assigns and any permitted assigns of Borrower. No other
Person, including any shareholder, officer or director of Borrower,
shall have standing to require satisfaction of such conditions in
accordance with their terms or be entitled to assume that Bank will
refuse or decline to make Advances in the absence of strict compliance
with any or all thereof, and no other Person shall, under any
circumstances, be deemed to be a beneficiary of such conditions, any and
all of which may be freely waived in whole or in part by the respective
party to whom the performance of any such condition shall run at any
time if in the sole discretion of such party it deems it desirable to do
so, or if it fails to do so for any other reason.
Section 8.13 No Agency
Bank is not the agent or representative of Borrower or Guarantors,
and neither Borrower nor either Guarantor is the agent or representative
of Bank, and nothing in this Agreement shall be construed to make Bank
liable to anyone for goods delivered to or services performed with
respect to the Collateral or for debts or claims accruing against
Borrower or Guarantors. Nothing herein, nor the acts of the parties
hereto, shall be construed to create a partnership or joint venture
between Bank and Borrower or either Guarantor or any other relationship
except as creditor, debtor, and guarantor.
Section 8.14 Bank's Performance of Borrower's Covenants and Duties
Should Borrower fail to perform any of its covenants, duties and
agreements in accordance with the terms hereof and an Event of Default
shall thereby result, Bank may, at its election and at Borrower's
expense, perform or attempt to perform such covenant, duty or agreement
on behalf of Borrower, but in no event shall Bank have any obligation to
do so. Borrower shall, at the request of Bank, promptly pay, upon
demand, any reasonable amount expended by Bank in such performance or
attempted performance to Bank at the Head Office, together with interest
thereon at the default rate under the Note from the date such amount was
requested by Bank to be paid until paid; provided that Bank does not
assume and shall never have, except by a subsequent, express written
undertaking of Bank, any liability for the performance of any duties of
Borrower under or in connection with all or any part of the Collateral.
Bank shall be subrogated to all rights, titles, Liens and security
interests securing the payment of any debt, claim, tax or assessment for
the payment of which Bank may make an advance or that Bank may pay.
Section 8.15 Course of Dealing; Waiver
No course of dealing in respect of, or any omission or delay in
the exercise of, any right, power, remedy or privilege by Bank shall
operate as a waiver thereof, nor shall any right, power, remedy or
privilege of Bank be exclusive of any other right, power, remedy or
privilege referred to herein or in any related document or now or
hereafter available at law, in equity, in bankruptcy, by statute or
otherwise. Each such right, power, remedy or privilege may be exercised
by Bank, either independently or concurrently with others, and as often
and in such order as Bank may deem expedient. No waiver or consent
granted by Bank with respect to this Agreement, the indebtedness or any
Loan Document or related writing shall be binding upon Bank, unless
specifically granted in writing by a duly authorized officer of Bank,
which writing shall be strictly construed.
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Section 8.16 Absence of Oral Representations
Borrower and Guarantors each represent and warrant that no
promises, assurances or commitments have been made to them by Bank or
have been relied on by them regarding any extension, renewal or future
financing, they understand and agree that Bank is entitled to enforce
this Agreement, the Note and all other Loan Documents strictly in
accordance with their terms, and any commitment or obligation to extend
or renew any financing or provide additional financing shall not be
binding on Bank, except to the extent contained in a writing signed by
every Person who is to be bound thereby. Borrower and Guarantors
further acknowledge that (i) Bank does not presently anticipate
renewing, extending or further modifying the financing referenced in
this Agreement, and (ii) Bank anticipates the Note will be fully paid in
accordance with its terms on or before maturity. Borrower and
Guarantors each agree and represent to Bank (which representation
Borrower and Guarantors acknowledge Bank is relying on in executing this
Agreement) that they will not rely on any (i) commitment or financing,
including, but not limited to, renewals, extensions and modifications,
unless signed in writing by Bank, and (ii) waiver of any right existing
at any time, and from time to time, either now or in the future, except
to the extent evidenced by a writing signed by the person effecting such
waiver.
Section 8.17 Indemnity
Borrower shall indemnify Bank from and hold Bank harmless against
any loss suffered or liability incurred by Bank on account of any damage
to the person or property of the parties hereto or to third parties by
reason of the operation of Borrower's business, or otherwise arising out
of or connected to the conduct of Borrower, its officers, directors,
employees or agents, in connection with any matters which are the
subject of this Agreement.
Section 8.18 References
Any and all references in this Agreement to any Document or
Documents shall be references to such document or documents as the same
may be from time to time modified, amended, renewed, consolidated or
extended, with the consent of Bank.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed as of the date first above written.
COMMONWEALTH PREMIUM FINANCE
CORPORATION, a Kentucky corporation
BY: /s/ D.R. Meyer
------------------------------------------
TITLE: President
---------------------------------------
/s/ John Robert Owens
---------------------------------------------
JOHN ROBERT OWENS
/s/ William W. Davis, Jr.
---------------------------------------------
WILLIAM W. DAVIS, JR.
/s/ D.R. Meyer
---------------------------------------------
D. RICHARD MEYER
BANK ONE, KENTUCKY, NA,
a national banking association
BY: /s/ William H. Poche
------------------------------------------
TITLE: Vice President
---------------------------------------
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EXHIBIT 10.18
SECURITY AGREEMENT
------------------
THIS SECURITY AGREEMENT is made and entered into effective the
18th day of October, 1996, by COMMONWEALTH PREMIUM FINANCE CORPORATION,
a Kentucky corporation, whose address is 3201 Nicholasville Road,
Lexington, Kentucky 40512-4032 (hereinafter referred to as "Debtor");
and BANK ONE, KENTUCKY, NA, a National Banking Association, 201 East
Main Street, Lexington, Fayette County, Kentucky 40507 (hereinafter
referred to as "Secured Party").
IT IS AGREED BY THE PARTIES AS FOLLOWS:
1. For value received, Debtor does hereby grant unto Secured Party a
security interest in and to all the collateral described in numerical
Paragraph two (2) hereof to secure all the indebtedness referred to in
numerical Paragraph three (3) hereof.
2. The collateral covered by this Security Agreement is (a) all of
Debtor's property described in Schedule A hereto and any supplemental
exhibits thereto, and (b) all proceeds and products thereof (all of
which collateral is hereinafter collectively referred to as the
"Collateral").
3. This Security Agreement is made as collateral security for:
a. The payment of an indebtedness for borrowed money evidenced
by a certain Revolving Credit Note (the "Note") dated
October 18, 1996, executed by Debtor, as maker, in the
original principal amount of One Million and No/100 Dollars
($1,000,000.00) with interest thereon from date at the rate
set forth therein, payable according to the terms and
conditions set forth therein to the order of Secured Party.
b. Performance of all obligations of Debtor under a Loan
Agreement (the "Loan Agreement") by and among Debtor, John
Robert Owens, William W. Davis, Jr., and D. Richard Meyer,
and Secured Party relating to the loan evidenced by the
Note, and each agreement of Debtor therein is incorporated
by reference herein; and
c. All other liabilities and obligations of whatever kind or
type of Debtor to Secured Party, including any guarantees of
the Debtor to Secured Party, whether created directly or
acquired by Secured Party by assignment or otherwise,
whether now existing or hereafter created, arising or
acquired, absolute or contingent, joint or several, due or
to become due (the foregoing obligations are herein
collectively referred to as "Indebtedness").
4. Debtor represents and warrants to Secured Party that:
a. All the Collateral is used or will be used for business;
b. Debtor is the absolute owner of the legal and beneficial
title to the Collateral, (exclusive of hereafter acquired,
replacement or hereafter created items), and is in full possession
thereof; and
c. Except as previously disclosed in writing, the Collateral is
free and clear of all liens, encumbrances and adverse claims
whatsoever;
d. Debtor has the right to enter into this Security Agreement.
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<PAGE>
5. Debtor represents, warrants and agrees that:
a. Debtor shall defend the Collateral against the claims and
demands of all persons.
b. Debtor shall not:
i. permit any loan or security interest (other than
Secured Party's security interest granted herein and those
liens previously disclosed in writing) to attach to any of
the Collateral;
ii. permit any of the Collateral to be levied upon under
any legal process; or
iii. dispose of or enter or agree to enter into any sale of
any of the Collateral, whether or not inventory,
without prior written consent of Secured Party.
c. Debtor shall insure or have insured the tangible Collateral
for the benefit of Secured Party (who shall be the loss payee) in such
amounts, for such risks and with such company as Secured Party may
request, and promptly deliver all policies with respect thereto to
Secured Party, or in the event Debtor at any time has not maintained and
delivered to Secured Party such requested policies of insurance, Secured
Party shall, in its sole and absolute discretion, whether or not any
Event of Default, as defined in this Security Agreement, has occurred,
have the right to place and effect such insurance as Secured Party deems
appropriate at the Debtor's expense and in the event Secured Party
elects to pay for such insurance coverage, Debtor shall reimburse
Secured Party for the amount(s) so paid plus interest thereon at the
rate charged on the unpaid balance of the promissory note mentioned in
Paragraph 3(a) of this Security Agreement.
d. Debtor shall keep the Collateral consisting of tangible
property, if any, in good condition.
e. Debtor shall advise Secured Party in writing, at least
thirty (30) days prior thereto, of any change in Debtor's place of
business or mailing address.
f. Debtor shall not conduct business under any other name than
that given above nor change or reorganize the type of business entity
under which it does business except upon prior written approval of
Secured Party. If such approval is given, Debtor agrees that all
documents, instruments and agreements demanded by Secured Party shall be
prepared and filed at Debtor's expense before such change of name or
business entity occurs.
g. Debtor shall execute and deliver to Secured Party upon
request new UCC-1 Financing Statements describing the same Collateral
specified herein for recordation where necessary in Secured Party's sole
discretion to perfect Security Party's security interest in the
Collateral, and Debtor shall pay all filing and recording fees and
filing and recording taxes in connection with the filing and/or
recordation of such Statements, and, if paid by the Secured Party,
Debtors will reimburse Secured Party therefor upon demand of Secured
Party.
h. Debtor hereby irrevocably appoints Secured Party as Debtor's
attorney-in-fact to do all acts and things which Secured Party may deem
necessary or appropriate to perfect and continue perfected the security
interest created by this Security Agreement and to protect and, in case
of an Event of Default hereunder, sell the Collateral, including, but
not limited to, the execution in Debtor's name as Debtor's irrevocable
attorney-in-fact:
i. notifications and agreements to sell where sale is
permitted,
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ii. any documents or papers necessary or helpful to comply
with the terms of any agreements relative to any of
the Collateral, and
iii. UCC-1 (and other) Financing Statements covering the
Collateral and filing and recordation of same wherever
Secured Party deems appropriate, with Debtor to
reimburse Secured Party for all filing and recording
fees, taxes and other expenses in connection therewith
upon demand of Secured Party.
Provided, however, the power of attorney granted hereby shall
survive the disability of the principal but when all the Indebtedness is
fully paid and performed and Debtor has no obligation to or commitment
for loan(s) from Secured Party, this power of attorney shall become null
and void upon Secured Party's receipt of written notification from
Debtor to such effect.
i. The Indebtedness shall be paid to Secured Party in
accordance with the terms thereof.
j. Debtor shall comply in all respects with any other agreement
between Debtor and Secured Party.
k. Debtor shall permit Secured Party and/or its agents to
inspect and appraise the Collateral and inspect the books and records of
Debtor at all reasonable times and from time to time, and shall pay all
expenses Secured Party may incur in connection with any such
inspection(s) and appraisal(s).
6. Upon the occurrence of any "Event of Default," which, for the
purposes of this Security Agreement means any default in, or breach of,
any covenant, agreement, representation or warranty by Debtor under the
provisions of any document evidencing any of the Indebtedness or other
obligations of Debtor to Secured Party or of any other agreement
regarding any of the Indebtedness, this Security Agreement, the Loan
Agreement and any mortgage(s) or other security agreement(s) securing or
otherwise relating to any of the Indebtedness, Secured Party shall have
all rights and remedies in and against the Collateral and otherwise of a
secured party under the Uniform Commercial Code and the other applicable
law of Kentucky (and all such other states where any part of the
Collateral may be located, if applicable) and all other applicable laws
and all rights provided herein, in all other documents evidencing,
securing or related to any of the Indebtedness, or in any other
applicable security or loan agreement, all of which rights and remedies
shall, to the full extent permitted by law, be cumulative. In addition,
Secured Party may require Debtor, at Debtor's sole expense, to assemble
the Collateral and make it available to Secured Party at the place or
places to be designated by Secured Party and Debtor. Secured Party
shall have the right to sell the Collateral at public or private sale.
Debtor agrees to pay to Secured Party, as part of the Indebtedness, all
amounts paid by Secured Party, including, but not limited to:
a. Secured Party's attorney's fees, to the extent not
prohibited by applicable law, in connection with the
enforcement of any of Debtor's obligations hereunder or
contained in the documents evidencing the Indebtedness, with
interest thereon at the highest rate provided for in any of
the Indebtedness,
b. for taxes, levies and prior liens and insurance on, repairs
to, maintenance of, or transporting or otherwise caring for,
the Collateral, and
c. in taking possession of or preserving the Collateral.
7. The requirement of reasonable notice of the time and place of
disposition of Collateral by Secured Party shall be conclusively deemed
to have been met if such notice is mailed, postage prepaid, to Debtor's
address specified above at least ten (10) days before the time of the
sale or disposition. Secured
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Party may bid upon and purchase any or all of the Collateral at any
public sale thereof. Secured Party may dispose of all or any part of
the Collateral at one or more times and from time to time and in one or
more lots or parcels, and upon such terms and conditions, including a
credit sale, as Secured Party determines in its sole discretion.
Secured Party shall apply the net proceeds of any such disposition of
the Collateral (after deducting therefrom all costs incurred in
connection therewith, or incidental to the holding, preparing for sale,
in whole or in part, of the Collateral, including Secured Party's
attorney's fees and court costs) to the Indebtedness and any other
obligations of Debtor to Secured Party in the order elected by Secured
Party in its sole discretion, and any remaining proceeds shall be paid
to the Debtor or such other party as is entitled thereto.
8. This is a continuing Security Agreement and all the rights, powers
and remedies hereunder shall apply to all past, present and future
indebtedness of Debtor to Secured Party, including any indebtedness
arising under subsequent transactions which shall either continue the
Indebtedness, increase or decrease it, or from time to time create new
indebtedness or additional indebtedness whether or not all or any prior
indebtedness has been satisfied, and notwithstanding the death,
incapacity or bankruptcy of Debtor, or any other event or proceeding
affecting Debtor.
9. The rights, powers and remedies given to Secured Party by this
Security Agreement shall be in addition to all rights, powers and
remedies given to the Secured Party by virtue of any other agreement now
existing or subsequently entered into by and between the parties hereto
and any statute or rule of law. Secured Party may exercise its right of
set off with respect to the Indebtedness in the same manner as if the
Indebtedness were unsecured. Any waiver, forbearance, failure or delay
by Secured Party in exercising any right, power or remedy hereunder
shall not be deemed to be a waiver of such right, power or remedy, and
any single or partial exercise of any right, power or remedy hereunder
shall not preclude the further exercise thereof; and every right, power
and remedy of Secured Party shall continue in full force and effect
until such right, power or remedy is specifically waived by an
instrument in writing executed by Secured Party.
10. DEBTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY
RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS SECURITY
AGREEMENT OR ANY OTHER DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF SECURED
PARTY, DEBTOR AND ANY GUARANTORS. DEBTOR ACKNOWLEDGES AND AGREES THAT
IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND
THAT THIS PROVISION IS A MATERIAL INDUCEMENT TO SECURED PARTY.
11. The Debtor agrees that the sole proper venue for the determination
of any litigation commenced by either Debtor or Secured Party on any
basis shall be in a court of competent jurisdiction which is located in
Fayette County, Kentucky, and the parties hereby expressly declare that
any other venue shall be improper and Debtor expressly waives any right
to a determination of any such litigation against Debtor by a court in
any other venue. Debtor further agrees that service of process by any
judicial officer or by registered or certified U.S. mail shall establish
personal jurisdiction over Debtor, and Debtor waives any rights under
the laws of any state to object to jurisdiction within the Commonwealth
of Kentucky. The aforesaid means of obtaining personal jurisdiction and
perfecting service of process are not intended to be exclusive, but are
cumulative and in addition to all other means of obtaining personal
jurisdiction and perfecting service of process now or hereafter provided
by the laws of the Commonwealth of Kentucky or by any other state in an
action brought by Secured Party in such state.
12. The laws of the Commonwealth of Kentucky shall govern the
construction of this Security Agreement and the rights, remedies and
duties of the parties hereto, unless the laws of the state where the
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Collateral or part thereof is situated dictate that the laws of such
other state shall govern with respect thereto.
13. This Security Agreement shall bind Debtor and Debtor's heirs,
successors and assigns and shall inure to the benefit of Secured Party
and its successors and assigns.
14. Time shall be of the essence in the performance of each of the
Debtor's obligations under this Security Agreement.
15. A judicial decree, order or judgment holding any provision herein
invalid or unenforceable shall not in any way impair or preclude
enforcement of the remaining provisions herein, and shall not in any way
impair or preclude enforcement of rights or remedies of Secured Party
under Chapter 355 of the Kentucky Revised Statutes, or other applicable
law.
16. This Security Agreement may, in the sole discretion of Secured
Party, be filed as a financing statement and Debtor agrees to also
execute any additional financing statements with respect hereto which
may be requested by Secured Party. Secured Party may, in its sole
discretion, attach this Security Agreement or any other document
executed pursuant hereto or in connection herewith with any person or
organization which registers, sells or is in any manner involved with
any or all of the Collateral. Secured Party shall be entitled to notify
the person in possession of the Collateral, or any other person Secured
Party deems appropriate of the security interest herein granted and to
notify such person or entity to forward all documents with respect to
the Collateral to Secured Party and otherwise as Secured Party deems
appropriate.
IN TESTIMONY WHEREOF, witness the signature of the parties hereto,
to be effective the day, month and year first above written.
COMMONWEALTH PREMIUM FINANCE
CORPORATION, a Kentucky corporation
By: /s/ D. R. Meyer
--------------------------------
Title: President
-----------------------------
BANK ONE, LEXINGTON, NA
By: /s/ William H. Poche
--------------------------------
Title: Vice President
-----------------------------
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<PAGE>
EXHIBIT A TO FINANCING STATEMENT AND/OR SECURITY AGREEMENT
----------------------------------------------------------
This Property covered by this Financing Statement and/or Security
Agreement includes all of the Debtor's right, title and interest in, to
and under the following described property, whether now owned or
hereafter acquired by the Debtor, and whether now existing or hereafter
created, arising, accruing, incurred or entered into (all of which
hereinafter collectively called the "Collateral"):
1. All right, title, interest, security interests, accounts, contract
rights, and general intangibles of Debtor, its successors and assigns,
whether now existing or hereinafter arising, under or in connection with
any and all insurance premium financing contracts and agreements entered
into between Debtor, its successors and assigns, and any and all other
parties, including but not limited to the rights of Debtor to unearned
insurance premiums under such insurance premium financing contracts and
the rights in favor of Debtor to cancel insurance contracts under such
insurance premium financing contracts.
2. All books, records, ledger cards, data processing records,
computer software and other property at any time evidencing or relating
to any of the foregoing; and
3. All "Proceeds", as such term is defined in the Uniform Commercial
Code of the State of Kentucky, and in any event shall include, but not
be limited to, (a) any and all proceeds of any insurance, indemnity,
warranty or guaranty payable to Secured Party or the Debtor, from time
to time, and claims for insurance, indemnity, warranty or guaranty
effected or held for the benefit of the Debtor, with respect to any of
the Collateral (as hereinafter defined), (b) any and all payments (in
any form whatsoever) made or due and payable to the Debtor, from time to
time in connection with any requisition, confiscation, condemnation,
seizure or forfeiture of all or any part of the Collateral by any
governmental authority (or any person acting under color of governmental
authority) and (c) any and all other amounts from time to time paid or
payable under or in connection with any of the Collateral (all of the
foregoing in this section 3, collectively, the "Proceeds"); and
4. Any and all additions and accessions to any of the foregoing, all
improvements thereto, all substitutions and replacements thereof and all
products and Proceeds thereof.
5. There is excepted from the Security Agreement, Financing Statement
and definition of Collateral, Insurance Premium Finance Contracts and
all rights thereunder, whether constituting accounts, general
intangibles, instruments or chattel paper sold to Premium Financing
Specialists, Inc., its successors and assigns, under a Purchase
Agreement dated May 3, 1996, and proceeds thereof.
The undersigned confirms that this Exhibit is
part of a financing statement and security
agreement signed by it:
COMMONWEALTH PREMIUM FINANCE CORPORATION
BY: /s/ D. R. Meyer
------------------------------------
TITLE: President
---------------------------------
"DEBTOR"
<PAGE>
EXHIBIT 10.19
FIRST AMENDMENT TO LOAN AGREEMENT
---------------------------------
This First Amendment to Loan Agreement (the "Amendment") is
dated and effective as of December 17, 1996, by, between and among
COMMONWEALTH PREMIUM FINANCE CORPORATION, a Kentucky corporation
(referred to herein as "Borrower"); JOHN ROBERT OWENS, WILLIAM W. DAVIS,
JR. and D. RICHARD MEYER, individuals (referred to herein as the
"Guarantors" or individually as a "Guarantor"); and BANK ONE, KENTUCKY,
NA, a national banking association (referred to herein as "Bank").
RECITALS
--------
1. Borrower, Guarantors and Bank are parties to that certain
Loan Agreement dated as of October 18, 1996 (the "Loan
Agreement").
2. Borrower, Guarantors and Bank have agreed to increase the
maximum principal amount of the Revolving Credit Note (as
defined in the Loan Agreement), and further desire to enter
into this Amendment to document such increase and other
terms applicable to such change.
NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants and agreements contained herein and in the Loan Agreement, and
intending to be legally bound hereby, covenant and agree as follows:
1. Amendment of Sections 2.01 and 2.02. Sections 2.01 and 2.02
-----------------------------------
of the Loan Agreement are hereby deleted and replaced with
the following:
Section 2.01 Revolving Credit Loan
Bank agrees, subject to the terms and conditions of this Agreement
and the other Loan Documents to make Advances to Borrower from time to
time during the period from the date when Borrower first qualifies for
the initial Advance pursuant to Section 3.01 hereof, up to, but not
including, the Maturity Date in an aggregate principal amount
outstanding not to exceed at any time One Million Five Hundred Thousand
Dollars ($1,500,000.00) (the "Revolving Credit Loan"). Subject to the
terms and conditions of this Agreement and of the other Loan Documents,
Borrower may borrow, prepay pursuant to Section 2.05, and reborrow under
this Section 2.01.
Section 2.02 Note
The Revolving Credit Loan and Advances thereunder shall be
evidenced by, and repaid with interest in accordance with, a single
promissory note of Borrower in form and content acceptable to Bank, in
the original principal amount of One Million Five Hundred Thousand
Dollars (U.S. $1,500,000.00), which Note shall be payable to Bank, and
shall mature and shall be due and payable in full on the Maturity Date,
which is October 20, 1997 (the "Revolving Credit Note").
2. Continuing Security. The Indebtedness as evidenced by the
-------------------
Note shall continue to be secured by all of the Loan
Documents and collateral described in the Loan Agreement.
<PAGE>
<PAGE>
3. No Defenses or Setoffs. As of the date hereof, neither Borrower
----------------------
nor Guarantors is aware of any defenses, credits or setoffs to the
payment of the Indebtedness evidenced by the Note, or to the
enforceability of the Note, the Loan Agreement, or the Loan
Documents against the Borrower or Guarantors, nor are there any
claims, actions or causes of action which could be asserted
against the Bank relating to the transactions evidenced by the
Note, the Loan Agreement, this Amendment or any of the
transactions relating thereto.
4. Limited Effect of Amendment. Except as specifically amended
---------------------------
herein, the terms and conditions of the Note, the Loan Agreement,
the Loan Documents, and all other existing agreements between the
parties are unaffected by this Amendment and shall continue to be
binding upon Borrower, Guarantors and the Bank. Further, the term
"Note" shall include the Amended and Restated Revolving Credit
Note dated December 17, 1996, in the amount of $1,500,000.00
between the Bank and Borrower.
5. Full Force and Effect of Loan Documents. The Loan Documents as
---------------------------------------
defined in the Loan Agreement, including the Amended and Restated
Revolving Credit Note dated December 17, 1996, in the amount of
$1,500,000.00, between the Bank and Borrower, are valid and
enforceable in accordance with their terms and shall continue to
remain in full force and effect.
BANK ONE, KENTUCKY, NA
BY: /s/ William H. Poche
--------------------------------------
TITLE: Vice President
-----------------------------------
COMMONWEALTH PREMIUM FINANCE
CORPORATION
BY: /s/ D.R. Meyer
--------------------------------------
TITLE: President
-----------------------------------
/s/ John Robert Owens
-----------------------------------------
JOHN ROBERT OWENS
/s/ William W. Davis, Jr.
-----------------------------------------
WILLIAM W. DAVIS, JR.
/s/ D.R. Meyer
-----------------------------------------
D. RICHARD MEYER
2
<PAGE>
EXHIBIT 10.20
SECOND AMENDMENT TO LOAN AGREEMENT
----------------------------------
This Second Amendment to Loan Agreement (the "Amendment") is dated
and effective as of August 4, 1997, by, between and among COMMONWEALTH
PREMIUM FINANCE COPORATION, a Kentucky corporation (referred to herein
as "Borrower"); JOHN ROBERT OWENS, WILLIAM W. DAVIS, JR. and D. RICHARD
MEYER, individuals (referred to herein as the "Guarantors" or
individually as a "Guarantor"); and BANK ONE, KENTUCKY, NA, a national
banking association (referred to herein as "Bank").
RECITALS
--------
1. Borrower, Guarantors and Bank are parties to that certain
Loan Agreement dated as of October 18, 1996, as amended by that certain
First Amendment to Loan Agreement dated as of December 17, 1996 (as
amended, the "Loan Agreement").
2. Borrower, Guarantors and Bank have agreed to further
increase the maximum principal amount of the Amended and Restated
Revolving Credit Note (as defined in the Loan Agreement), and further
desire to enter into this Amendment to document such increase and other
terms applicable to such change.
NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants and agreements contained herein and in the Loan Agreement, and
intending to be legally bound hereby, covenant and agree as follows:
1. Amendment of Sections 2.01 and 2.02. Sections 2.01 and 2.02 of
-----------------------------------
the Loan Agreement are hereby deleted and replaced with the following:
Section 2.01 Revolving Credit Loan
Bank agrees, subject to the terms and conditions of this Agreement
and the other Loan Documents to make Advances to Borrower from time to
time during the period from the date when Borrower first qualifies for
the initial Advance pursuant to Section 3.01 hereof, up to, but not
including, the Maturity Date in an aggregate principal amount
outstanding not to exceed at any time Two Million Dollars
($2,000,000.00) (the "Revolving Credit Loan"). Subject to the terms and
conditions of this Agreement and of the other Loan Documents, Borrower
may borrow, prepay pursuant to Section 2.05, and reborrow under this
Section 2.01.
Section 2.02 Note
The Revolving Credit Loan and Advances thereunder shall be
evidenced by, and repaid with interest in accordance with, a single
promissory note of Borrower in form and content acceptable to Bank, in
the original principal amount of Two Million Dollars
(U.S. $2,000,000.00), which Note shall be payable to Bank, and shall
mature and shall be due and payable in full on the Maturity Date, which
is April 18, 1998 (the "Note").
2. Continuing Security. The Indebtedness as evidenced by the Note
-------------------
shall continue to be secured by all of the Loan Documents and collateral
described in the Loan Agreement.
<PAGE>
<PAGE>
3. No Defenses or Setoffs. As of the date hereof, neither Borrower
----------------------
nor Guarantors are aware of any defenses, credits or setoffs to the
payment of the Indebtedness evidenced by the Note, or to the
enforceability of the Note, the Loan Agreement, or the Loan Documents
against the Borrower or Guarantors, nor are there any claims, actions or
causes of action which could be asserted against the Bank relating to
the transactions evidenced by the Note, the Loan Agreement, this
Amendment or any of the transactions relating thereto.
4. Limited Effect of Amendment. Except as specifically amended
---------------------------
herein, the terms and conditions of the Note, the Loan Agreement, the
Loan Documents, and all other existing agreements between the parties
are unaffected by this Amendment and shall continue to be binding upon
Borrower, Guarantors and the Bank. Further, the term "Note" shall
include the Amended and Restated Revolving Credit Note dated August 4,
1997, in the amount of $2,000,000.00 between the Bank and Borrower.
5. Full Force and Effect of Loan Documents. The Loan Documents as
---------------------------------------
defined in the Loan Agreement, including the Amended and Restated
Revolving Credit Note dated August 4, 1997, in the amount of
$2,000,000.00, between the Bank and Borrower, are valid and enforceable
in accordance with their terms and shall continue to remain in full
force and effect.
BANK ONE, KENTUCKY, NA
BY: /s/ Mark Boison
--------------------------------------
TITLE: Senior Vice President
-----------------------------------
COMMONWEALTH PREMIUM FINANCE
CORPORATION
BY: /s/ D. R. Meyer
--------------------------------------
TITLE: President
-----------------------------------
/s/ John Robert Owens
-----------------------------------------
JOHN ROBERT OWENS
/s/ William W. Davis, Jr.
-----------------------------------------
WILLIAM W. DAVIS, JR.
/s/ D. R. Meyer
-----------------------------------------
D. RICHARD MEYER
- 2 -
<PAGE>
EXHIBIT 10.21
THIRD AMENDMENT TO LOAN AGREEMENT
---------------------------------
This Third Amendment to Loan Agreement (the "Amendment") is dated
and effective as of July 23, 1998, by, between and among COMMONWEALTH
PREMIUM FINANCE CORPORATION, a Kentucky corporation (referred to herein
as "Borrower"); JOHN ROBERT OWENS and D. RICHARD MEYER, individuals,
(referred to herein as the "Guarantors" or individually as a
"Guarantor"); and BANK ONE, KENTUCKY, NA, a national banking association
(referred to herein as "Bank").
RECITALS
--------
1. Borrower, Guarantors and Bank are parties to that certain
Loan Agreement dated as of October 18, 1996, as amended by that certain
First Amendment to Loan Agreement dated as of December 17, 1996 and that
certain Second Amendment to Loan Agreement dated as of August 4, 1997
(as amended, the "Loan Agreement").
2. Borrower, Guarantors and Bank have agreed to a renewal of
the Revolving Credit Note (as defined in the Loan Agreement), and
further desire to enter into this Amendment to document other amendments
in the terms of the Loan Agreement.
NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants and agreements contained herein and in the Loan Agreement, and
intending to be legally bound hereby, covenant and agree as follows:
1. Amendment of Section 2.02. Section 2.02 of the Loan Agreement is
-------------------------
hereby deleted and replaced with the following:
Section 2.02 Note
The Revolving Credit Loan and Advances thereunder shall be
evidenced by, and repaid with interest in accordance with, a single
renewed promissory note of Borrower, in the original principal amount of
Two Million Dollars (U.S. $2,000,000.00), which Note shall be payable to
Bank, and shall mature and shall be due and payable in full on the
Maturity Date, which is June 18, 1999 (the "Note").
2. Amendment of Section 5.08 Reporting Requirements. Section 5.08 of
------------------------------------------------
the Loan Agreement is hereby deleted and replaced with the following:
Section 5.08 Reporting Requirements
Borrower shall furnish to Bank:
a. Quarterly Reporting.
-------------------
(i) Within sixty (60) days after the end of each fiscal
quarter, Borrower shall provide Bank with a Covenant Compliance
Certificate in such form as provided in Exhibit "A" attached hereto,
balance sheets as of the end of each quarter, statements of income
and retained earnings as of the end of such fiscal quarter, and properly
completed calculations necessary to test compliance with all of
<PAGE>
<PAGE>
the financial covenants set forth herein, in form and content reasonably
acceptable to Bank, and all in reasonable detail, and all such financial
statements shall be prepared in accordance with GAAP consistently
applied and certified as correct by Borrower's chief financial officer.
Provided, however, Borrower shall not be obligated to deliver the
Borrower's internally prepared balance sheet and income statement for
the last month of Borrower's fiscal year.
(ii) Within sixty (60) days after the end of each fiscal
quarter, Borrower shall provide to Bank the following company prepared
quarterly reports, Balance Sheet and Income Statement, Summary of Cash
Receivables from Contracts, Company Activity Summary, and Summary of
Accounts Past Due.
b. Annual Financial Statements. Within one hundred twenty
---------------------------
(120) days after the end of Borrower's 1997 fiscal year, and for all
fiscal years thereafter so long as any Indebtedness remains unpaid, a
complete, unqualified, annual audit report of Borrower. The audited
report shall consist of balance sheet, statement of profit and loss,
application of funds, change in financial position and the like,
prepared and certified by a firm of independent public accountants of
recognized standing acceptable to the Bank. All of the foregoing shall
be in reasonable detail and stating in comparative form the respective
figures for the corresponding date and period in the prior fiscal year
and all such financial statements shall be prepared in accordance with
GAAP consistently applied and certified as correct by Borrower's chief
financial officer.
c. Notice of Litigation. Promptly after the commencement
--------------------
thereof, notice of all actions, suits, and proceedings before any court
or governmental department, commission, board, bureau, agency, or
instrumentality, domestic or foreign, affecting Borrower or either
Guarantor which, if determined adversely, could have a material, adverse
effect on Borrower's or a Guarantor's financial condition, properties,
or operations.
d. Notice of Defaults and Events of Default. As soon as
----------------------------------------
possible and in any event within ten (10) days after the occurrence of
each Default or Event of Default, a written notice setting forth the
details of such Default or Event of Default and the action which is
proposed to be taken with respect thereto.
e. Borrowing Base Certificate. Within fifteen (15) days after
--------------------------
the end of each month, Borrower shall provide Bank with a Borrowing Base
Certificate in such form as provided in Exhibit "B" attached hereto.
f. Guarantors' Financial Statements and Tax Returns. Within
------------------------------------------------
thirty (30) days after filing, copies of each Guarantor's federal and
state income tax returns, amendments and schedules. Within ninety (90)
days after the anniversary date of receipt of the last financial
statement, Guarantors shall provide a financial statement of assets,
liabilities and net worth for each Guarantor, in form and content
reasonably acceptable to Bank, and all in reasonable detail.
g. Annual Reporting on Equity Insurance Managers, Inc. ("EIM").
-----------------------------------------------------------
As soon as available and in any event within one hundred twenty (120)
days after EIM's 1997 fiscal year, a complete, unqualified, annual audit
report of EIM in such detail as required under Section 5.08(b).
h. Quarterly Reporting on EIM. No later than sixty (60) days
--------------------------
after the end of the calendar quarter, balance sheets and statements of
income and retained earnings in such detail as required under
Section 5.08(a)(i).
2
<PAGE>
<PAGE>
i. General Information. Such other information respecting the
-------------------
condition or operations, financial or otherwise, of Borrower or any
Guarantor, as Bank may from time to time reasonably request.
3. Amendment of Article VIII of the Loan Agreement. Article VIII of
-----------------------------------------------
the Loan Agreement is amended as follows:
8.19 Arbitration
Borrower, Guarantors and Bank agree that upon the written demand
of either party, whether made before or after the institution of any
legal proceedings, but prior to the rendering of any judgment in that
proceeding, all disputes, claims and controversies between them, whether
individual, joint, or class in nature, arising from the Note, any Loan
Documents or otherwise, including without limitation contract disputes
and tort claims, shall be resolved by binding arbitration pursuant to
the Commercial Rules of the American Arbitration Association ("AAA").
Any arbitration proceeding held pursuant to this arbitration provision
shall be conducted at the city nearest the Borrower's address having an
AAA regional office, or at any other place selected by mutual agreement
of the parties. No act to take or dispose of any Collateral shall
constitute a waiver of this arbitration agreement or be prohibited by
this arbitration agreement. This arbitration provision shall not limit
the right of either party during any dispute, claim or controversy to
seek, use and employ ancillary, or preliminary rights and/or remedies,
judicial or otherwise, for the purposes of realizing upon, preserving,
protecting, foreclosing upon or proceeding under forcible entry and
detainer for possession of, any real or personal property, and any such
action shall not be deemed an election of remedies. Such remedies
include, without limitation, obtaining injunctive relief or a temporary
restraining order, invoking power of sale under any deed of trust or
mortgage, obtaining a writ of attachment or imposition of a
receivership, or exercising any rights relating to personal property,
including exercising the right of set-off, or taking or disposing of
such property with or without judicial process pursuant to Uniform
Commercial Code. Any disputes, claims or controversies concerning the
lawfulness or reasonableness of an act, or exercise of any right or
remedy concerning any Collateral, including any claim to rescind, reform
or otherwise modify any agreement relating to the Collateral, shall also
be arbitrated; provided, however, that no arbitrator shall have the
right or the power to enjoin or restrain any act of either party.
Judgment upon any award rendered by any arbitrator may be entered in any
court having jurisdiction. The statute of limitations, estoppel,
waiver, laches and similar doctrines which would otherwise be applicable
in an action brought by a party shall be applicable in any arbitration
proceeding, and the commencement of an arbitration proceeding shall be
deemed the commencement of any action for these purposes. The Federal
Arbitration Act (Title 9 of the United States Code) shall apply to the
construction, interpretation, and enforcement of this arbitration
provision.
8.20 Year 2000 Provisions
(a) Representation and Warranties. Borrower represents and
-----------------------------
warrants as follows to Bank that: (i) as of the date of any request for
an advance under the Loan Documents (ii) as of the date of any renewal,
extension or modification of the Loan Documents, and (iii) at all times
the Loan Documents or Bank's commitment to make advances under the Loan
Documents is outstanding:
i. Borrower will use good faith efforts to ensure that by
December 31, 1998, all devices, systems, machinery, information
technology, computer software and hardware, and other date sensitive
technology (jointly and severally the "Systems") necessary for Borrower
to carry on its business as presently conducted and as contemplated to
be conducted in the future are Year 2000 Compliant or will be Year 2000
Compliant with a period of time calculated to result in no material
disruption of any of Borrower's business operations. For purposes of
these provisions, "Year 2000
3
<PAGE>
<PAGE>
Compliant" means that such Systems are designed to be used prior to,
during and after the Gregorian calendar year 2000 A.D. and will operate
during such time period without error relating to date data,
specifically including any error relating to, or the product of, date
data which represents or referenced different centuries or more than on
century.
ii. Borrower will: (1) undertake a detailed inventory,
review and assessment of all areas within its business and operations
that could be adversely affected by the failure of Borrower to be Year
2000 Compliant on a timely basis; (2) develop a detailed plan and time
line for becoming Year 2000 Compliant on a timely basis; and
(3) implement that plan in accordance with that timetable in all
material respects.
iii. By December 31, 1998, Borrower will make written
inquiry of each of its key suppliers, vendors, and customers, and will
obtain in writing confirmations from all such persons, as to whether
such persons have initiated programs to become Year 2000 Compliant and
on the basis of such confirmations, Borrower will make a good faith
effort to ensure that all such persons will be or become so compliant.
For purposes hereof, "key suppliers, vendors and customers" refers to
those suppliers, vendors, and customers of Borrower whose business
failure would, with reasonable probability, result in a material adverse
change in the business, properties, condition (financial or otherwise),
or prospects of Borrower. For purposes of this paragraph, Bank, as
lender of funds under the terms of the Loan Documents, confirms to
Borrower that Bank has initiated its own corporate-wide Year 2000
program with respect to its lending activities.
iv. Borrower will make a good faith effort to ensure that
the fair market value of all real and personal property, if any, pledged
to Bank as Collateral to secure the Loan Documents is not and shall not
be less than currently anticipated or subject to substantial
deterioration in value because of the failure of such Collateral to be
Year 2000 Compliant.
(b) Affirmative Covenants. Borrower covenants and agrees with
---------------------
Bank that, while any Loan Documents is in effect, Borrower will:
i. Furnish such additional information, statements and
other reports with respect to Borrower's activities, course of action
and progress towards becoming Year 2000 Compliant as Bank may request
from time to time.
ii. In the event of any change in circumstances that
causes or will likely cause any of Borrower's representations and
warranties with respect to its being or becoming Year 2000 Compliant to
no longer be true (hereinafter referred to as a "Change in
Circumstances") then Borrower shall promptly, and in any event within
ten (10) days of receipt of information regarding a Change in
Circumstances, provide Bank with written notice (the "Notice") that
describes in reasonable detail the Change in Circumstances and how such
Change in Circumstances caused or will likely cause Borrower's
representations and warranties with respect to being or becoming Year
2000 Compliant to no longer be true. Borrower shall, within ten (10)
days of a request, also provide Bank with any additional information
Bank requests of Borrower in connection with the Notice and/or Change of
Circumstances.
iii. Give any representative of Bank access during all
business hours to, and permit such representative to examine, copy or
make excerpts from, any and all books, records and documents in the
possession of Borrower and relating to its affairs, and to inspect any
of the properties and Systems of Borrower, and to project test the
Systems to determine if they are Year 2000 Compliant in an integrated
environment, all at the sole cost and expense of Bank.
4
<PAGE>
<PAGE>
4. Continuing Security. The Indebtedness as evidenced by the Note
-------------------
shall continue to be secured by all of the Loan Documents and collateral
described in the Loan Agreement.
5. No Defenses or Setoffs. As of the date hereof, neither Borrower
----------------------
nor Guarantors are aware of any defenses, credits or setoffs to the
payment of the Indebtedness evidenced by the Note, or to the
enforceability of the Note, the Loan Agreement, or the Loan Documents
against the Borrower or Guarantors, nor are there any claims, actions or
causes of action which could be asserted against the Bank relating to
the transactions evidenced by the Note, the Loan Agreement, this
Amendment or any of the transactions relating thereto.
6. Limited Effect of Amendment. Except as specifically amended
---------------------------
herein, the terms and conditions of the Note, the Loan Agreement, the
Guaranties, the Loan Documents, and all other existing agreements
between the parties are unaffected by this Amendment and shall continue
to be binding upon Borrower, Guarantors and the Bank. Further, the term
"Note" shall include the Renewed Revolving Credit Note dated effective
as of June 18, 1998, with a maturity date of June 18, 1999, in the
amount of $2,000,000.00 between the Bank and Borrower.
7. Full Force and Effect of Loan Documents. The Loan Documents as
---------------------------------------
defined in the Loan Agreement, including the Renewed Revolving Credit
Note dated effective as of June 18, 1998, in the amount of
$2,000,000.00, between the Bank and Borrower, are valid and enforceable
in accordance with their terms and shall continue to remain in full
force and effect.
BANK ONE, KENTUCKY, NA
BY: /s/ Rhonda Lenney
----------------------------------------
TITLE: Officer
-------------------------------------
COMMONWEALTH PREMIUM FINANCE
CORPORATION
BY: /s/ Slayton S. Stewart
----------------------------------------
TITLE: V.P. Operations
-------------------------------------
/s/ John Robert Owens
-------------------------------------------
JOHN ROBERT OWENS
/s/ D.R. Meyer
-------------------------------------------
D. RICHARD MEYER
5
<PAGE>
EXHIBIT 10.22
RENEWED REVOLVING CREDIT NOTE
-----------------------------
("Note")
COMMONWEALTH PREMIUM FINANCE CORPORATION
a Kentucky corporation
3201 Nicholasville Road
Lexington, Kentucky 40512-4032
"BORROWER"
$2,000,000.00
DATED EFFECTIVE AS OF June 18, 1998
Executed at Lexington, Kentucky
1. FOR VALUE RECEIVED, COMMONWEALTH PREMIUM FINANCE CORPORATION
("Borrower"), promises to pay to the order of BANK ONE, KENTUCKY, NA, a
national banking association (the "Bank"), the principal sum of Two
Million Dollars ($2,000,000.00) or so much thereof as may be advanced by
Bank and outstanding from time to time under this Note pursuant to the
Loan Agreement between Borrower and Bank dated as of October 18, 1996
(the "Loan Agreement"), as amended by the First Amendment to Loan
Agreement dated December 17, 1996, the Second Amendment to Loan
Agreement dated as of August 4, 1997, and the Third Amendment to Loan
Agreement dated July 23, 1998 (the "Amendments") and to pay interest
from the date hereof on such principal amount from time to time
outstanding at the per annum rate equal to the Prime rate of interest as
declared by Bank from time to time and adjusted daily, all of such
payments to be made in lawful money of the United States of America in
immediately available funds, without defalcation. "Prime" rate of
interest as used herein means a variable rate of interest announced from
time to time by Bank as its prime rate whether or not such rate if
otherwise published, which rate may not be Bank's lowest or best rate;
provided, that in the event this Note is assigned to another holder
which is a commercial bank, Prime rate shall mean the reference rate of
interest established by such subsequent holder from and after the date
of such assignment, as its prime rate from time to time. The Prime rate
shall be adjusted each time and at the time the Bank's Prime rate
changes.
2. This Note represents a renewal of, and not a novation of, that
certain Amended and Restated Revolving Credit Note dated August 4, 1997,
which was modified by agreement dated April 22, 1998. All terms not
otherwise defined herein shall have the same meaning given to them in
the Loan Agreement and Amendments. Advances under this Note shall only
be made in accordance with the terms and conditions set forth in the
Loan Agreement and Amendments and provided that no Event of Default as
defined herein, in the Loan Agreement or Amendments has occurred or then
exists. This Note, the Loan Agreement, the Amendments and any and all
other documents referred to in the Loan Agreement or Amendments or
instruments securing repayment of this Note or relating thereto, whether
made by Borrower or any other person(s) or entities, are hereinafter
referred to collectively as the "Loan Documents".
3. This Note evidences indebtedness of Borrower to Bank which
indebtedness may increase or decrease from time to time and the total
amount advanced pursuant hereto may exceed the face amount hereof;
provided, however, the aggregate principal amount outstanding hereunder
shall not exceed the face amount of this Note at any time. It is
further contemplated that, by reason of payments hereon, there
<PAGE>
<PAGE>
may be times when no indebtedness is owing hereunder, but
notwithstanding such occurrences, this Note shall remain valid and shall
continue to be in full force and effect as to Advances made subsequent
to each such occurrence.
4. Borrower shall repay this Note by paying all accrued interest
monthly beginning on July 18, 1998 and continuing on the eighteenth day
of each month until June 18, 1999 (the "Maturity Date") at which time
all outstanding principal and accrued interest shall be due and payable
in full. Interest on this Note will be computed on the basis of the
actual number of days elapsed over an assumed year of 360 days. Borrower
shall make each payment under this Note not later than 12:00 p.m.
(Noon), Louisville, Kentucky, Eastern time, on the date when due, in
lawful money of the United States of America, to Bank at 416 West
Jefferson Street, Louisville, Kentucky 40202-3244, in immediately
available funds. Borrower hereby authorizes Bank to charge against any
account of Borrower with Bank containing unrestricted funds any amount
so due. Whenever any payment to be made under this Note shall be stated
to be due on a Saturday, Sunday or a public holiday or banking holiday,
such payment shall be made on the next succeeding Domestic Business Day,
and such extension of time shall be in such case be included in the
computation of the payment of interest.
5. If any amount due hereunder is past due for more than fifteen (15)
days (whether by lapse of time or by reason of acceleration under the
provisions hereof or under the Loan Documents), or upon the occurrence
of any Event of Default defined hereinbelow, the interest rate on the
entire principal balance and all matured interest installments
outstanding shall increase by three percent (3%) per annum and shall
continue at that rate as long as any amount due is more than fifteen
(15) days late; provided, however, that the total interest rate charged
Borrower shall not exceed the maximum rate of interest allowed by law
and if such increased rate of interest exceeds the maximum amount
permitted under applicable law in such circumstances, the amount of the
increased interest rate shall be increased by such lesser maximum amount
as legally may be allowed, and Bank's entitlement to such sum shall be
in addition to, and not in lieu of, all other rights and remedies
available to Bank as a result of such overdue payment. If a law which
applies to this Note is interpreted so that the interest collected or to
be collected hereunder exceeds the legal amount, then the interest rate
charged hereunder shall be reduced by the amount necessary to reduce the
interest charged to the maximum legal amount and this Note and all sums
due hereunder shall immediately become due and payable in full at the
election of the holder hereof. It is agreed that all matured interest
installments outstanding shall also bear interest until paid at the same
rate that continues to accrue on the principal outstanding. Any payment
on this Note that is overdue for more than fifteen (15) days from its
due date shall be increased by an amount equal to the lesser of $250.00
or five percent (5%) of the overdue payment.
6. The occurrence of any Event of Default as described in the Loan
Agreement shall constitute an event of default under this Note, the
occurrence of which shall entitle the holder hereof to declare the
entire principal balance of this Note, together with all accrued
interest, and all other liabilities, indebtedness and obligations of
Borrower to Bank, whether now existing or hereafter created, to be
immediately due and payable, and to take any and all action allowed the
holder by law or equity, under the terms of this Note and/or under the
terms of the Loan Documents and under the terms of any other agreements
between Borrower and Bank.
7. All rights and remedies of Bank under this Note, the Loan
Documents, any document securing or relating thereto, and under any
other applicable law or at equity, are and shall be cumulative to the
greatest extent permitted by law. The delay or failure of Bank or the
holder hereof to insist upon strict performance of any of the terms of
this Note, or to exercise any rights herein confirmed shall not be
construed as a waiver or relinquishment to any extent of Bank's or the
holder's right to assert or rely upon such terms or rights at any
subsequent time or in any other instance.
2
<PAGE>
<PAGE>
8. The Borrower and all endorsers, guarantors and all other parties
to this Note hereby:
(a) consent to the negotiation or assignment of this Note to any
other person at any time;
(b) waive presentment and demand, notice of demand, notice of
dishonor, protest and notice of protest and non-payment
thereof and all other notices or demands in connection with
the delivery, acceptance, performance, default, enforcement,
endorsement or guarantee hereof;
(c) waive all exemptions to which they may now or hereafter be
entitled under the laws of this or any other state or of the
United States;
(d) waive any requirement of marshaling of assets and all other
legal or equitable doctrines which might otherwise require
the holder hereof to proceed against any persons or any
collateral or any other property or with respect to any
other rights in any particular order and agree that the
holder may elect not to proceed against any collateral
securing this note and may instead seek to enforce and
collect this note through whatever means may otherwise be
available at law or equity;
(e) agree that Bank shall have the right, but not the
obligation, without notice to Borrower or any other party,
to renew this Note, grant the Borrower extensions of time
for, or changes in the amounts of, payment of this Note or
any other indulgence or forbearance by Bank, and Bank may
release any or all of the security and collateral for this
Note, and modify the terms of any of the Loan Documents or
any other document securing or relating to this Note, and
may release any guarantors, endorsers or any party to this
Note, and otherwise deal in any way, at any time, with
Borrower, or any guarantor of this Note or with any other
party who may become primarily or secondarily liable for any
of the obligations of Borrower under this Note, in every
instance without the consent of Borrower or any such other
parties and without in any way affecting the continuing
liability of the Borrower or any such other parties
hereunder or under any of the other Loan Documents.
9. Bank shall have the right to set off, at all times and without
notice to Borrower, and Borrower hereby grants Bank a security interest
in, any and all deposits, credits, accounts, securities, certificates of
deposit, cash, instruments, documents, general intangibles and any other
property or other sums of Borrower at any time or times held by Bank or
credited by or due from Bank to Borrower, whether held by Bank in a
fiduciary capacity or otherwise, and all products and proceeds thereof,
as additional security for all sums due hereunder and all other
liabilities of Borrower to Bank, whether now existing or hereafter
arising or acquired and whether absolute or contingent.
10. The Borrower agrees that it will pay to the Bank or the holder
hereof all costs and expenses, including without limitation reasonable
attorneys' fees, incurred by Bank in connection with the preparation of
this Note and all related documentation, the enforcement thereof, and
the collection or attempted collection of the sums due hereunder or in
securing or attempting to secure or protecting and defending or
attempting to protect and defend holder's interest in any property
securing this Note.
11. BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES
ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR
ANY
3
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<PAGE>
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN) OR ACTIONS OF BANK AND BORROWER. BORROWER ACKNOWLEDGES AND
AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS
PROVISION AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT TO BANK.
12. The Borrower agrees that the sole proper venue for the
determination of any litigation commenced by either Borrower or Bank on
any basis shall be in a court of competent jurisdiction which is located
in Fayette County, Kentucky, and the parties hereby expressly declare
that any other venue shall be improper and Borrower expressly waives any
right to a determination of any such litigation against Bank by a court
in any other venue. Borrower further agrees that service of process by
any judicial officer or by registered or certified U.S. mail shall
establish personal jurisdiction over Borrower, and Borrower waives any
rights under the laws of any state to object to jurisdiction within the
Commonwealth of Kentucky. Borrower acknowledges that this Note was
executed and delivered in the Commonwealth of Kentucky and shall be
governed and construed in accordance with the laws thereof. The
aforesaid means of obtaining personal jurisdiction and perfecting
service of process are not intended to be exclusive, but are cumulative
and in addition to all other means of obtaining personal jurisdiction
and perfecting service of process now or hereafter provided by the laws
of the Commonwealth of Kentucky or by any other state in an action
brought by Bank in such state.
13. The substantive laws of the Commonwealth of Kentucky (without
regard to provisions governing conflicts of laws) shall govern the
construction of this Note and the rights and remedies of the parties
hereto.
14. Time is of the essence in the payment and performance of all of
Borrower's obligations under this Note and all documents securing this
Note or relating hereto.
15. This Note cannot be modified, altered or amended except by an
agreement in writing duly signed and acknowledged by authorized
representatives of Bank and Borrower.
16. If any one or more of the provisions of this Note, or the
applicability of any such provision to a specific situation, shall be
held invalid or unenforceable, such provision shall be modified to the
minimum extent necessary to make it or its application valid and
enforceable, and the validity and enforceability of all other provisions
of this Note and all other applications of any such provision shall not
be affected thereby. In the event such provision(s) cannot be modified
to make it or them enforceable, the invalidity or unenforceability of
any such provision(s) of this Note shall not impair the validity or
enforceability of any other provision of this Note.
17. This Note shall bind the heirs, successors and assigns of Borrower
and shall inure to the benefit of Bank and its successors and assigns.
Borrower shall not assign or allow the assumption of its rights and
obligations hereunder without Bank's prior written consent.
4
<PAGE>
<PAGE>
DATED as of the day and year first above written.
COMMONWEALTH PREMIUM FINANCE
CORPORATION, a Kentucky corporation
BY: /s/ D.R. Meyer
--------------------------------------
TITLE: President
-----------------------------------
5
<PAGE>
EXHIBIT 10.23
FOURTH AMENDMENT TO LOAN AGREEMENT
----------------------------------
This Fourth Amendment to Loan Agreement (the "Amendment") is dated
and effective as of February 25, 1999, by, between and among
COMMONWEALTH PREMIUM FINANCE CORPORATION, a Kentucky corporation
(referred to herein as "Borrower"); UNIFIED FINANCIAL SERVICES, INC., a
Delaware corporation (referred to herein as the "Guarantor"); and BANK
ONE, KENTUCKY, NA, a national banking association (referred to herein as
"Bank").
RECITALS
--------
1. The Borrower, the Guarantor and the Bank desire to further
amend Loan Agreement dated as of October 18, 1996, as amended by that
certain First Amendment to Loan Agreement dated as of December 17, 1996,
the Second Amendment to Loan Agreement dated as of August 4, 1997, and
the Third Amendment to Loan Agreement dated July 23, 1998 (as amended,
the "Loan Agreement").
2. Borrower, Guarantor and Bank have agreed to enter into this
Amendment to further amend the terms of the Loan Agreement, including
the substitution of the Guarantor.
NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants and agreements contained herein, covenant and agree as
follows:
1. Substitution of Guaranties. The Bank hereby agrees to
--------------------------
accept the Guaranty of the Guarantor as evidenced by the Guaranty dated
February 18, 1999 (the "Guaranty"), in substitution of the Guaranties of
John Robert Owens and D. Richard Meyer, and the Bank further agrees that
John Robert Owens and D. Richard Meyer are hereby deemed to be released
of their obligations as Guarantors of the obligations of Borrower under
the Renewed Revolving Credit Note dated June 18, 1998, in the principal
amount of $2,000,000.00 (the "Note") upon execution and delivery of all
documents required herein.
2. Collateral. The Indebtedness shall continue to be secured
----------
by the Collateral described in the Loan Agreement dated October 18,
1996, as amended. Further, the Guarantor shall execute and deliver to
the Bank its Stock Pledge and Security Agreement whereby the Guarantor
pledges and assigns to the Bank all of its interest in the Common Stock
of Equity Underwriting Group, Inc. and Commonwealth Finance Premium
Corporation (the "Stock") as shown on Schedule A attached to the Stock
Pledge and Security Agreement dated February 25, 1999.
3. Conditions Precedent. The obligation of the Bank to enter
--------------------
into this Agreement and the other Loan Documents is subject to the
condition precedent that the Bank shall have received and approved on or
before the closing each of the following, in form and substance
reasonably satisfactory to the Bank:
a. This Agreement, the Guaranty and the Stock Pledge and
Security Agreement shall be duly executed and delivered by the Borrower
and the Guarantor to the Bank.
b. Lien Report. A lien report from the counsel for the
-----------
Guarantor, which states that the Bank has first and prior lien on the
Stock.
c. Articles and By-Laws; Evidence of Existence/Good
-------------------------------------------------
Standing of the Guarantor. Certified copies of the Guarantor's
- -------------------------
Articles and By-Laws and the Certificate of Existence/Good Standing of
the Guarantor issued by the Secretary of State of Delaware.
<PAGE>
<PAGE>
d. Evidence of Corporate Action by the Borrower and the
-----------------------------------------------------
Guarantor. Certified copies of all corporate action taken by the
- ---------
Borrower and the Guarantor, including resolutions of the Borrower and
the Guarantor authorizing the execution, delivery and performance of the
Loan Documents. A certificate of the Secretary of the Guarantor
certifying the names and true signatures of officers of the Guarantor
authorized to sign the aforementioned documents to which it is a party.
e. Opinion of Counsel. The Borrower and the Guarantor
------------------
shall provide the Bank with an opinion of counsel satisfactory to the
Bank regarding such matters as the validity and enforceability of the
Loan Documents.
4. Representations and Warranties of the Borrower. The
----------------------------------------------
Borrower represents and warrants to the Bank as follows:
a. Good Standing and Due Qualification. The Borrower
-----------------------------------
is a corporation, duly incorporated, validly existing and is duly
qualified and in good standing under the laws of each jurisdiction in
which such qualification is required by law.
b. Corporate Power and Authority. The execution,
-----------------------------
delivery and performance by the Borrower of the Loan Documents have been
duly authorized by all necessary corporate action.
c. Legally Enforceable Loan Documents. The Loan
----------------------------------
Documents executed and/or delivered in connection with this Agreement
are legal, valid and binding obligations of the Borrower and enforceable
in accordance with their respective terms, except to the extent that
such enforcement may be limited by applicable bankruptcy, insolvency and
other similar laws affecting creditors rights generally.
d. No Adverse Change. No material adverse change has
-----------------
occurred in any of the businesses of the Borrower and no material
adverse change has occurred in the financial condition of the Borrower
since the date of the most current financial information provided to the
Bank.
e. No Defenses or Setoffs. As of the date hereof, the
----------------------
Borrower is not aware of any defenses, credits or setoffs to the payment
of the Indebtedness evidenced by the Note, or to the enforceability of
the Note, or the Loan Documents, nor are there any claims, actions or
causes of action which could be asserted against the Bank relating to
the transactions evidenced by any of the Loan Documents.
f. Limited Effect of Amendment. Except as specifically
---------------------------
amended herein, the terms and conditions of the Note, the Loan Documents
and all other existing agreements between the parties are unaffected by
this Amendment and shall continue to be binding upon the Borrower and
the Bank and continue to remain in full force and effect.
5. Representations and Warranties of the Guarantor. The
-----------------------------------------------
Guarantor represents and warrants to the Bank as follows:
a. Good Standing and Due Qualification. The Guarantor
-----------------------------------
is a corporation, duly incorporated, validly existing and is duly
qualified and in good standing under the laws of Delaware.
b. Corporate Power and Authority. The execution,
-----------------------------
delivery and performance by the Guarantor of the Loan Documents to which
it is a party have been duly authorized by all necessary corporate
action.
- 2 -
<PAGE>
<PAGE>
c. Legally Enforceable Loan Documents. The Loan
----------------------------------
Documents executed and/or delivered by the Guarantor are legal, valid
and binding obligations of the Guarantor and enforceable in accordance
with their respective terms, except to the extent that such enforcement
may be limited by applicable bankruptcy, insolvency and other similar
laws affecting creditors rights generally.
6. Additional Reporting Requirements. In addition to the
---------------------------------
reporting requirements contained in the Loan Agreement, as amended, the
Guarantor shall, within sixty (60) days after the end of each fiscal
quarter (and beginning with the March 31, 1999 quarter end), provide
Bank with balance sheets, statements of income and retained earnings as
of the end of such fiscal quarter, and properly completed calculations
necessary to test compliance with all of the financial covenants set
forth herein, in form and content reasonably acceptable to Bank, and all
in reasonable detail, and all such financial statements shall be
internally prepared in accordance with GAAP consistently applied and
certified as correct by Guarantor's chief financial officer. Provided,
however, the Guarantor shall not be obligated to deliver the Guarantor's
internally prepared balance sheet and income statement for the last
month of the Guarantor's fiscal year.
7. Affirmative Covenants. So long as any portion of the Note
---------------------
shall remain unpaid, the Borrower agrees to fully comply with all of the
affirmative convents contained in the Loan Agreement and the Amendments.
Further, the Borrower shall fully comply with the negative covenants
contained in the Loan Agreement and the Amendments.
8. No Defenses or Setoffs. As of the date hereof, the
----------------------
Borrower is not aware of any defenses, credits or setoffs to the payment
of the Indebtedness evidenced by the Note, or to the enforceability of
the Note, the Loan Agreement, or the Loan Documents against the
Borrower, nor are there any claims, actions or causes of action which
could be asserted against the Bank relating to the transactions
evidenced by the Note, the Loan Agreement, this Amendment or any of the
transactions relating thereto.
9. Limited Effect of Amendment. Except as specifically
---------------------------
amended herein, the terms and conditions of the Note, the Loan
Documents, and all other existing agreements between the parties are
unaffected by this Amendment and shall continue to be binding upon the
Borrower and the Bank and remain in full force and effect.
10. Notices. All notices and other communications given to or
-------
made upon any party hereto in connection with this Security Agreement,
the Notes or any other Loan Documents shall, except as herein or therein
otherwise expressly provided, be in writing, sent by certified or
registered mail return receipt requested, as follows:
If to Borrower: 220 Lexington Green Circle
Lexington, Kentucky 40503
ATTN: Robert Owens
with a copy to: Robert M. Beck, Jr.
Stites & Harbison
2300 Lexington Financial Center
Lexington, Kentucky 40507
- 3 -
<PAGE>
<PAGE>
If to Guarantor: Unified Financial Services, Inc.
1104 Buttonwood Court
Lexington, Kentucky 40515
ATTN: President and CEO
with a copy to: Charles H. Binger
Thompson Coburn
One Mercantile Center, Suite 34007
St. Louis, Missouri 63101
If to Bank: Bank One, Kentucky, NA
416 West Jefferson Street
Louisville, Kentucky 40202
with a copy to: Mark Boison
Bank One, Kentucky, NA
201 East Main Street
Lexington, Kentucky 40507
11. Entire Agreement. This Amendment and the other Loan
----------------
Documents constitute the entire understanding among the parties with
respect to the subject matter hereof and supersede any prior agreements,
written or oral, with respect thereto. This Agreement may not be
amended without the prior written consent of all parties herein.
COMMONWEALTH PREMIUM FINANCE
CORPORATION
BY: /s/ D. R. Meyer
--------------------------------------
TITLE: President
-----------------------------------
BANK ONE, KENTUCKY, NA
BY: /s/ Rhonda Lenney
--------------------------------------
TITLE: Officer
-----------------------------------
UNIFIED FINANCIAL SERVICES, INC.
BY: /s/ Timothy L. Ashburn
--------------------------------------
TITLE: Chairman, CEO, President
-----------------------------------
- 4 -
<PAGE>
EXHIBIT 10.24
GUARANTY OF PAYMENT AND PERFORMANCE
-----------------------------------
("Guaranty")
Dated as of February 25, 1999
1. FOR VALUE RECEIVED, and in order to induce BANK ONE,
KENTUCKY, NA, a national banking association, and its successors and
assigns, 416 West Jefferson Street, Louisville, Kentucky 40202 (the
"Bank"), to enter into certain loan modifications and to extend
additional or to continue to extend credit to EQUITY UNDERWRITING GROUP,
INC. ("EIMI") and EQUITY INSURANCE MANAGERS, INC. ("EUGI") (EUGI, EIMI,
and Commonwealth Premium Finance Corporation are collectively referred
to herein as the "Borrower"), the undersigned, UNIFIED FINANCIAL
SERVICES, INC. (the "Guarantor") does hereby personally guarantee
unconditionally to the holder of the Notes listed in Exhibit "A"
attached hereto (the "Notes") the due and punctual payment of all
installments of principal and interest now or in the future due under
the Notes, as and when the same shall be due and payable thereunder in
accordance with their respective terms, and whether the same be declared
due by the holder of the Notes prior to its stated maturity date by
virtue of default thereunder. The undersigned further guarantees the
prompt performance by Borrower of all non-monetary undertakings,
covenants and agreements to be performed by Borrower under the Notes.
2. The Guarantor consents and agrees that the whole or any part
of the security now or hereafter held for the Notes may be exchanged,
compromised, surrendered or released from time to time; that the time or
place of payment of the Notes or of any security therefor may be
exchanged or extended, in whole or in part, to a time certain or
otherwise, and the Notes may be renewed or accelerated, in whole or in
part; that Borrower may be extended further loans and be granted
indulgences generally; that any of the provisions of the Notes, or of
any instrument securing or pertaining to the security for the same, may
be modified or waived (either expressly or through tacit acquiescence);
that any party liable for the payment of the Notes may be granted
indulgences or released; that neither the death, insolvency, bankruptcy,
dissolution, nor disability of the Borrower or of the Guarantor shall
affect the obligations hereunder of the Guarantor; that no claim need be
asserted against the personal representatives, guardian, trustee in
bankruptcy or receiver of any deceased, incompetent, bankrupt or
insolvent Borrower or guarantor; that any deposit balance to the credit
of Borrower, Guarantor or any other party liable for payment of the
Notes or liable upon any security therefor may be released from time to
time in whole or in part, at, before or after the stated, extended or
accelerated maturity date of the Notes; and that the undersigned
Guarantor shall remain bound hereunder, notwithstanding any such
exchange, compromise, surrender, extension, renewal, acceleration,
modification, waiver, indulgence, release or other action, all of which
may be affected without notice to or further assent or agreement by
Guarantor.
3. The Guarantor expressly waives:
(a) Notice of acceptance of this Guaranty;
(b) Presentment and demand for payment of the Notes;
(c) Protest and notice of protest, dishonor or
default to Guarantor or to any other party with
respect to the Notes or any security for the
Notes;
(d) Demand for payment under this Guaranty;
(e) Notice of disposition of any security for the
Notes; and
(f) All rights of indemnity, exoneration,
reimbursement, contribution and/or subrogation
of Guarantor against Borrower.
<PAGE>
<PAGE>
4. This is a guaranty of payment as to monetary
obligations and not of collection. The liability of Guarantor
under this Guaranty shall be direct and immediate and not
conditional or contingent upon the pursuit of any remedies against
Borrower or any other guarantor or other person nor against the
security or liens available to holder for the payment of the
Notes. The Guarantor waives any claim to marshaling of assets and
waives any right to require that an action be brought against
Borrower or any other person prior to action against the Guarantor
hereunder and waives any right to require that resort be had to
any security for the Notes or to any balance of any deposit
account or credit on the books of the holder of the Notes in favor
of Borrower or any other party prior to action by the holder of
the Notes against the Guarantor hereunder. If the Notes are
partially paid through the election of the holder thereof to
pursue any of the remedies mentioned in this literary paragraph or
if the Notes is otherwise partially paid, Guarantor shall remain
personally liable for the entire unpaid principal balance of, and
all accrued interest on, the Notes.
5. The Notes shall constitute the primary independent and
continuing obligation of the Guarantor, who shall be liable for
payment of the debt evidenced by the Notes, notwithstanding the
partial or total invalidity of the Notes.
6. The obligations of the Guarantor under this Guaranty
shall not be subject to any counterclaim, set off, deduction or
defense based upon any claim Guarantor may have against Borrower
or Bank, and the obligations of Guarantor under this Guaranty
shall remain in full force and effect, without regard to, and
shall not be released, discharged or in any way modified or
affected by, any circumstance or condition (whether or not
Guarantor shall have any knowledge or notice thereof), including,
but not limited to, any bankruptcy, insolvency, reorganization,
arrangement, readjustment, composition, liquidation or similar
proceeding with respect to Borrower or its properties or its
creditors, or any action taken by any trustee or receiver or by
any court in any such proceeding.
7. In the event of any default by Borrower under the
Notes, Guarantor will pay, to the extent allowable by law to Bank
such further amount as shall be sufficient to reimburse fully Bank
for all of its costs and expenses of enforcing its rights and
remedies under the Notes, including, without limitation, Bank's
reasonable attorney's fees and court costs, and all of same shall
be evidenced by the Notes and this Guaranty.
8. This Guaranty shall be construed in accordance with
and governed by the laws of the Commonwealth of Kentucky, without
reference to its principles of conflicts of laws.
9. GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR
IN CONNECTION WITH THIS GUARANTY, THE LOAN AGREEMENT OR ANY OTHER
DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF BANK, BORROWER OR ANY
GUARANTOR. GUARANTOR ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED
FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS
PROVISION IS A MATERIAL INDUCEMENT TO BANK.
10. The Guarantor agrees that the sole proper venue for
the determination of any litigation commenced by either Guarantor
or Bank on any basis shall be in a court of competent jurisdiction
which is located in Fayette County, Kentucky, and the parties
hereby expressly declare that any other venue
2
<PAGE>
<PAGE>
shall be improper and Guarantor expressly waives any right to a
determination of any such litigation against Guarantor by a court
in any other venue. Guarantor further agrees that service of
process by any judicial officer or by registered or certified U.S.
mail shall establish personal jurisdiction over Guarantor, and
Guarantor waives any rights under the laws of any state to object
to jurisdiction within the Commonwealth of Kentucky. The
aforesaid means of obtaining personal jurisdiction and perfecting
service of process are not intended to be exclusive, but are
cumulative and in addition to all other means of obtaining
personal jurisdiction and perfecting service of process now or
hereafter provided by the laws of the Commonwealth of Kentucky or
by any other state in an action brought by Bank in such state.
Provided, however, nothing herein shall in any way be deemed to
limit the ability of Bank to serve any writs, process or summons
in any other manner permitted by applicable law or to obtain
jurisdiction over Guarantor in such other jurisdictions and in
such manner as may be permitted by applicable law.
11. The undersigned does hereby agree and acknowledge that
the maximum aggregate liability of the Guarantor shall be the sum
of Four Million Four Hundred Fifty Thousand Dollars
($4,450,000.00), plus interest accruing on said amount, plus fees,
charges and costs of collecting the guaranteed indebtedness
(including reasonable attorneys fees).
12. This Guaranty shall terminate on June 30, 2000.
Provided, however, the undersigned acknowledges and agrees that
such termination shall not affect its liability with respect to:
(a) obligations created or incurred prior to such date (which
specifically includes the Notes), or (b) extensions or renewals
of, interest accruing on, or fees, costs or expenses incurred with
respect to such obligations (which specifically includes the
Notes), on or after such date.
13. If any payment made on the Notes shall be required to
be repaid or refunded by Bank as a result of any bankruptcy or
insolvency of Borrower or of Guarantor or by virtue of any claim
of preference, invalidity, unenforceability or right of
rescission, Guarantor hereby acknowledges and agrees that
Guarantor shall remain liable for the amount of such payment
refunded, to the extent provided herein, as if such payment had
never been made by Borrower or by Guarantor to Bank.
14. This Guaranty shall remain fully enforceable
irrespective of any claim, defense or counterclaim which Borrower
may or could assert as to the Notes, including, but not limited
to, failure of consideration, breach of warranty, payment, statute
of frauds, statute of limitations, fraud, bankruptcy, and usury,
all of which Guarantor hereby waives along with any standing by
Guarantor to assert any said claim, defense or counterclaim. This
Guaranty is in addition to and not in lieu of, nor does it
supercede, any prior Guaranties signed by Guarantor.
15. The Guarantor has, to its satisfaction, independently
investigated: (a) Borrower's credit history; (b) Borrower's
payment history with Bank; (c) Borrower's past, current and
projected financial condition; and (d) the sufficiency of any
collateral supporting Borrower's obligations under the Notes.
Guarantor represents and warrants that it has relied exclusively
on his own independent investigation of Borrower for its decision
to guarantee the Notes. Guarantor agrees that it has sufficient
knowledge of Borrower to make an informed decision about this
Guaranty, and that Bank has no duty or obligation to disclose any
information in its possession or control about Borrower to
Guarantor.
16. In the event that any one or more of the provisions
contained herein shall for any reason be held to be invalid,
illegal, or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other
provision hereof and this Guaranty shall be construed as if such
invalid, illegal or unenforceable provision had never been
contained herein.
3
<PAGE>
<PAGE>
17. The provisions of this Guaranty shall be binding upon
the Guarantor and its, successors, and assigns and shall inure to
the benefit of the holder of the Notes, and its successors,
endorsees and assigns.
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty
to be effective as of the date and year first above written.
UNIFIED FINANCIAL SERVICES, INC.
BY: /s/ Timothy L. Ashburn
----------------------------------
TITLE: Chairman, CEO, President
-------------------------------
4
<PAGE>
<PAGE>
EXHIBIT "A"
-----------
(a) a Revolving Credit Note dated as of December 30, 1997,
and made by Equity Insurance Managers, Inc. payable to the order
of Bank One in the original principal amount of $400,000.00;
(b) an Amended and Restated Term Note dated as of
February 18, 1999, and made by Equity Insurance Managers, Inc. and
Equity Underwriting Group, Inc. payable to the order of Bank One
in the original principal amount of $1,250,000.00;
(c) a Term Note dated as of February 18, 1999, and made by
Equity Insurance Managers, Inc. and Equity Underwriting Group,
Inc. payable to the order of Bank One in the original principal
amount of $800,000.00; and
(d) a Renewed Revolving Credit Note dated as of June 18,
1998, and made by Commonwealth Premium Finance Corporation payable
to the order of the Bank One in the original principal amount of
$2,000,000.00
<PAGE>
EXHIBIT 10.25
STOCK PLEDGE AND SECURITY AGREEMENT
-----------------------------------
THIS STOCK PLEDGE AND SECURITY AGREEMENT is made and entered into
effective as of February 25, 1999, by and between UNIFIED FINANCIAL
SERVICES, INC., a Delaware corporation, whose address is 431 North
Pennsylvania Street, Indianapolis, Indiana 46204 (hereinafter called
"Obligor"), and BANK ONE, KENTUCKY, NA, a national banking association,
whose address is 416 West Jefferson Street, Louisville, Kentucky 40202
(hereinafter called "Secured Party").
W I T N E S S E T H :
-------------------
That, for and in consideration of credit extended by Secured
Party, the parties do hereby agree as follows:
1. Deposit and Pledge of Stock. As collateral security for
---------------------------
the Obligor's Guaranty to Secured Party dated as of February 25, 1999
whereby the Obligor guaranteed the payment of the obligations set forth
in Exhibit "A" attached thereto up to the maximum amount of
$4,450,000.00, plus interest, fees, charges and costs as provided
therein (the "Indebtedness").
Obligor, pursuant to the provisions of the Uniform Commercial Code
of the State of Kentucky, hereby grants to Secured Party a first and
prior security interest in and lien on all of the following (all of
which is hereinafter collectively called the "Collateral"):
(a) all property delivered to and deposited with Secured Party
or its designee/bailee, including all of the property
specified on Schedule "A" attached hereto and incorporated
herein by reference (the "Stock");
(b) all money and property heretofore delivered to, or which
shall hereafter be delivered by Obligor to or under the
custody or control of Secured Party in any manner or for any
purpose whatever during the existence of this Security
Agreement, and whether held in a general or special account
or deposit or for safekeeping or otherwise; and
(c) together with any and all stock rights, rights to subscribe,
liquidating dividends, stock dividends, dividends paid in
stock, new securities or other property to which Obligor is
or may hereafter become entitled to receive on account of
any or all of the Stock or such other property, and in the
event that Obligor hereafter receives any such rights,
dividends, new securities or other property, Obligor will
immediately deliver such property to Secured Party to be
held by Secured Party hereunder in the same manner as the
property originally delivered hereunder.
2. Delivery of Stock Power Agreements. Contemporaneously
----------------------------------
with the execution of this Security Agreement, the Obligor shall deliver
to Secured Party duly executed irrevocable stock power agreements with
respect to the aforementioned Stock, subject to the provisions contained
in this Agreement, to the extent same have not already been delivered to
Secured Party.
3. Voting. So long as there is no default in the payment and
------
performance of the Indebtedness or of any of the terms, provisions and
conditions of this Security Agreement, the Loan Agreement, or any other
agreement securing repayment of the Indebtedness, Obligor shall be
entitled to
<PAGE>
<PAGE>
vote the Stock pledged, provided, however, upon the occurrence of an
Event of Default as defined in Section 7 hereof, Secured Party shall be
entitled to vote the Stock pledged hereunder.
4. Status of Stock. Obligor hereby represents and warrants
---------------
to Secured Party that (a) the Stock described on Schedule A is validly
issued and outstanding, is fully paid and nonassessable, and Obligor is
the registered, absolute, legal and beneficial owner of all shares of
the Stock, free and clear of all liens, charges, equities and
encumbrances, except for the lien and encumbrance created by this
Security Agreement; (b) Obligor has received all necessary approvals
from all appropriate regulatory authorities with respect to Obligor's
acquisition of the Stock and acquisition of control of EUGI and CPFC;
and (c) Obligor has the full power and authority to pledge the Stock to
Secured Party pursuant to this Security Agreement, and the Stock is not
subject to any restrictions imposed by law, regulation, agreement or
otherwise against public or private sale.
5. Maintenance of Priority of Pledge. Obligor shall be
---------------------------------
liable for, and shall from time to time pay and discharge, all
intangible and other taxes, assessments and governmental charges imposed
upon any of the Stock by any federal, state or local authority, the
liens of which would or might be held prior to the security interest and
rights of Obligor in and to the Stock. Obligor shall not, at any time
while this Security Agreement is in effect, do or suffer any act or
thing whereby the rights of Secured Party in and to the Stock would or
might be impaired or diminished. Obligor shall execute and deliver such
further documents and instruments and take such further actions as may
be required to confirm the rights of Secured Party in and to the Stock
or otherwise to effectuate the intention of this Security Agreement.
6. Transfer of Encumbrance of the Stock. Obligor shall not
------------------------------------
transfer, sell, pledge, assign or further encumber the Stock or any part
thereof without the prior written consent of Secured Party, which
consent may be withheld by Secured Party for any reason whatsoever so
long as this Security Agreement is in effect. Obligor shall not vote
the Stock in favor of any merger, consolidation, share exchange
agreement, reorganization or other business combination involving,
relating to or affecting EUGI and CPFC, or in favor of any amendment to
the Articles or Incorporation of EUGI and CPFC whereby EUGI and CPFC
would be authorized to issue any additional capital stock or securities
convertible into or exchangeable for any capital stock of EUGI and CPFC
without the prior written consent of Secured Party. However, in the
event CPFC becomes the subsidiary of EUGI, Secured Party agrees to
release the stock of CPFC to EUGI.
7. Events of Default. Each of the following shall constitute
-----------------
a Event of Default hereunder:
a. If any warranty or representation made by Obligor
herein or by the Borrowers as defined in the Loan Agreement dated
October 18, 1996, as amended, among Commonwealth Premium Finance
Corporation, John Robert Owens, D. Richard Meyer and Secured Party, and
the Loan Agreement dated January 20, 1998, as amended, among Equity
Underwriting Group, Inc., Equity Insurance Managers, Inc., 21st Century
Claim Services, John Robert Owens, D. Richard Meyer and Secured Party
(the "Loan Agreements"), shall prove to be untrue or incorrect in any
material respect when made or effected and said default shall continue
unremedied for a period of thirty (30) calendar days after date of
written notice to Obligor.
b. If any covenant made by Obligor herein or by the
Borrowers in the Loan Agreements shall be broken or breached at any time
and said default shall continue unremedied for a period of thirty (30)
calendar days after date of written notice to Obligor.
c. Failure of the Borrowers to make any payment of the
Indebtedness when due.
2
<PAGE>
<PAGE>
d. The insolvency, the filing of voluntary or involuntary
bankruptcy or for relief under the provisions of the National Bankruptcy
Act, of, by or against any of the Borrowers or the Guarantor.
e. The occurrence of any Event of Default as defined in
the Loan Agreements other than a default described in a. and b. of this
Section 7.
8. Remedies Upon Occurrence of Default.
-----------------------------------
a. Upon the occurrence of any Event of Default as defined
in Section 7 hereof, Secured Party shall have the following rights and
remedies, in addition to all other rights and remedies provided by law
or at equity, the Loan Agreements and any other document or instrument
relating to, securing or evidencing the Indebtedness, all of which shall
be cumulative and may be exercised from time to time, either
successively or concurrently:
(i) To sell all or any of the Stock in one (1) or
more lots, and from time to time, upon ten (10) days' prior written
notice to Obligor of the time and place of sale (which notice Obligor
hereby agrees is commercially reasonable), for cash or upon credit or
for future delivery, Obligor hereby waiving all rights, if any, of
marshalling the Stock and any other security for the payment of the
Indebtedness, and at the option and in the complete discretion of
Secured Party, either:
(a) at a public sale or sales, including a
sale at or over any broker's board or exchange, and in one or more lots;
or
(b) at a private sale or sales, and in one or
more lots.
Secured Party may bid for and acquire the Stock or any portion
thereof at any public sale, free from any redemption rights of Obligor,
all of which are hereby waived by Obligor. Provided, however, Secured
Party's right to sell the Stock is subject to the terms and provisions
set forth in the Intercreditor and Escrow Agreement of even date.
(ii) To exercise all rights of a secured party under
the Uniform Commercial Code of Kentucky and all other applicable law.
From time to time, Secured Party may, but shall not be obligated
to, postpone the time of any proposed sale of any of the Stock, which
has been subject of a notice as provided above, and also, upon ten (10)
days' prior written notice to Obligor (which notice Obligor hereby
agrees is commercially reasonable), may change the time and/or place of
such sale.
b. In the case of any sale by Secured Party of the Stock
or any portion thereof on credit or for future delivery, which may be
elected at the option and in the complete discretion of Secured Party,
the Stock so sold may, at Secured Party's option, either be transferred
and/or delivered to the purchaser or retained by Secured Party until the
selling price therefor is paid by the purchaser, but in either event
Secured Party shall not incur any liability to Obligor in case of
failure of the purchaser to pay for the Stock so sold. In case of any
such failure, such Stock may be again sold by Secured Party in the
manner provided in this Paragraph 8.
c. After deducting all of Secured Party's costs and
expenses of every kind, including, without limitation, legal fees and
registration fees and expenses, if any, in connection with the
3
<PAGE>
<PAGE>
sale of the Stock, Secured Party shall apply the remainder of the
proceeds of any sale or sales of the Stock to the Indebtedness in such
order Secured Party may select in its sole and absolute discretion. All
sales of Stock shall be made in a commercially reasonable manner.
Secured Party shall not incur any liability as a result of the sale of
the Stock or any part thereof at any private sale or sales, and Obligor
hereby waives any claim arising by reason of (i) the fact that the price
or prices for which the Stock or any portion thereof is sold at any
private sale or sales is less than the price which would have been
obtained at a public sale or sales or is less than the Indebtedness,
even if Secured Party accepts the first offer received and does not
offer the Stock or any portion thereof to more than one offeree;
(ii) any delay by Secured Party in selling the Stock following an Event
of Default hereunder, even if the price of the Stock thereafter
declines; or (iii) the immediate sale of the Stock upon the occurrence
of an Event of Default hereunder, even if the price of the Stock should
thereafter increase.
9. Miscellaneous.
-------------
a. Secured Party shall be under no duty or obligation to
give Obligor notice of, or to exercise, any subscription rights or
privileges, any rights or privileges to exchange, convert or redeem or
any other rights or privileges relating to or affecting any Collateral
held by Secured Party other than those notices required under the Loan
Agreements.
b. All advances, charges, costs and expenses including
reasonable attorney's fees, to the extent allowed by law, incurred or
paid by Secured Party in exercising any right, power or remedy conferred
by the Notes, this Security Agreement or the Loan Agreements, or in the
enforcement thereof, shall become a part of the indebtedness secured
hereunder and shall be paid to Secured Party by Obligor immediately and
without demand, with interest thereon at twelve (12%) percent per annum,
or at the highest rate charged on any of the Indebtedness, whichever
rate is greater.
c. Obligor waives any right to require Secured Party to
(a) proceed against any person, (b) proceed against or exhaust any
Collateral, or (c) pursue any other remedy in Secured Party's power.
d. Secured Party may at any time deliver the Collateral
or any part thereof to Obligor and the receipt of Obligor shall be a
complete and full acquittance for the Collateral so delivered, and
Secured Party shall thereafter be discharged from any liability or
responsibility therefor.
e. This is a continuing Security Agreement and all the
rights, powers and remedies hereunder shall apply to all past, present
and future Indebtedness of Obligor to Secured Party, including that
arising under successive transactions which shall either continue,
increase or decrease the Indebtedness, or from time to time create new
Indebtedness after all or any prior Indebtedness has been satisfied.
f. Until all of the Indebtedness shall have been paid in
full the power of sale and all other rights, powers and remedies granted
to Secured Party hereunder shall continue to exist and may be exercised
by Secured Party at any time.
g. The rights, powers and remedies given to Secured Party
by this Security Agreement shall be in addition to all rights, powers
and remedies given to Secured Party by virtue of the Loan Agreements,
any other prior Security Agreements, any other agreement relating to the
indebtedness, and any statute or rule of law. Secured Party may
exercise its right of setoff with respect to the Indebtedness in the
same manner as if the Indebtedness were unsecured. Any forbearance or
failure or delay by Secured Party in exercising any right, power or
remedy hereunder shall not be deemed to be a
4
<PAGE>
<PAGE>
waiver of such right, power or remedy, and any single or partial
exercise of any right, power or remedy hereunder shall not preclude the
further exercise thereof; and every right, power and remedy of Secured
Party shall continue in full force and effect until such right, power or
remedy is specifically waived by an instrument in writing executed by
Secured Party.
h. In all cases where more than one party executes this
Security Agreement, all words used herein in the singular shall be
deemed to have been used in the plural where the context and
construction so require, and the obligations and undertakings hereunder
are joint and several.
i. The law of the Commonwealth of Kentucky applies to
this Agreement and its construction and interpretation.
j. This Security Agreement shall bind Obligor and its
successors and assigns and shall inure to the benefit of Secured Party
and its successors and assigns.
k. Time shall be of the essence in the performance of
each and every one of the obligations hereunder.
l. All notices and other communications given to or made
upon any party hereto in connection with this Security Agreement, the
Notes or any other Loan Documents shall, except as herein or therein
otherwise expressly provided, be in writing, sent by certified or
registered mail return receipt requested, as follows:
If to Obligor: Unified Financial Services, Inc.
1104 Buttonwood Court
Lexington, Kentucky 40515
ATTN: President and CEO
with a copy to: Charles H. Binger
Thompson Coburn
One Mercantile Center, Suite 34007
St. Louis, Missouri 63101
If to Secured Party: Bank One, Kentucky, NA
416 West Jefferson Street
Louisville, Kentucky 40202
with a copy to: Mark Boison
Bank One, Kentucky, NA
201 East Main Street
Lexington, Kentucky 40507
5
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have entered into this
Security Agreement effective as of the 25th day of February, 1999.
BANK ONE, KENTUCKY, NA
BY: /s/ Rhonda Lenney
----------------------------------
TITLE: Officer
-------------------------------
UNIFIED FINANCIAL SERVICES, INC.
BY: /s/ Timothy L. Ashburn
----------------------------------
TITLE: Chairman, CEO, President
-------------------------------
6
<PAGE>
<PAGE>
SCHEDULE A
----------
Certificate No. No. Of Shares
Equity Underwriting Group, Inc. 14 1000
Commonwealth Premium Finance
Corporation 6 1000
<PAGE>
EXHIBIT 10.26
LOAN AGREEMENT
--------------
Dated as of January 20, 1998
by and among
EQUITY UNDERWRITING GROUP, INC. ("EUGI")
EQUITY INSURANCE MANAGERS, INC. ("EIMI")
21ST CENTURY CLAIM SERVICE, INC. ("21st Century")
(collectively the "Borrowers")
and
JOHN ROBERT OWENS and D. RICHARD MEYER
(collectively the "Guarantors")
and
BANK ONE, KENTUCKY, NA
LOAN AGREEMENT
--------------
THIS LOAN AGREEMENT (the "Agreement") dated as of January 20, 1998
between EQUITY UNDERWRITING GROUP, INC., EQUITY INSURANCE MANAGERS, INC.
and 21ST CENTURY CLAIM SERVICE, INC. (referred to herein as the
"Borrowers"); JOHN ROBERT OWENS and D. RICHARD MEYER, individuals
(referred to herein as the "Guarantors or individually as a "Guarantor")
and BANK ONE, KENTUCKY, NA, a national banking association, 416 West
Jefferson Street, Louisville, Kentucky 40202 (referred to herein as the
"Bank").
R E C I T A L S:
1. The Borrowers have applied to the Bank for a Term Loan as
defined herein in the amount of $1,250,000.00, which shall be secured by
assets of the Borrowers and guaranteed by the Guarantors.
2. EIMI borrowed from the Bank the sum of $400,000.00, as
evidenced by a Revolving Credit Note dated December 30, 1997, which is
secured by assets of EIMI and guaranteed by the Guarantors.
3. EIMI has guaranteed the loan from the Bank to 21st
Century, which loan is evidenced by a Term Note dated December 30, 1997,
in the amount of $200,000.00, pursuant to a Guaranty dated December 30,
1997.
4. One of the conditions to the Bank making the loans as
described herein is that the Borrowers and the Guarantors must enter
into this Agreement setting forth the terms and conditions of the Loans.
NOW, THEREFORE, in consideration of their mutual covenants, the
financial accommodations extended to the Borrowers and the Guarantors
herein and for other good and valuable consideration, the
<PAGE>
<PAGE>
receipt and sufficiency of which are hereby acknowledged, the parties do
hereby agree to and affirm the foregoing recitals and further agree as
follows:
ARTICLE I
---------
DEFINITIONS
-----------
Section 1.01 Defined Terms
As used in this Agreement the following terms have the following
meanings (terms defined in the singular to have the same meaning when
used in the plural and vice versa):
"Advance" means any disbursement of funds to the Borrowers under
the Notes.
"Agreement" means this Loan Agreement, as amended, supplemented or
modified from time to time.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in Lexington, Kentucky, are
authorized or required to close under the laws of the Commonwealth of
Kentucky or of the United States.
"Collateral" means all property which is subject to, becomes
subject to, or is to be subject to the Liens granted by the Security
Agreements or which otherwise becomes security for the Loan as described
in Section 2.06.
"Corporate Guaranty" means the guaranty by EIMI of the obligations
of 21st Century to the Bank dated December 30, 1997.
"Debt" means any and all (i) indebtedness or liability for
borrowed money, or for the deferred purchase price of property or
services (excluding trade obligations incurred in the ordinary course of
business); (ii) obligations under letters of credit issued for the
account of any Person; (iii) guarantees, endorsements (other than for
collection or deposit in the ordinary course of business), and other
contingent obligations to purchase, to provide funds for payment, to
supply funds to invest in any Person, or otherwise to assure a creditor
against loss.
"Debt Service Coverage Ratio" means the earnings before interest,
expenses, taxes, depreciation and amortization divided by current
maturities of long term debt.
"Event of Default" means any of the events specified in Section
7.01, provided that any requirement for the giving of notice, the lapse
of time, or both, or any other condition, has been satisfied.
"GAAP" means generally accepted accounting principles in the
United States.
"Guaranty" means each of the personal guaranties of the Notes
executed by each of the Guarantors.
"Interest Coverage Ratio" means the earnings before interest
expenses and taxes divided by interest expense.
"Lexington Office" means the office of the Bank at 201 East Main
Street, Lexington, Kentucky 40507.
- 2 -
<PAGE>
<PAGE>
"Lien" means any pledge, security interest, hypothecation,
conditional assignment, deposit arrangement, encumbrance, lien
(statutory or other), or other security agreement, or encumbrance of any
kind or nature whatsoever (including, without limitation, any lien on
unearned premiums and the filing of any financing statement under the
Uniform Commercial Code or comparable law of any jurisdiction to
evidence any of the foregoing).
"Loans" means the Revolving Credit Loan, the Term Loan and the
21st Century Loan.
"Loan Documents" means this Agreement, the Notes, the Security
Agreements, the UCC-1's, the Guaranties, and any additional documents
required to be delivered by the Borrowers, the Guarantors, or any of
them, under this Agreement, or otherwise evidencing, securing and/or
relating to the Loan.
"Notes" means the Revolving Credit Note, the Term Note and the
21st Century Note.
"Obligations" means the obligations of the Borrowers, 21st Century
and the Guarantors to the Bank under the Loan Documents.
"Others" shall mean any Person as defined herein other than Bank
or its affiliates.
"Person" means any individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint
venture, governmental authority, or other entity of whatever nature.
"Prime Rate" means a variable rate of interest announced from time
to time by the Bank as its prime rate whether or not such rate is
otherwise published, which rate may not be the Bank's lowest or best
rate.
"Revolving Credit Loan" or "Revolving Credit Note" shall have the
meaning assigned to such terms in Section 2.01(a).
"Security Agreements" mean the Security Agreements to be delivered
by the Borrowers under the terms of this Agreement granting Bank a first
priority security interest in all assets of the Borrowers; the Stock
Pledge and Security Agreements to be delivered by the Guarantors to the
Bank; and the Security Agreement dated December 30, 1997 from 21st
Century to the Bank.
"Term Loan" or "Term Note" shall have the same meaning assigned to
such terms in Section 2.01(b).
"21st Century Loan" or "21st Century Note" means the note from
21st Century to the Bank dated December 30, 1997, in the principal
amount of $200,000.00 which was guaranteed by EIMI.
"UCC-1's" means all filings under the Uniform Commercial Code as
adopted in the various states in which filings may be made by Bank now
or at any time in the future for purposes of perfecting any security
interest granted by the Security Agreements.
Section 1.02 Accounting Terms
All accounting terms not specifically defined herein shall be
construed in accordance with GAAP consistent with that applied in the
preparation of the financial statements referred to in Section 5.08, and
all financial data submitted pursuant to this Agreement shall be
prepared in accordance with such principles.
- 3 -
<PAGE>
<PAGE>
ARTICLE II
----------
AMOUNT AND TERMS OF THE LOAN
----------------------------
Section 2.01 The Loans
a. Revolving Credit Loan. The Bank has entered into the
---------------------
Revolving Credit Loan as evidenced by the Revolving Credit Note dated
December 30, 1997, in the amount of $400,000.00. Interest shall be at
the Bank's Prime Rate which shall be payable monthly.
b. Term Loan. The Term Loan from the Borrowers to the
---------
Bank is evidenced by the Term Note in the amount of $1,250,000.00 and is
dated January 20, 1998. The interest rate is the Bank's Prime Rate and
is payable monthly for one (1) year at which time the Borrowers shall
begin to pay monthly payments of principal and interest as provided
therein.
c. 21st Century Loan. The Bank has loaned $200,000.00 to
-----------------
21st Century as evidenced by the Term Note dated December 30, 1997, in
the amount of $200,000.00 with payments of principal and interest as
provided therein.
Section 2.02 No Prepayment Premium
The Borrowers may prepay the Notes, in whole or in part, at any
time without incurring any premium or penalty. Any partial prepayment
shall not change the amount or dates of payments due from the Borrowers
under the Notes.
Section 2.03 Method of Payment
Borrowers shall make each payment under this Agreement and under
the Notes in lawful money of the United States, to the Bank at the
Lexington Office, in immediately available funds. Whenever any payment
to be made under this Agreement or under the Notes shall be stated to be
due on a Saturday, Sunday or a public holiday or banking holiday, such
payment shall be made on the next succeeding Business Day, and such
extension of time shall in such case be included in the computation of
the payment of interest.
Section 2.04 Fees
a. Revolving Credit Loan. The Borrowers shall pay this
---------------------
fee in the amount of $2,640.00 at Closing.
b. Term Loan. The Borrower shall pay a fee of
---------
$12,500.00, of which $12,000.00 shall be paid at Closing and $500.00
paid on the anniversary date of the Loan.
c. 21st Century Loan. A fee of $1,320.00 shall be paid
-----------------
by 21st Century at Closing.
Section 2.05 Guaranty by Guarantors
a. Revolving Credit Loan. The Guarantors have guaranteed
---------------------
this Loan as evidenced by the Guaranties dated December 30, 1997.
- 4 -
<PAGE>
<PAGE>
b. Term Loan. The Guarantors have guaranteed this Loan
---------
as evidenced by their Guaranties dated January 20, 1998.
c. 21st Century Loan. EIMI has guaranteed this Loan
-----------------
evidenced by its Guaranty dated December 30, 1997.
Section 2.06 Collateral
The Borrowers and the Guarantors shall or have pledged (as the
case may be) the following assets to the Bank to secure the Obligations
to the Bank:
a. Blanket Liens on Assets of the Borrowers. All of the
----------------------------------------
Borrowers shall execute and deliver to the Bank Security Agreements and
UCC-1 financing statements whereby each of the Borrowers pledge and
grant to the Bank a valid and enforceable security interest in all of
their assets as described in Exhibit "A" attached to each of the
Security Agreements which shall be duly perfected upon the recording of
the UCC-1 financing statements in the Fayette County Clerk's office.
b. Pledge of Stock by Owens and Meyer. Owens and Meyer
----------------------------------
shall each execute and deliver to the Bank their Stock Pledge and
Security Agreements whereby each of them pledge and assign to the Bank
all of their interest in their EUGI common stock as shown on Schedule
"A" attached to each of the Stock Pledge and Security Agreements. All
of said common stock shall be held in escrow by Vimont & Wills, PLLC,
who shall act as Escrow Agent pursuant to the Intercreditor Agreement
and Escrow Agreement dated January 20, 1998 (the "Escrow Agreement").
Further, the Escrow Agreement shall provide that the Escrow Agent shall
hold the common stock owned by William W. Davis, Jr. ("Davis") and
Hannah D. Emig ("Emig") in escrow pursuant to the terms of the Escrow
Agreement and the Purchase and Sale Agreement dated January 20, 1998
(the "Purchase Agreement"). Upon payment by the purchasers under the
Purchase Agreement to Davis and Emig on January 20, 1999, Davis,
individually and as Trustee for Emig, shall subordinate thirty-nine (39)
of their shares in favor of the Bank who shall then have a first and
prior lien upon the shares owned by Owens and Meyer and also a first and
prior lien on thirty-nine (39) of the shares owned by Davis and Emig.
Further, upon payment of the balance due Davis and Emig under the
Purchase Agreement, Davis, individually and as Trustee for Emig, shall
release all of their interest in and to their remaining shares held by
the Escrow Agent and shall further direct and authorize the Escrow Agent
to release and transfer all of their shares to the Bank who shall then
hold all of the then outstanding shares of EUGI as collateral.
ARTICLE III
-----------
CONDITIONS PRECEDENT
--------------------
Section 3.01 Conditions Precedent to the Term Loan
The obligation of the Bank to make the Term Loan is subject to the
condition precedent that the Bank shall have received and approved on or
before the closing each of the following, in form and substance
reasonably satisfactory to the Bank and its counsel:
a. Loan Documents. The Loan Documents duly executed and
--------------
delivered by the Borrowers and the Guarantors.
b. Insurance. Certificates of insurance coverage
---------
satisfying all requirements as provided in Section 5.05.
- 5 -
<PAGE>
<PAGE>
c. Lien Report. A lien report from the Borrowers'
-----------
counsel acceptable to the Bank identifying all of the financing
statements and other Liens on file with respect to the Borrowers, which
report shall reflect no prior filings against any of the Collateral
except for such Liens as are to be paid in full and released prior to or
in connection with the Loans or those Liens which have previously been
disclosed to and approved by the Bank.
d. Articles and By-Laws; Evidence of Existence and Good
----------------------------------------------------
Standing of the Borrowers. Certified copies of the Borrowers' Articles
- -------------------------
and By-Laws, Certificate of Existence of the Borrowers issued by the
Secretary of State of Kentucky and certificates of authority from each
state in which qualification of the Borrowers is necessary or
appropriate.
e. Evidence of all Corporate Action by the Borrowers.
-------------------------------------------------
Certified (as of the date of this Agreement) copies of all corporate
action taken by the Borrowers, including resolutions of the Borrowers'
Board of Directors, authorizing the execution, delivery, and performance
of the Loan Documents. A certificate (dated as of the date of the
closing) of the Secretary of each of the Borrowers certifying the names
and true signatures of the officers of each of the Borrowers authorized
to sign the Loan Documents to which it is a party and the other
documents to be delivered by the Borrowers under this Agreement.
f. Delivery of Intercreditor and Escrow Agreement.
----------------------------------------------
Executed copy of the Intercreditor and Escrow Agreement dated January
20, 1998.
g. Other Documents. Such other approvals, opinions, or
---------------
documents as the Bank may reasonably request.
Section 3.02 Authorized Representative
The Borrowers do hereby authorize and empower John Robert Owens
and D. Richard Meyer or either of them acting alone, or such other
individuals who are designated in writing by the Borrowers, to request
Advances, direct or authorize the Bank as to such account(s) or such
parties into which or to whom Advances are to be made (including the
accounts of or to such authorized representatives), sign such
instruments or documents as may be required from or on behalf of the
Borrowers in connection with any such Advances, and any Advances made by
the Bank to, at the request of, or at the direction of either such
authorized representative(s) shall be deemed to have been received by
the Borrowers and used for the benefit of the Borrowers, evidenced by
the Notes, and entitled to the benefit and security of the Loan
Documents, irrespective of the ultimate use of such funds. Such
designation shall remain in full force and effect and the Bank may rely
thereon until written notice of any change in the individuals designated
has been provided to Bank accompanied by resolutions of the Borrowers
effecting any such change and a current incumbency certificate.
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES
------------------------------
Each Borrower and Guarantor (where applicable) represent and
warrant to the Bank as of the date hereof, which representations and
warranties shall be deemed remade by each Borrower and Guarantor (where
applicable) as of the date of this Closing and thereafter, that:
- 6 -
<PAGE>
<PAGE>
Section 4.01 Incorporation, Good Standing and Due Qualification of the
Borrowers
Each Borrower is a corporation duly incorporated, validly
existing, and in good standing under the laws of the State of Kentucky;
has the corporate power and authority to own its assets and to transact
the business in which it is now engaged or proposed to be engaged; and
is duly qualified as a foreign corporation and in good standing under
the laws of each other jurisdiction in which such qualification is
required by law or under this Agreement.
Section 4.02 Corporate Power and Authority of the Borrowers
The execution, delivery, and performance by the Borrowers of the
Loan Documents have been duly authorized by all necessary corporate
action and do not and will not (i) require any consent or approval of
the stockholders of the Borrowers; (ii) contravene any provision of any
of the Borrowers' Articles or By-Laws; (iii) violate any provision of
any law, regulation, writ, judgment, injunction, decree or determination
presently in effect having applicability to any of the Borrowers, other
than the Liens to be granted in favor of Bank; (iv) result in a breach
of or constitute a default under (whether with the giving of notice,
passage of time, or both) any indenture or loan or credit agreement or
any other agreement, lease, or instrument to which any Borrower is a
party or by which it or its properties may be bound or affected; (v)
result in, or require, the creation or imposition of any Lien, upon or
with respect to any of the properties now owned or hereafter acquired by
any Borrower; or (vi) cause any Borrower to be in default under any law,
rule, regulation, order, writ, judgment, injunction, decree,
determination, or award or any such indenture, agreement, lease, or
instrument.
Section 4.3 Legally Enforceable Agreement
This Agreement is, and each of the other Loan Documents executed
and/or delivered in connection with this Agreement are, legal, valid and
binding obligations of each Borrower and Guarantor, as applicable,
enforceable in accordance with their respective terms, except to the
extent that such enforcement may be limited by applicable bankruptcy,
insolvency, and other similar laws affecting creditors' rights
generally.
Section 4.04 Other Agreements
None of the Borrowers are a party to any indenture, loan, or
credit agreement, or to any lease or other agreement or instrument, or
subject to any charter or corporate restriction or partnership
restriction, which could have a material adverse effect on the business,
properties, assets, operations or conditions, financial or otherwise, of
any Borrower or the ability of any Borrower to carry out its respective
obligations under the Loan Documents to which it is a party. None of
the Borrowers are in default in any respect in the performance,
observance, or fulfillment of any of the obligations, covenants, or
conditions contained in any agreement or instrument material to its
business to which it is a party.
Section 4.05 Litigation
There is no pending or threatened action or proceeding against or
affecting any of the Borrowers or the Guarantors before any court,
governmental agency or arbitrator, which may, in any one case or in the
aggregate, materially and adversely affect the respective financial
condition, operation, properties, or business of any of the Borrowers or
the Guarantors or the ability of any of the Borrowers or the Guarantors
to perform their respective obligations under the Loan Documents to
which they are a party.
- 7 -
<PAGE>
<PAGE>
Section 4.06 No Liens Upon Collateral
There are no liens on any of the Collateral (other than which
shall be released at Closing or have been previously disclosed to the
Bank) nor have either of the Borrowers previously assigned any of their
rights to any of the Collateral.
Section 4.07 Operation of Business
Except as may have been disclosed in writing to and approved by
the Bank, all of the Borrowers have made application for or otherwise
possesses all licenses, permits, franchises, patents, copyrights,
trademarks and trade names, or rights thereto, to conduct their
businesses substantially as now conducted and as presently proposed to
be conducted, and none of the Borrowers are in violation of any of the
foregoing or any valid rights of others with respect to any of the
foregoing.
Section 4.08 Taxes and Reports
All of the Borrowers have filed, in a timely fashion and will in
the future file in a timely fashion, all tax returns or reports
(federal, state and local) required to be filed and has paid, and will
pay in the future, all taxes, assessments, fees and governmental charges
and levies shown or required to be shown thereon to be due, including
interest and penalties, and has paid, and will pay in the future, all
real estate and personal property taxes, license fees and/or assessments
due with respect to their assets.
Section 4.09 Accuracy of Information
All factual information heretofore or contemporaneously furnished
by each Borrower and Guarantor in writing to the Bank for purposes of,
or in connection with, this Agreement or any transaction contemplated
hereby is, and all other such factual information hereafter furnished by
them to the Bank will be, true and accurate in every material respect on
the date as of which such information is certified and as of the date of
execution and delivery of this Agreement by the Bank, and such
information is not, or shall not be, as the case may be, incomplete or
omit to state any material fact necessary to make such information not
misleading.
Section 4.10 No Adverse Change
No material adverse change has occurred in any of the Borrowers'
businesses, or any of the Borrowers' or Guarantors' financial condition
since the date of the most current financial statements provided by each
Borrower and Guarantor to the Bank.
Section 4.11 Registered Agent
The registered agent for EUGI and EIMI is Richard E. Vimont, who
is located at 155 E. Main Street, Suite 300, Lexington, Kentucky 40507.
The registered agent for 21st Century is Robert M. Beck, Jr., who is
located at 2300 Lexington Financial Center, Lexington, Kentucky 40507.
Each Borrower shall give written notice within thirty (30) days of any
change in the name or location of its registered agent.
ARTICLE V
---------
AFFIRMATIVE COVENANTS
---------------------
So long as any portion of the Notes shall remain unpaid or the
Bank shall have any obligation under this Agreement, the Borrowers and
the Guarantors (where applicable) each covenant as follows:
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<PAGE>
<PAGE>
Section 5.01 Maintenance of Existence
Each Borrower will preserve and maintain its corporate existence
and good standing in the jurisdiction of its incorporation, shall
qualify and remain qualified as a foreign corporation in each
jurisdiction in which such qualification is required, and shall not
enter into any merger, consolidation or other arrangement whereby either
Borrower, or a controlling interest in either Borrower, shall be
acquired by any other Person unless, as a part thereof, the Loan is to
be paid in full and this Agreement and the Loans shall be terminated.
Section 5.02 Maintenance of Records
Each Borrower will keep adequate, consolidated records and books
of account in which complete entries will be made in accordance with
GAAP consistently applied, reflecting all financial transactions.
Section 5.03 Maintenance of Properties
Each Borrower will maintain, keep, and preserve all of its
properties necessary or useful in the proper conduct of its business in
good working order and condition, ordinary wear and tear and insured
casualty damage or taking through the power of eminent domain excepted.
Section 5.04 Conduct of Business
Each Borrower will continue to engage in an efficient and
economical manner in a business of substantially the same general type
as conducted by each of them on the date of this Agreement.
Section 5.05 Maintenance of Insurance
Each Borrower will maintain insurance with financially sound and
reputable insurance companies or associations, reasonably acceptable to
the Bank, in such amounts and covering such risks as are usually carried
by companies engaged in the same or a similar business and similarly
situated. Specifically, each Borrower will maintain, with respect to
each of their respective properties:
a. Casualty. Insurance against loss or damage to all the
--------
improvements to the Premises by fire and any of the risks covered by
insurance of the type now known as "fire and extended coverage".
b. Liability. Comprehensive public liability insurance
---------
on an "occurrence basis" against claims for "personal injury,"
including, without limitation, bodily injury, death or property damage
occurring on the Borrowers' properties; such insurance to afford
immediate minimum protection to a limit of not less than that reasonably
required by the Bank with respect to personal injury or death to any one
or more persons or damages to property.
All policies of insurance shall be issued by companies and in
amounts in each company reasonably satisfactory to the Bank. Each
Borrower shall furnish the Bank with an original certificate of
insurance and a copy of all policies of required insurance. Prior to
the expiration of each such policy, each Borrower shall furnish the Bank
with evidence satisfactory to Bank of the payment of premium and the
reissuance of a policy continuing insurance in force as required by this
Agreement. The Borrowers shall give the Bank notice of any
cancellations or material amendments or alterations of said policies.
- 9 -
<PAGE>
<PAGE>
Section 5.06 Compliance with Laws
Each Borrower has at all times heretofore and will hereafter
comply in all material respects with all applicable laws, rules,
regulations and orders, including, without limitation, all applicable
covenants and restrictions of record and all valid laws, statutes,
codes, acts, ordinances, orders, judgments, decrees, injunctions, rules,
regulations, certificates, franchises, permits, licenses,
authorizations, directions and requirements, including, without
limitation, the Americans With Disabilities Act and regulations
thereunder and all laws, ordinances, rules and regulations of all
federal, state, county, municipal and other governments, departments,
commissions, boards, courts, authorities, officials and officers.
Section 5.07 Right of Inspection & Audit by Bank
At any reasonable time and from time to time, each Borrower will
permit the Bank or any agent or representative thereof to examine and
make copies of and abstracts from the Borrower's records and books of
account, and visit their properties and to discuss its affairs,
finances, and accounts with any of their respective officers and their
independent accountants. Without limiting the foregoing rights of the
Bank, each Borrower agrees that without any prior notice to the
Borrowers and not more frequently than two (2) times per calendar year,
the Bank and its agents and employees may conduct an audit of each
Borrower's records and books to determine each Borrower's compliance
with this Agreement and the other Loan Documents.
Section 5.08 Reporting Requirements
The Borrowers shall furnish to Bank:
a. Quarterly Reporting. As soon as available and in any
-------------------
event within thirty (30) days after the end of each quarter, balance
sheets as of the end of each quarter, statements of income and retained
earnings as of the end of such quarter, and properly completed
calculations necessary to test compliance with all of the financial
covenants set forth herein, in form and content reasonably acceptable to
the Bank, and all in reasonable detail, and all such financial
statements shall be prepared in accordance with GAAP consistently
applied and certified as correct by the Borrowers' chief financial
officer. Provided, however, the Borrowers shall not be obligated to
deliver the Borrowers' internally prepared balance sheet and income
statement for the last quarter of Borrowers' fiscal year.
b. Annual Financial Statements. As soon as available and
---------------------------
in any event within one hundred twenty (120) days after the end of their
fiscal year so long as any Obligations remain unpaid, a complete,
unqualified, annual audit report of EIMI and 21st Century. The audited
report shall consist of balance sheet, statement of profit and loss,
application of funds, change in financial position and the like,
prepared and certified by a firm of independent public accountants of
recognized standing acceptable to the Bank. EUGI shall also provide an
internally prepared annual financial statement which shall be on a
consolidated basis. All of the foregoing shall be in reasonable detail
and stating in comparative form the respective figures for the
corresponding date and period in the prior fiscal year and all such
financial statements shall be prepared in accordance with GAAP
consistently applied and certified as correct by each of the Borrowers'
chief financial officer.
c. Notice of Litigation. Promptly after the commencement
--------------------
thereof, notice of all actions, suits, and proceedings before any court
or governmental department, commission, board, bureau, agency, or
instrumentality, domestic or foreign, affecting any of the Borrowers or
Guarantors which, if determined adversely, could have a material,
adverse effect on any of their financial conditions, properties, or
operations.
- 10 -
<PAGE>
<PAGE>
d. Notice of Defaults and Events of Default. As soon as
----------------------------------------
possible and in any event within ten (10) days after the occurrence of
each Event of Default, a written notice setting forth the details of
such Event of Default and the action which is proposed to be taken with
respect thereto.
e. Tax Returns. Copies of each of the Borrowers'
-----------
federal and state income tax returns, and any amendments and extensions
no later than the earlier of the date filed or one hundred twenty (120)
days after the end of their fiscal year for so long as any portion of
the Loans remains unpaid or the Bank has any obligations hereunder. In
the event any Borrower files for an extension with the Internal Revenue
Service, such Borrower shall provide to the Bank copies of the federal
income tax return prior to the expiration of such extension period.
f. Guarantors' Financial Statements and Tax Returns. On
------------------------------------------------
or before April 30 of each year, or no later than October 30 if an
extension is filed, copies of each Guarantor's federal and state income
tax returns, amendments and schedules, and a financial statement of
assets, liabilities and net worth for each Guarantor by January 31, of
each year, in form and content reasonably acceptable to the Bank, and
all in reasonable detail.
g. Fiscal Year Projections. EIMI shall provide the Bank
-----------------------
with its fiscal year projections by January 31, of each year for so long
as any portion of the Loans remains unpaid.
h. Compliance Certificates. EIMI shall provide the Bank
-----------------------
with a Compliance Certificate in the same form as attached hereto as
Exhibit "A" within thirty (30) days after the end of the first three
calendar quarters of each year which are internally prepared and then
provide a Covenant Compliance Certificate within thirty (30) days after
the end of the fiscal year based on the audited consolidated financial
statement.
i. General Information. Such other information
-------------------
respecting the condition or operations, financial or otherwise, of any
of the Borrowers or Guarantors, as the Bank may from time to time
reasonably request.
Section 5.09 Financial Covenants to Be Maintained by EIMI
a. Net Worth. EIMI shall maintain a net worth, as
---------
defined by GAAP, of not less than $300,000.00 based on the 1997 year end
audited financial reports, which shall increase annually by the greater
of fifty percent (50%) of net income or $200,000.00 over the previous
year end audit reports.
b. Interest Coverage Ratio. EIMI shall not permit the
-----------------------
ratio of (i) its calendar quarterly earnings before interest expenses
and taxes to (ii) calendar quarterly interest expenses to be less than
3.00 to 1.00, which shall be reported on a calendar quarterly basis.
c. Debt Service Coverage Ratio. EIMI shall not permit
---------------------------
the debt service ratio to be less than 1.5 to 1.0, which shall be
reported on a calendar quarter basis.
Section 5.10 Employment Considerations, Assignment of Life Insurance,
Etc.
The EIMI and EUGI shall maintain John Robert Owens as the
President and CEO of each of the Borrowers and he shall also remain the
majority shareholder of each of them. The Borrowers agree that the
total compensation for John Robert Owens for any one (1) year shall be
no greater than $300,000.00. Further, the Borrowers shall provide key
man life insurance on the life of John Robert Owens of which $500,000.00
of said insurance shall be assigned to the Bank as collateral. The
Borrowers shall have four
- 11 -
<PAGE>
<PAGE>
(4) weeks from the date of Closing in which to complete the assignment
of the key man life insurance policy to the Bank.
Section 5.11 Further Assurances
The Borrowers and the Guarantors shall, upon request by the Bank,
promptly cure any defects in the creation, issuance and delivery of the
Notes and the execution and delivery of the other Loan Documents,
including this Agreement. The Borrowers and the Guarantors, at their
expense, promptly will execute and deliver to the Bank, upon request,
all such other and further documents, agreements and instruments
reasonably required to ensure compliance with or the accomplishment of
the covenants and agreements of the Borrowers and the Guarantors in the
Loan Documents, including this Agreement, or to evidence further and to
describe more fully any Collateral or other property intended as
security for the Loan or to correct any omissions in the Loan Documents,
or to state more fully the obligations set out in this Agreement or in
any of the other Loan Documents, or to perfect, protect or preserve any
Liens created pursuant to any of the Loan Documents, or to make any
recordings, to file any notices or to obtain any consents, all as may be
necessary or determined by the Bank in good faith to be reasonably
appropriate in connection therewith.
Section 5.12 Taxes and Other Payment Obligations.
The Borrowers shall pay and discharge, or cause to be paid and
discharged, before any of them becomes in arrears:
a. all taxes, assessments, governmental charges, levies,
and claims for labor, materials or supplies which if unpaid might become
a lien or charge upon any of Borrowers' property; and
b. all of the Borrowers' other debts, obligations and
liabilities as and when same become due.
Provided, however, the Borrowers may refrain from paying any
amount they would be required to pay pursuant to this section only if
the validity or amount thereof is being contested in good faith by
appropriate proceedings timely instituted which shall operate to prevent
the collection or enforcement of the obligation contested, and provided
that the Borrowers shall have set aside on their books appropriate
reserves with respect thereto.
ARTICLE VI
----------
NEGATIVE COVENANTS
------------------
So long as any portion of the Notes shall remain unpaid or the
Bank shall have any obligation under this Agreement, the Borrowers and
the Guarantors (where applicable) shall comply with the following
negative covenants:
Section 6.01 Liens on or Assignments of Collateral
The Borrowers will not create, incur, assume or suffer to exist
any Lien upon or with respect to any of the Collateral now owned or
hereafter acquired, except:
a. Liens in favor of the Bank;
- 12 -
<PAGE>
<PAGE>
b. Liens for taxes or assessments or other government
charges or levies if not yet due and payable or, if due and payable, if
they are being contested in good faith by appropriate proceedings and
for which appropriate reserves are maintained;
c. Liens imposed by law, such as mechanics, materialmen,
landlords, warehousemen and carrier Liens, and other similar Liens,
securing obligations incurred in the ordinary course of business which
are not past due or which are being contested in good faith by
appropriate proceedings and for which appropriate reserves have been
established;
d. Liens under worker's compensation, unemployment
insurance, social security, or similar legislation for sums which are
not past due;
e. Liens, deposits, or pledges to secure the performance
of public or statutory obligations, surety, stay, appeal, indemnity,
performance or other similar bonds, or other similar obligations arising
in the ordinary course of business; or
f. Liens in favor of third parties which do not exceed
$75,000.00 in the aggregate.
Section 6.02 Mergers, Etc.
The Borrowers will not merge, engage in a share exchange, or
consolidate with any other entity, or sell, assign, lease, or otherwise
dispose of (whether in one transaction or in a series of transactions)
all or substantially all of their assets at any time hereafter owned by
the Borrowers to any Person, or acquire all or substantially all of the
assets or the business of any Person, without the prior written consent
of the Bank which shall not be unreasonably withheld.
Section 6.03 Advances or Loans to Insiders
The Borrowers will not either lend funds or make other advances to
shareholders or related entities, which in the aggregate would exceed
$250,000.00, without the prior written consent of the Bank.
Section 6.04 Additional Debt
The Borrowers will not borrow from third party lenders nor shall
they guarantee any additional indebtedness which in the aggregate
exceeds $150,000.00, without the prior written consent of the Bank.
ARTICLE VII
-----------
EVENTS OF DEFAULT AND REMEDIES OF BANK
--------------------------------------
Section 7.01 Events of Default
Each of the following shall be an Event of Default under this
Agreement:
a. Payment Default. The Borrowers fail to pay any
---------------
installment of principal or interest on the Notes when due without
notice from the Bank.
b. Other Defaults with Bank. The occurrence of a default
------------------------
under any other obligation or agreement of the Borrowers or the
Guarantors to or with the Bank, whether now or hereafter arising and
such default shall continue for a period of thirty (30) days after
notice to the Borrowers or Guarantors from the Bank describing the
nature of the default.
- 13 -
<PAGE>
<PAGE>
c. Breach of Warranty, Etc. Any representation or
------------------------
warranty made or deemed made by any of the Borrowers or the Guarantors
in this Agreement, the Loan Documents, or in any other certificate,
document, opinion, or financial or other statement furnished at any time
under or in connection with any Loan Document shall prove to have been
incorrect in any material respect on or as of the date made or deemed
made.
d. Breach of Covenant. Any of the Borrowers or the
------------------
Guarantors fail to perform or observe any term, covenant or agreement on
their part to be performed or observed contained in any Loan Document
(other than a failure to pay any sum to the Bank when due) to which any
of them is a party and such failure shall continue for a period of
thirty (30) days after notice to either Borrowers or the Guarantors from
the Bank describing the nature of the failure.
e. Bankruptcy/Insolvency. Any of the Borrowers or the
---------------------
Guarantors (i) are unable to, or admit in writing their inability to,
pay their debts as such debts become due; or (ii) make an assignment for
the benefit of creditors, petition or apply to any tribunal for the
appointment of a custodian, receiver or trustee for them or a
substantial part of their assets; or (iii) commence any proceeding under
any bankruptcy; or (iv) have any such petition or application filed or
any such proceeding commenced against them in which an order for relief
is entered or adjudication or appointment is made and which remains
undismissed for a period of sixty (60) days or more; or (v) by any act
or omission indicate their consent to, approval of, or acquiescence in
any such petition, application, or proceeding, or order for relief, or
the appointment of a custodian, receiver, or trustee for all or any
substantial part of their properties; or (vi) suffer any such
custodianship, receivership, or trusteeship to continue undischarged for
a period of sixty (60) days or more.
f. Defaults with Other Parties. The occurrence of a
---------------------------
default under any other obligation or agreement of the Borrowers with
other third parties, including without limitation, agreements with
William W. Davis, Jr., individually and as Trustee for Hannah D. Emig,
which default would have a material adverse effect upon the financial
condition of the Borrowers in the opinion of the Bank.
g. Termination of the Borrowers. Any of the Borrowers
----------------------------
(or any Person affiliated with any of them) take any action that is
intended to result in the termination, dissolution or liquidation of
either of the Borrowers.
Section 7.02 Remedies of Bank in the Event of Default
a. Acceleration, etc. Upon the occurrence of any Event
------------------
of Default set forth in section 7.01 hereof, the Bank may, by notice to
the Borrowers: (i) declare its obligation to make Advances under this
Agreement and the Notes terminated, whereupon the same shall forthwith
terminate; (ii) declare the outstanding principal balance owing under
the Notes, all interest thereon, and all other amounts payable under
this Agreement or any Loan Document, or otherwise to be forthwith due
and payable, whereupon the Notes, all such interest, and all such
amounts shall become and be forthwith due and payable, without
presentment, demand, protest, or further notice of any kind, all of
which are hereby expressly waived by the Borrowers, without any action
on the part of the Bank; (iii) avail itself of any and all remedies
available to it in any of the Loan Documents, including, without
limitation, appointment of receivers for the Collateral; and (iv) avail
itself of any and all other or additional remedies available by law or
in equity.
b. File Action. Upon the occurrence of any Event of
-----------
Default, the Bank shall have the right to proceed to protect and enforce
its rights by suit in equity, action at law and/or other appropriate
proceedings either for specific performance of any covenant or condition
contained in this
- 14 -
<PAGE>
<PAGE>
Agreement or in any of the other Loan Documents, or in aid of the
exercise of any power granted in this Agreement or any of the other Loan
Documents.
c. Use of Collateral. Upon the occurrence of any Event
-----------------
of Default, the Borrowers' rights to use, sell, substitute, exchange or
exercise any other rights relating to the Collateral and all proceeds
thereof and income therefrom shall automatically terminate without
notice and the Bank shall thereafter be entitled to take possession of,
receive, sell, and collect same.
d. Waiver of Marshaling of Assets. The Borrowers waive
------------------------------
any requirement of marshaling of assets and all other legal or equitable
doctrines which might otherwise require the Bank to proceed against any
Persons or any Collateral or any other property or with respect to any
other rights in any particular order.
e. Sale of Collateral. Upon the occurrence of any Event
------------------
of Default, the Bank shall have the right to sell the Collateral at
public or private sale, and shall have the right to bid upon and
purchase the Collateral at any sale. The Bank shall have the right to
deliver the Collateral to the buyer at any public or private sale. This
includes the right to sell all of the common stock held by the Escrow
Agent which is owned by Davis, Emig, Owens or Meyer provided that Davis,
both individually and as Trustee for Emig, and the Bank agree to
mutually acceptable terms for the sale of stock. In such event the Bank
and Davis may direct the Escrow Agent to release said stock to either
Davis or the Bank for the sole purpose of selling same.
f. No Waiver. Upon the occurrence of any Event of
---------
Default, the Bank may choose to exercise and enforce any of its rights
or remedies, or decline to exercise and enforce any of its rights or
remedies, at the Bank's sole discretion. The failure of the Bank to
exercise and enforce any rights or remedies shall not prevent the Bank
from thereafter exercising or enforcing any such rights or remedies, nor
shall such failure release any Person or property with respect to which
the Bank has any rights or remedies, or in any way limit or diminish
Bank's rights with respect to any such property or Person.
g. Cumulative Rights. All of the Bank's rights and
-----------------
remedies shall be cumulative to the greatest extent permitted by law,
may be exercised successively or concurrently, from time to time, and
shall be in addition to all of those rights and remedies afforded the
Bank at law, or in equity, or in bankruptcy. Any exercise of any right
or remedy shall not be deemed to be an election of that right or remedy
to the exclusion of any other right or remedy.
h. Recovery. The Bank shall be entitled to recover from
--------
the cumulative exercise of all remedies the sum of:
(i) the outstanding principal amount of the Loan;
(ii) all accrued but unpaid interest with respect to
the principal amount of the Loan;
(iii) any other amounts that either the Borrowers or
Guarantors are required by this Agreement or the Loan Documents to
pay to the Bank (for example, and without limitation, the
reimbursement of reasonable expenses and legal fees, and late
charges); and
(iv) any costs, expenses or damages which the Bank is
otherwise permitted to recover by the terms of this Agreement, the
other Loan Documents, or at law or equity.
- 15 -
<PAGE>
<PAGE>
i. Application of Payments. All payments from the
-----------------------
Borrowers to the Bank under the Note or any of the other Loan Documents,
and payments to the Bank from the sale or other disposition of
Collateral, shall all be applied by the Bank as follows:
(i) to the payment of the costs and expenses of the
Bank and the reasonable fees and expenses of its counsel in
connection with the administration or enforcement of the Bank's
rights and remedies against any of the Borrowers or the
Guarantors, and the Collateral and sale or collection thereof;
(ii) to the payment in full of all indebtedness
referred to hereunder and under the Loan Documents, applying such
amounts first to accrued interest and then to principal; and
(iii) the balance, if any, to the Borrowers or to any
third party entitled thereto.
j. Appointment of the Bank as Attorney-In-Fact. The
-------------------------------------------
Borrowers hereby appoint the Bank as the Borrowers' attorney-in-fact
upon the occurrence of any Event of Default for the purpose of dealing
with the Collateral, including the collection and disposition of same.
The powers vested in said attorney are, and shall be deemed to be,
coupled with an interest and cannot be revoked.
ARTICLE VIII
------------
MISCELLANEOUS
-------------
Section 8.01 Amendments, Etc.
No amendment, modification, termination, or waiver of any
provision of any Loan Document, nor consent to any departure by any of
the Borrowers or the Guarantors from any Loan Document to which any of
them is a party, shall in any event be effective unless the same shall
be in writing and signed by the Bank, and then such waiver or consent
shall be effective only in the specific instance and for the specific
purpose for which given.
Section 8.02 Notices, Etc.
All notices required or provided for in this Agreement or under
any of the other Loan Documents shall be made in writing and delivered
either (i) personally, (ii) via certified mail with return receipt
requested, (iii) by Federal Express or other nationally recognized,
overnight courier service, or (iv) by facsimile, with the original by
United States, first class, postage prepaid mail, to the party to whom
directed at the addresses and facsimile numbers set forth below, or to
such other addresses and numbers as may be designated by any party by
the giving of notice of a change in its address or facsimile number as
provided for herein. All notices given as provided for herein, other
than by way of certified mail, shall be deemed effective upon personal
delivery, the next business day after delivery to the overnight courier
service or upon being faxed, as applicable. Notice given by way of
certified mail shall be deemed effective upon receipt or refusal of
receipt thereof. The addresses and facsimile numbers for notice to the
parties hereto are as follows:
If to the Borrowers: 3201 Nicholasville Road
Lexington, KY 40512-4032
Facsimile: (606) 245-2550
If to John Robert Owens: 1905 Lakes Edge Drive
Lexington, KY 40502
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If to D. Richard Meyer: 912 Witthuhn Way
Lexington, KY 40503
with a copy to the
Borrowers' and
Guarantors' counsel: Robert M. Beck, Jr., Esq.
Stites & Harbison
2300 Lexington Financial Center
Lexington, KY 40507
Facsimile: (606) 253-9144
Richard E. Vimont, Esq.
Vimont & Wills, PLLC
155 East Main Street, Suite 300
Lexington, KY 40507-1317
Facsimile: (606) 259-2927
If to the Bank: Robert Heiple
Bank One, Kentucky, NA
201 East Main Street
Lexington, KY 40507-2002
Facsimile: (606) 231-2732
with a copy to the Bank's
counsel at: Harvie B. Wilkinson
Stoll, Keenon & Park, LLP
201 East Main Street, Suite 1000
Lexington, KY 40507-1380
Facsimile: (606) 253-1093
Section 8.03 No Waiver; Remedies
No failure on the part of the Bank to exercise, and no delay in
exercising, any right, power, or remedy under any Loan Documents shall
operate as a waiver thereof; nor shall any single or partial exercise of
any right under any Loan Documents preclude any other or further
exercise thereof or the exercise of any other right. The remedies
provided in the Loan Documents are cumulative and not exclusive of any
remedies provided by law or in equity.
Section 8.04 Successor and Assigns
This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, except
that neither the Borrowers nor the Guarantors may assign or transfer any
of their rights under any Loan Document to which they are a party
without the prior written consent of the Bank.
Section 8.05 Costs, Expenses and Taxes
The Borrowers agree to pay on demand all reasonable costs and
expenses in connection with the preparation, execution, delivery,
filing, recording and administration of any and all of the Loan
Documents, including, without limitation, the reasonable fees and out-
of-pocket expenses of counsel for the Bank, and all costs and expenses,
if any, in connection with the enforcement of any of the Loan Documents.
In addition, the Borrowers shall pay any and all fees payable or
determined to be payable in
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connection with the execution, delivery, filing, and recording of any of
the Loan Documents and the other documents to be delivered under any
such Loan Documents. The Borrowers shall further pay all of the
foregoing reasonable costs, including reasonable attorney fees,
associated with modification of the Loan Documents, and preparation and
recording of additional Loan Documents.
Section 8.06 Right of Set Off
Upon the occurrence and during the continuance of any Event of
Default, the Bank is hereby authorized at any time and from time to
time, without notice to the Borrowers (any such notice being expressly
waived), to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other
indebtedness at any time owing by the Bank to or for the credit or the
account of the Borrowers against any and all of the obligations of the
Borrowers, now or hereafter existing under this Agreement or the Notes
or any other Loan Document, irrespective of whether or not the Bank
shall have made any demand under this Agreement or the Notes or such
other Loan Document and although such obligations may be unmatured. The
Bank agrees promptly to notify the Borrowers after any such set off and
application, provided that the failure to give such notice shall not
affect the validity of such set off and application. The rights of the
Bank under this Section 8.06 are in addition to other rights and
remedies (including, without limitation, other rights of set off) which
the Bank may have.
Section 8.07 Waiver of Jury Trial
THE BANK, THE BORROWERS AND THE GUARANTORS HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT,
OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN) OR ACTIONS OF THE BANK, THE BORROWERS OR THE GUARANTORS. THE
BORROWERS AND THE GUARANTORS ACKNOWLEDGE AND AGREE THAT THEY HAVE
RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE BANK ENTERING INTO THIS
AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT.
Section 8.08 Governing Law; Entire Agreement; Interpretation and
Counterparts
The substantive laws of the Commonwealth of Kentucky (without
regard to provisions governing conflicts of laws) shall govern the
construction of this Agreement, the Notes and each other Loan Document
and the rights and remedies of the parties thereto, except to the extent
that the laws of any applicable state shall govern the creation or
perfection of the lien or security interest in Collateral located in
such applicable state, the enforcement of the Bank's rights to such
property and/or the realization of Bank's rights in such property as
security for the Loan Obligations. Except as otherwise provided herein,
this Agreement, the Notes and the other Loan Documents constitute the
entire understanding among the parties hereto with respect to the
subject matter hereof and supersede any prior agreements, written or
oral, with respect thereto. This Agreement may be executed in one or
more counterparts, each of which shall be a duplicate original, but all
of which shall constitute the same agreement. In the event of any
conflict between any other Loan Document and the terms of this
Agreement, the terms of this Agreement shall be deemed to govern any
such conflict. To the extent any other Loan Document is not directly in
conflict with the provisions hereof or can be reasonably construed in
such a way as to be consistent with the terms of this Agreement, the
terms of such other instrument or document shall govern.
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Section 8.09 Severability of Provisions
Any provision of any Loan Document which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provisions of such Loan Document or
affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 8.10 Headings
Article and Section headings in the Loan Documents are included in
such Loan Documents for the convenience of reference only and shall not
constitute a part of the applicable Loan Documents for any other
purpose.
Section 8.11 Jurisdiction and Venue
The parties agree that the sole proper venue for the determination
of any litigation commenced by either the Borrowers or the Guarantors
against the Bank on any basis shall be in a court of competent
jurisdiction which is located in Fayette County, Kentucky, and the
parties hereby expressly declare that any other venue shall be improper
and the Borrowers and the Guarantors expressly waive any right to a
determination of any such litigation against the Bank by a court in any
other venue. The Borrowers and the Guarantors further agree that
service of process by any judicial officer or by registered or certified
U.S. mail, as specified in Section 8.02 on Notices, shall establish
personal jurisdiction over the Borrowers and the Guarantors, and the
Borrowers and the Guarantors waive any rights under the laws of any
state to object to jurisdiction within the Commonwealth of Kentucky.
The Borrowers and the Guarantors acknowledge that this Agreement was
negotiated, executed and delivered in the Commonwealth of Kentucky and
shall be governed and construed in accordance with the laws thereof.
Provided, however, nothing contained in this Section 8.11 shall prevent
the Bank from bringing any action or exercising any rights against any
security or against the Borrowers or the Guarantors personally, and any
of their property, within any other state. Initiating such proceedings
or taking such action in any other state shall in no event constitute a
waiver of the agreement contained herein that the laws of the
Commonwealth of Kentucky shall govern the rights and obligations of the
parties hereunder or of the submission herein made by each Borrower and
Guarantor to personal jurisdiction within the Commonwealth of Kentucky.
The aforesaid means of obtaining personal jurisdiction and perfecting
service of process are not intended to be exclusive, but are cumulative
and in addition to all other means of obtaining personal jurisdiction
and perfecting service of the laws of the Commonwealth of Kentucky or by
any other state in an action brought by Bank in such state.
Section 8.12 No Third Party Beneficiaries
All conditions on the obligations of any party hereunder,
including the obligation of the Bank to make Advances, are imposed
solely and exclusively for the benefit of the other parties thereto and
the Bank's successors and assigns and any permitted assigns of the
Borrowers. No other Person, including any shareholder, officer or
director of either Borrower, shall have standing to require satisfaction
of such conditions in accordance with their terms or be entitled to
assume that the Bank will refuse or decline to make Advances in the
absence of strict compliance with any or all thereof, and no other
Person shall, under any circumstances, be deemed to be a beneficiary of
such conditions, any and all of which may be freely waived in whole or
in part by the respective party to whom the performance of any such
condition shall run at any time if in the sole discretion of such party
it deems it desirable to do so, or if it fails to do so for any other
reason.
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Section 8.13 No Agency
The Bank is not the agent or representative of any of the
Borrowers or the Guarantors, and neither the Borrowers nor the
Guarantors are the agents or representatives of the Bank, and nothing in
this Agreement shall be construed to make the Bank liable to anyone for
goods delivered to or services performed with respect to the Collateral
or for debts or claims accruing against either the Borrowers or the
Guarantors. Nothing herein, nor the acts of the parties hereto, shall
be construed to create a partnership or joint venture between the Bank
and the Borrowers or Guarantors or any other relationship except as
creditor, debtor, and guarantor.
Section 8.14 Bank's Performance of the Borrowers' Covenants and Duties
Should any of the Borrowers fail to perform any of their
covenants, duties and agreements in accordance with the terms hereof and
an Event of Default shall thereby result, the Bank may, at its election
and at the Borrowers' expense, perform or attempt to perform such
covenant, duty or agreement on behalf of the Borrowers, but in no event
shall the Bank have any obligation to do so. The Borrowers shall, at
the request of the Bank, promptly pay, upon demand, any reasonable
amount expended by the Bank in such performance or attempted performance
to the Bank at the Lexington Office, together with interest thereon at
the default rate under the Notes from the date such amount was requested
by the Bank to be paid until paid; provided that the Bank does not
assume and shall never have, except by a subsequent, express written
undertaking of the Bank, any liability for the performance of any duties
of the Borrower under or in connection with all or any part of the
Collateral. The Bank shall be subrogated to all rights, titles, Liens
and security interests securing the payment of any debt, claim, tax or
assessment for the payment of which the Bank may make an advance or that
the Bank may pay.
Section 8.15 Course of Dealing; Waiver
No course of dealing in respect of, or any omission or delay in
the exercise of, any right, power, remedy or privilege by the Bank shall
operate as a waiver thereof, nor shall any right, power, remedy or
privilege of the Bank be exclusive of any other right, power, remedy or
privilege referred to herein or in any related document or now or
hereafter available at law, in equity, in bankruptcy, by statute or
otherwise. Each such right, power, remedy or privilege may be exercised
by the Bank, either independently or concurrently with others, and as
often and in such order as the Bank may deem expedient. No waiver or
consent granted by the Bank with respect to this Agreement, the
indebtedness or any Loan Document or related writing shall be binding
upon the Bank, unless specifically granted in writing by a duly
authorized officer of the Bank, which writing shall be strictly
construed.
Section 8.16 Absence of Oral Representations
The Borrowers and the Guarantors each represent and warrant that
no promises, assurances or commitments have been made to them by the
Bank or have been relied on by them regarding any extension, renewal or
future financing, they understand and agree that the Bank is entitled to
enforce this Agreement, the Notes and all other Loan Documents strictly
in accordance with their terms, and any commitment or obligation to
extend or renew any financing or provide additional financing shall not
be binding on Bank, except to the extent contained in a writing signed
by every Person who is to be bound thereby. The Borrowers and the
Guarantors further acknowledge that (i) the Bank does not presently
anticipate renewing, extending or further modifying the financing
referenced in this Agreement, and (ii) the Bank anticipates the Notes
will be fully paid in accordance with their terms on or before maturity.
The Borrowers and the Guarantors each agree and represent to the Bank
(which representation the Borrowers and the Guarantors acknowledge the
Bank is relying on in executing this Agreement) that they will not rely
on any (i) commitment or future financing, including, but not limited
to, renewals,
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extensions and modifications, unless signed in writing by the Bank, and
(ii) waiver of any right existing at any time, and from time to time,
either now or in the future, except to the extent evidenced by a writing
signed by the person effecting such waiver.
Section 8.17 Indemnity
The Borrowers and the Guarantors shall indemnify the Bank from and
hold the Bank harmless against any loss suffered or liability incurred
by the Bank on account of any damage to the person or property of the
parties hereto or to third parties by reason of the operation of the
Borrowers' business, or otherwise arising out of or connected to the
conduct of the Borrowers or the Guarantors, their officers, directors,
employees or agents, in connection with any matters which are the
subject of this Agreement.
Section 8.18 Arbitration
The Borrowers, the Guarantors and the Bank agree that upon the
written demand of either party, whether made before or after the
institution of any legal proceedings, but prior to the rendering of any
judgment in that proceeding, all disputes, claims and controversies
between them, whether individual, joint, or class in nature, arising
from the Notes, any Loan Documents or otherwise, including without
limitation contract disputes and tort claims, shall be resolved by
binding arbitration pursuant to the Commercial Rules of the American
Arbitration Association. Any arbitration proceeding held pursuant to
this arbitration provision shall be conducted in the city nearest the
Borrower's address having an AAA regional office, or at any other place
selected by mutual agreement of the parties. No act to take or dispose
of any Collateral shall constitute a waiver of this arbitration
agreement or be prohibited by this arbitration agreement. This
arbitration provision shall not limit the right of either party during
any dispute, claim or controversy to seek, use and employ ancillary, or
preliminary rights and/or remedies, judicial or otherwise, for the
purposes of realizing upon, preserving, protecting, foreclosing upon or
proceeding under forcible entry and detainer for possession of, any real
or personal property, and any such action shall not be deemed an
election of remedies. Such remedies include, without limitation,
obtaining injunctive relief or a temporary restraining order, invoking
power of sale under any deed of trust or mortgage, obtaining a writ of
attachment or imposition of a receivership, or exercising any rights
relating to personal property, including taking or disposing of such
property with or without judicial process pursuant to Article 9 of the
Uniform Commercial Code or when applicable, a judgment by confession of
judgment. Any disputes, claims or controversies concerning the
lawfulness or reasonableness of an act, or exercise of any right or
remedy concerning any Collateral, including any claim to rescind, reform
or otherwise modify any agreement relating to the Collateral, shall also
be arbitrated; provided, however, that no arbitrator shall have the
right or the power to enjoin or restrain any act of either party.
Judgment upon any award rendered by any arbitrator may be entered in any
court having jurisdiction. Nothing in this arbitration provision shall
preclude either party from seeking equitable relief from a court of
competent jurisdiction. The status of limitations, estoppel, waiver,
laches and similar doctrines which would otherwise be applicable in an
action brought by a party shall be applicable in any arbitration
proceeding, and the commencement of an arbitration proceeding shall be
deemed the commencement of any action for these purposes. The Federal
Arbitration Act (Title 9 of the United States Code) shall apply to the
construction, interpretation, and enforcement of this arbitration
provision.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed as of the date first above written.
EQUITY INSURANCE MANAGERS, INC.
BY: /s/ John R. Owens
----------------------------------------
TITLE: President
-------------------------------------
EQUITY UNDERWRITING GROUP, INC.
BY: /s/ John R. Owens
----------------------------------------
TITLE: President
-------------------------------------
21ST CENTURY CLAIM SERVICE, INC.
BY: /s/ John R. Owens
----------------------------------------
TITLE: Secretary/Treasurer
-------------------------------------
/s/ John R. Owens
-------------------------------------------
JOHN ROBERT OWENS
/s/ D. Richard Meyer
-------------------------------------------
D. RICHARD MEYER
BANK ONE, KENTUCKY, NA
BY: /s/ R. J. Heiple
----------------------------------------
TITLE: Executive Vice President
-------------------------------------
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EXHIBIT 10.27
GUARANTY OF PAYMENT AND PERFORMANCE
-----------------------------------
("Guaranty")
Dated as of December 30, 1997
1. FOR VALUE RECEIVED, and in order to induce BANK ONE,
KENTUCKY, NA, a national banking association, and its successors and
assigns, 416 West Jefferson Street, Louisville, Kentucky 40202 (the
"Bank"), to make the loan evidenced by that certain Amended and Restated
Revolving Credit Note dated December 30, 1997, in the face principal
amount of Two Hundred Thousand Dollars ($200,000.00) (the "Note") and
made by 21ST CENTURY CLAIM SERVICE, INC. ("Borrower"), the undersigned,
EQUITY INSURANCE MANAGERS, INC. (the "Guarantor") does hereby personally
guarantee unconditionally to the holder of the Note the due and punctual
payment of all installments of principal and interest now or in the
future due under the Note, as and when the same shall be due and payable
thereunder in accordance with their respective terms, and whether the
same be declared due by the holder of the Note prior to its stated
maturity date by virtue of default thereunder. The undersigned further
guarantees the prompt performance by Borrower of all non-monetary
undertakings, covenants and agreements to be performed by Borrower under
the Note.
2. The Guarantor consents and agrees that the whole or any part
of the security now or hereafter held for the Note may be exchanged,
compromised, surrendered or released from time to time; that the time or
place of payment of the Note or of any security therefor may be
exchanged or extended, in whole or in part, to a time certain or
otherwise, and the Note may be renewed or accelerated, in whole or in
part; that Borrower may be extended further loans and be granted
indulgences generally; that any of the provisions of the Note, or of any
instrument securing or pertaining to the security for the same, may be
modified or waived (either expressly or through tacit acquiescence);
that any party liable for the payment of the Note may be granted
indulgences or released; that neither the death, insolvency, bankruptcy,
dissolution, nor disability of the Borrower or of the Guarantor shall
affect the obligations hereunder of the Guarantor; that no claim need be
asserted against the personal representatives, guardian, trustee in
bankruptcy or receiver of any deceased, incompetent, bankrupt or
insolvent Borrower or guarantor; that any deposit balance to the credit
of Borrower, Guarantor, or any other party liable for payment of the
Note or liable upon any security therefor may be released from time to
time in whole or in part, at, before or after the stated, extended or
accelerated maturity date of the Note; and that the undersigned
Guarantor shall remain bound hereunder, notwithstanding any such
exchange, compromise, surrender, extension, renewal, acceleration,
modification, waiver, indulgence, release or other action, all of which
may be affected without notice to or further asset or agreement by
Guarantor.
3. The Guarantor expressly waives:
(a) Notice of acceptance of this Guaranty;
(b) Presentment and demand for payment of the Note;
(c) Protest and notice of protest, dishonor or
default to Guarantor or to any other party with
respect to the Note or any security for the
Note;
(d) All other notices to which Guarantor may
otherwise be entitled;
(e) Demand for payment under this Guaranty;
(f) Notice of disposition of any security for the
Note;
(g) All rights of indemnity, exoneration,
reimbursement, contribution and/or subrogation
of Guarantor against Borrower; and
(h) All suretyship and guarantor's defenses
generally.
<PAGE>
<PAGE>
4. This is a guaranty of payment as to monetary obligations and
not of collection. The liability of Guarantor under this Guaranty shall
be direct and immediate and not conditional or contingent upon the
pursuit of any remedies against Borrower or any other guarantor or other
person nor against the security or liens available to holder for the
payment of the Note. The Guarantor waives any claim to marshaling of
assets and waives any right to require that an action be brought against
Borrower or any other person prior to action against the Guarantor
hereunder and waives any right to require that resort be had to any
security for the Note or to any balance of any deposit account or credit
on the books of the holder of the Note in favor of Borrower or any other
party prior to action by the holder of the Note against the Guarantor
hereunder. If the Note is partially paid through the election of the
holder thereof to pursue any of the remedies mentioned in this literary
paragraph or if the Note is otherwise partially paid, Guarantor shall
remain personally liable for the entire unpaid principal balance of, and
all accrued interest on, the Note.
5. The Note shall constitute the primary independent and
continuing obligation of the Guarantor, who shall be liable for payment
of the debt evidenced by the Note, notwithstanding the partial or total
invalidity of the Note.
6. The obligations of the Guarantor under this Guaranty shall
not be subject to any counterclaim, set off, deduction or defense based
upon any claim Guarantor may have against Borrower or Bank, and the
obligations of Guarantor under this Guaranty shall remain in full force
and effect, without regard to, and shall not be released, discharged or
in any way modified or affected by, any circumstance or condition
(whether or not Guarantor shall have any knowledge or notice thereof),
including, but not limited to, any bankruptcy, insolvency,
reorganization, arrangement, readjustment, composition, liquidation or
similar proceeding with respect to Borrower or its properties or its
creditors, or any action taken by any trustee or receiver or by any
court in any such proceeding.
7. In the event of any default by Borrower under the Note,
Guarantor will pay, to the extent allowable by law to Bank such further
amount as shall be sufficient to reimburse fully Bank for all of its
costs and expenses of enforcing its rights and remedies under the Note,
including, without limitation, Bank's reasonable attorney's fees and
court costs, and all of same shall be evidenced by the Note and this
Guaranty.
8. This Guaranty shall be construed in accordance with and
governed by the laws of the Commonwealth of Kentucky, without reference
to its principles of conflicts of laws.
9. GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES ANY RIGHTS HE MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS GUARANTY, THE LOAN AGREEMENT OR ANY OTHER DOCUMENT, OR ANY COURSE
OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR
ACTIONS OF BANK, BORROWER OR ANY GUARANTOR. GUARANTOR ACKNOWLEDGES AND
AGREES THAT HE HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS
PROVISION AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT TO BANK.
10. The Guarantor agrees that the sole proper venue for the
determination of any litigation commenced by either Guarantor or Bank on
any basis shall be in a court of competent jurisdiction which is located
in Fayette County, Kentucky, and the parties hereby expressly declare
that any other venue shall be improper and Guarantor expressly waives
any right to a determination of any such litigation against Guarantor by
a court in any other venue. Guarantor further agrees that service of
process by any
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judicial officer or by registered or certified U.S. mail shall establish
personal jurisdiction over Guarantor, and Guarantor waives any rights
under the laws of any state to object to jurisdiction within the
Commonwealth of Kentucky. The aforesaid means of obtaining personal
jurisdiction and perfecting service of process are not intended to be
exclusive, but are cumulative and in addition to all other means of
obtaining personal jurisdiction and perfecting service of process now or
hereafter provided by the laws of the Commonwealth of Kentucky or by any
other state in an action brought by Bank in such state. Provided,
however, nothing herein shall in any way be deemed to limit the ability
of Bank to serve any writs, process or summons in any other manner
permitted by applicable law or to obtain jurisdiction over Guarantor in
such other jurisdictions and in such manner as may be permitted by
applicable law.
11. The undersigned does hereby agree and acknowledge that the
maximum aggregate liability of the Guarantor shall be the sum of Two
Hundred Thousand Dollars ($200,000.00), plus interest accruing on said
amount, plus fees, charges and costs of collecting the guaranteed
indebtedness (including reasonable attorneys fees).
12. This Guaranty shall terminate on January 30, 1999.
Provided, however, the undersigned acknowledges and agrees that such
termination shall not affect his liability with respect to:
(a) obligations created or incurred prior to such date (which
specifically includes the Note), or (b) extensions or renewals of,
interest accruing on, or fees, costs or expenses incurred with respect
to such obligations (which specifically includes the Note), on or after
such date.
13. If any payment made on the Note shall be required to be
repaid or refunded by Bank as a result of any bankruptcy or insolvency
of Borrower or of Guarantor or by virtue of any claim of preference,
invalidity, unenforceability or right of rescission, Guarantor hereby
acknowledges and agrees that Guarantor shall remain liable for the
amount of such payment refunded, to the extent provided herein, as if
such payment had never been made by Borrower or by Guarantor to Bank.
14. This Guaranty shall remain fully enforceable irrespective of
any claim, defense or counterclaim which Borrower may or could assert as
to the Note, including, but not limited to, failure of consideration,
breach of warranty, payment, statute of frauds, statute of limitations,
fraud, bankruptcy, and usury, all of which Guarantor hereby waives along
with any standing by Guarantor to assert any said claim, defense or
counterclaim.
15. The Guarantor has, to his satisfaction, independently
investigated: (a) Borrower's credit history; (b) Borrower's payment
history with Bank; (c) Borrower's past, current and projected financial
condition; and (d) the sufficiency of any collateral supporting
Borrower's obligations under the Note. Guarantor represents and
warrants that he has relied exclusively on his own independent
investigation of Borrower for his decision to guarantee the Note.
Guarantor agrees that he has sufficient knowledge of Borrower to make an
informed decision about this Guaranty, and that Bank has no duty or
obligation to disclose any information in its possession or control
about Borrower to Guarantor.
I. In the event that any one or more of the provisions contained
herein shall for any reason be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof and this
Guaranty shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein.
II. The provisions of this Guaranty shall be binding upon the
Guarantor and his respective heirs, successors, legal representatives
and assigns and shall inure to the benefit of the holder of the Note,
and its successors, endorsees and assigns.
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<PAGE>
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty to be
effective as of the date and year first above written.
/s/ John R. Owens, President
---------------------------------------
EQUITY INSURANCE MANAGERS, INC.
STATE OF KENTUCKY
COUNTY OF FAYETTE
Subscribed, acknowledged and sworn to before me this 30th day of
December, 1997, by John Robert Owens, as President of Equity Insurance
Managers, Inc., as Guarantor.
My Commission Expires: July 11, 2000
--------------------
/s/ Judith W. Lis
---------------------------------------
NOTARY PUBLIC, STATE AT LARGE
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EXHIBIT 10.28
SECURITY AGREEMENT
------------------
THIS SECURITY AGREEMENT is made and entered into effective as of
the 20th day of January, 1998, by EQUITY UNDERWRITING GROUP, INC., a
Kentucky corporation, with address of 3201 Nicholasville Road,
Lexington, Kentucky 40503 (hereinafter referred to as "Debtor"); and
BANK ONE, KENTUCKY, NA, a national banking association, 416 West
Jefferson Street, Louisville, Kentucky 40202 (hereinafter referred to as
"Secured Party").
IT IS AGREED BY THE PARTIES AS FOLLOWS:
I. For value received, Debtor does hereby grant unto Secured Party a
security interest in and to all the collateral described in
numerical Paragraph two (2) hereof to secure all the indebtedness
referred to in numerical Paragraph three (3) hereof.
II. The collateral covered by this Security Agreement is (a) all of
Debtor's property described in Schedule A hereto and any
supplemental exhibits thereto, and (b) all proceeds and products
thereof (all of which collateral is hereinafter collectively
referred to as the "Collateral").
III. This Security Agreement is made as collateral security for:
A. The payment of all sums due to Secured Party from Debtor and
the other maker under the terms of that certain
$1,250,000.00 Term Note dated as of January 20, 1998 (the
"Note"); and
B. All other liabilities and obligations of whatever kind or
type of Debtor to Secured Party, including any guarantees of
the Debtor to Secured Party, whether created directly or
acquired by Secured Party by assignment or otherwise,
whether now existing or hereafter created, arising or
acquired, absolute or contingent, joint or several, due or
to become due (the foregoing obligations are herein
collectively referred to as "Indebtedness").
IV. Debtor represents and warrants to Secured Party that:
A. All of the Collateral is used or will be used for business.
B. Debtor is the absolute owner of the legal and beneficial
title to the Collateral, (exclusive of hereafter acquired,
replacement or hereafter created items), and is in full
possession thereof.
C. Except as previously disclosed in writing, the Collateral is
free and clear of all liens, encumbrances and adverse claims
whatsoever;
D. Debtor has the right to enter into this Security Agreement.
V. Debtor covenants and agrees that:
A. Debtor shall defend the Collateral against the claims and
demands of all persons.
B. Debtor shall not:
<PAGE>
<PAGE>
1. permit any loan or security interest (other than
Secured Party's security interest granted herein and
those liens previously disclosed in writing) to attach
to any of the Collateral;
2. permit any of the Collateral to be levied upon under
any legal process; or
3. dispose of or enter or agree to enter into any sale of
any of the Collateral, which is in excess of
$50,000.00 per sale and $100,000.00 in the aggregate
on an annual basis, whether or not inventory, without
prior written consent of Secured Party.
C. Debtor shall insure or have insured the tangible Collateral
for the benefit of Secured Party (who shall be the loss
payee) in such amounts, for such risks and with such company
as Secured Party may request, and promptly deliver all
policies with respect thereto to Secured Party, or in the
event Debtor at any time has not maintained and delivered to
Secured Party such requested policies of insurance, Secured
Party shall, in its sole and absolute discretion, whether or
not any Event of Default, as defined in this Security
Agreement, has occurred, have the right to place and effect
such insurance as Secured Party deems appropriate at the
Debtor's expense and in the event Secured Party elects to
pay for such insurance coverage, Debtor shall reimburse
Secured Party for the amount(s) so paid plus interest
thereon at the default rate of interest due under the Note.-
D. Debtor shall keep the Collateral consisting of tangible
property in good condition.
E. Debtor shall advise Secured Party in writing, at least
thirty (30) days prior thereto, of any change in Debtor's
place of business or mailing address.
F. Debtor shall not conduct business under any other name than
that given above nor change or reorganize the type of
business entity under which it does business except upon
prior written approval of Secured Party. If such approval
is given, Debtor agrees that all documents, instruments and
agreements demanded by Secured Party shall be prepared and
filed at Debtor's expense before such change of name or
business entity occurs.
G. Debtor shall execute and deliver to Secured Party upon
request new UCC-1 Financing Statements describing the same
Collateral specified herein for recordation where necessary
in Secured Party's sole discretion to perfect Secured
Party's security interest in the Collateral, and Debtor
shall pay all filing and recording fees and filing and
recording taxes in connection with the filing and/or
recordation of such Statements, and, if paid by the Secured
Party, Debtors will reimburse Secured Party therefor upon
demand of Secured Party.
H. Debtor hereby irrevocably appoints Secured Party as Debtor's
attorney-in-fact to do all acts and things which Secured
Party may deem necessary or appropriate to perfect and
continue perfected the security interest created by this
Security Agreement and to protect and, in case of an Event
of Default hereunder, sell the Collateral, including, but
not limited to, the execution in Debtor's name as Debtor's
irrevocable attorney-in-fact:
1. notifications and agreements to sell where sale is
permitted,
2. any documents or papers necessary or helpful to comply
with the terms of any agreements relative to any of
the Collateral, and
2
<PAGE>
<PAGE>
3. UCC-1 (and other) Financing Statements covering the
Collateral and filing and recordation of same wherever
Secured Party deems appropriate, with Debtor to
reimburse Secured Party for all filing and recording
fees, taxes and other expenses in connection therewith
upon demand of Secured Party.
Provided, however, the power of attorney granted hereby shall
survive the disability of the principal but when all the Indebtedness is
fully paid and performed and Debtor has no obligation to or commitment
for loan(s) from Secured Party, this power of attorney shall become null
and void upon Secured Party's receipt of written notification from
Debtor to such effect.
I. The Indebtedness shall be paid to Secured Party in
accordance with the terms thereof.
J. Debtor shall comply in all respects with any other agreement
between Debtor and Secured Party.
K. Debtor shall permit Secured Party and/or its agents to
inspect and appraise the Collateral and inspect the books
and records of Debtor at all reasonable times and from time
to time, and shall pay all expenses Secured Party may incur
in connection with any such inspection(s) and appraisal(s).
VI. Upon the occurrence of any "Event of Default," which, for the
purposes of this Security Agreement means any default in, or
breach of, any covenant, agreement, representation or warranty by
Debtor under the provisions of any document evidencing any of the
Indebtedness or other obligations of Debtor to Secured Party or of
any other agreement regarding any of the Indebtedness, this
Security Agreement, the Note, and any mortgage(s) or other
security agreement(s) securing or otherwise relating to any of the
Indebtedness, Secured Party shall have all rights and remedies in
and against the Collateral and otherwise of a secured party under
the Uniform Commercial Code and the other applicable law of
Kentucky (and all such other states where any part of the
Collateral may be located, if applicable) and all other applicable
laws and all rights provided herein, in all other documents
evidencing, securing or related to any of the Indebtedness, or in
any other applicable security or loan agreement, all of which
rights and remedies shall, to the full extent permitted by law, be
cumulative. In addition, Secured Party may require Debtor, at
Debtor's sole expense, to assemble the Collateral and make it
available to Secured Party at the place or places to be designated
by Secured Party and Debtor. Secured Party shall have the right
to sell the Collateral at public or private sale. Debtor agrees
to pay to Secured Party, as part of the Indebtedness, all amounts
paid by Secured Party, including, but not limited to:
A. Secured Party's attorney's fees, to the extent not
prohibited by applicable law, in connection with the
enforcement of any of Debtor's obligations hereunder or
contained in the documents evidencing the Indebtedness, with
interest thereon at the highest rate provided for in any of
the Indebtedness;
B. taxes, levies and prior liens and insurance on, repairs to,
maintenance of, or transporting or otherwise caring for, the
Collateral; and
C. expenses incurred in taking possession of or preserving the
Collateral.
VII. The requirement of reasonable notice of the time and place of
disposition of Collateral by Secured Party shall be conclusively
deemed to have been met if such notice is mailed, postage prepaid,
to Debtor's address specified above at least ten (10) days before
the time of the sale or
3
<PAGE>
<PAGE>
disposition. Secured Party may bid upon and purchase any or all
of the Collateral at any public sale thereof. Secured Party may
dispose of all or any part of the Collateral at one or more times
and from time to time and in one or more lots or parcels, and upon
such terms and conditions, including a credit sale, as Secured
Party determines in its sole discretion. Secured Party shall
apply the net proceeds of any such disposition of the Collateral
(after deducting therefrom all costs incurred in connection
therewith, or incidental to the holding, preparing for sale, in
whole or in part, of the Collateral, including Secured Party's
attorney's fees and court costs) to the Indebtedness and any other
obligations of Debtor to Secured Party in the order elected by
Secured Party in its sole discretion, and any remaining proceeds
shall be paid to the Debtor or such other party as is entitled
thereto.
VIII. This is a continuing Security Agreement and all the rights, powers
and remedies hereunder shall apply to all past, present and future
indebtedness of Debtor to Secured Party, including any
indebtedness arising under subsequent transactions which shall
either continue the Indebtedness, increase or decrease it, or from
time to time create new indebtedness or additional indebtedness
whether or not all or any prior indebtedness has been satisfied,
and notwithstanding the death, incapacity or bankruptcy of Debtor,
or any other event or proceeding affecting Debtor.
IX. The rights, powers and remedies given to Secured Party by this
Security Agreement shall be in addition to all rights, powers and
remedies given to the Secured Party by virtue of any other
agreement now existing or subsequently entered into by and between
the parties hereto and any statute or rule of law. Secured Party
may exercise its right of set off with respect to the Indebtedness
in the same manner as if the Indebtedness were unsecured. Any
waiver, forbearance, failure or delay by Secured Party in
exercising any right, power or remedy hereunder shall not be
deemed to be a waiver of such right, power or remedy, and any
single or partial exercise of any right, power or remedy hereunder
shall not preclude the further exercise thereof; and every right,
power and remedy of Secured Party shall continue in full force and
effect until such right, power or remedy is specifically waived by
an instrument in writing executed by Secured Party.
X. DEBTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY
RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
SECURITY AGREEMENT OR ANY OTHER DOCUMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN)
OR ACTIONS OF SECURED PARTY, DEBTOR AND ANY GUARANTORS. DEBTOR
ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A
MATERIAL INDUCEMENT TO SECURED PARTY.
XI. The Debtor agrees that the sole proper venue for the determination
of any litigation commenced by either Debtor or Secured Party on
any basis shall be in a court of competent jurisdiction which is
located in Fayette County, Kentucky, and the parties hereby
expressly declare that any other venue shall be improper and
Debtor expressly waives any right to a determination of any such
litigation against Debtor by a court in any other venue. Debtor
further agrees that service of process by any judicial officer or
by registered or certified U.S. mail shall establish personal
jurisdiction over Debtor, and Debtor waives any rights under the
laws of any state to object to jurisdiction within the
Commonwealth of Kentucky. The aforesaid means of obtaining
personal jurisdiction and perfecting service of process are not
intended to be exclusive, but are cumulative and in addition to
all other means of obtaining personal jurisdiction and perfecting
service of process now or hereafter provided by the laws of the
Commonwealth of Kentucky or by any other state in an action
brought by Secured Party in such state.
4
<PAGE>
<PAGE>
XII. The laws of the Commonwealth of Kentucky shall govern the
construction of this Security Agreement and the rights, remedies
and duties of the parties hereto, unless the laws of the state
where the Collateral or part thereof is situated dictate that the
laws of such other state shall govern with respect thereto.
XIII. This Security Agreement shall bind Debtor and Debtor's heirs,
successors and assigns and shall inure to the benefit of Security
Party and its successors and assigns.
XIV. Time shall be of the essence in the performance of each of the
Debtor's obligations under this Security Agreement.
XV. A judicial decree, order or judgment holding any provision herein
invalid or unenforceable shall not in any way impair or preclude
enforcement of the remaining provisions herein, and shall not in
any way impair or preclude enforcement of rights or remedies of
Secured Party under Chapter 355 of the Kentucky Revised Statutes,
or other applicable law.
XVI. This Security Agreement may, in the sole discretion of Secured
Party, be filed as a financing statement and Debtor agrees to also
execute any additional financing statements with respect hereto
which may be requested by Secured Party. Secured Party may, in
its sole discretion, attach this Security Agreement or any other
document executed pursuant hereto or in connection herewith with
any person or organization which registers, sells or is in any
manner involved with any or all of the Collateral. Secured Party
shall be entitled to notify the person in possession of the
Collateral, or any other person Secured Party deems appropriate of
the security interest herein granted and to notify such person or
entity to forward all documents with respect to the Collateral to
Secured Party and otherwise as Secured Party deems appropriate.
IN TESTIMONY WHEREOF, witness the signature of the parties hereto,
to be effective the day, month and year first above written.
EQUITY UNDERWRITING GROUP, INC.
BY: /s/ John R. Owens
-------------------------------------
TITLE: President
----------------------------------
BANK ONE, KENTUCKY, NA
BY: /s/ R. J. Heiple
-------------------------------------
TITLE: Executive Vice President
----------------------------------
5
<PAGE>
EXHIBIT 10.29
SECURITY AGREEMENT
------------------
THIS SECURITY AGREEMENT is made and entered into effective as of
January 20, 1998, by EQUITY INSURANCE MANAGERS, INC., a Kentucky
corporation, with address of 3201 Nicholasville Road, Lexington,
Kentucky 40503 (hereinafter referred to as "Debtor"); and BANK ONE,
KENTUCKY, NA, a National Banking Association, 416 West Jefferson Street,
Louisville, Kentucky 40202 (hereinafter referred to as "Secured Party").
IT IS AGREED BY THE PARTIES AS FOLLOWS:
I. For value received, Debtor does hereby grant unto Secured Party a
security interest in and to all the collateral described in
numerical Paragraph two (2) hereof to secure all the indebtedness
referred to in numerical Paragraph three (3) hereof.
II. The collateral covered by this Security Agreement is (a) all of
Debtor's property described in Schedule A hereto and any
supplemental exhibits thereto, and (b) all proceeds and products
thereof (all of which collateral is hereinafter collectively
referred to as the "Collateral").
III. This Security Agreement is made as collateral security for:
a. The payment of all sums due to Secured Party from Debtor and
the other maker under the terms of that certain $400,000.00
Revolving Credit Note dated as of December 30, 1997; and
b. The payment of all sums due to Secured Party from Debtor and
the other maker under the terms of that certain
$1,250,000.00 Term Note dated as of January 20, 1998 (the
Revolving Credit Note and the Term Note are referred to
collectively as the "Note");
c. All other liabilities and obligations of whatever kind or
type of Debtor to Secured Party, including any guarantees of
the Debtor to Secured Party, including, without limitation
the Guaranty of the loan from 21st Century Claim Service,
Inc. dated December 30, 1997, whether created directly or
acquired by Secured Party by assignment or otherwise,
whether now existing or hereafter created, arising or
acquired, absolute or contingent, joint or several, due or
to become due (the foregoing obligations are herein
collectively referred to as "Indebtedness").
IV. Debtor represents and warrants to Secured Party that:
A. All of the Collateral is used or will be used for business.
B. Debtor is the absolute owner of the legal and beneficial
title to the Collateral, (exclusive of hereafter acquired,
replacement or hereafter created items), and is in full
possession thereof.
C. Except as previously disclosed in writing, the Collateral is
free and clear of all liens, encumbrances and adverse claims
whatsoever;
<PAGE>
<PAGE>
D. Debtor has the right to enter into this Security Agreement.
V. Debtor covenants and agrees that:
A. Debtor shall defend the Collateral against the claims and
demands of all persons.
B. Debtor shall not:
1. permit any loan or security interest (other than
Secured Party's security interest granted herein and
those liens previously disclosed in writing) to attach
to any of the Collateral;
2. permit any of the Collateral to be levied upon under
any legal process; or
3. dispose of or enter or agree to enter into any sale of
any of the Collateral, which is in excess of
$50,000.00 per sale and $100,000.00 in the aggregate
on an annual basis, whether or not inventory, without
prior written consent of Secured Party.
C. Debtor shall insure or have insured the tangible Collateral
for the benefit of Secured Party (who shall be the loss
payee) in such amounts, for such risks and with such company
as Secured Party may request, and promptly deliver all
policies with respect thereto to Secured Party, or in the
event Debtor at any time has not maintained and delivered to
Secured Party such requested policies of insurance, Secured
Party shall, in its sole and absolute discretion, whether or
not any Event of Default, as defined in this Security
Agreement, has occurred, have the right to place and effect
such insurance as Secured Party deems appropriate at the
Debtor's expense and in the event Secured Party elects to
pay for such insurance coverage, Debtor shall reimburse
Secured Party for the amount(s) so paid plus interest
thereon at the default rate of interest due under the Note.
D. Debtor shall keep the Collateral consisting of tangible
property in good condition.
E. Debtor shall advise Secured Party in writing, at least
thirty (30) days prior thereto, of any change in Debtor's
place of business or mailing address.
F. Debtor shall not conduct business under any other name than
that given above nor change or reorganize the type of
business entity under which it does business except upon
prior written approval of Secured Party. If such approval
is given, Debtor agrees that all documents, instruments and
agreements demanded by Secured Party shall be prepared and
filed at Debtor's expense before such change of name or
business entity occurs.
G. Debtor shall execute and deliver to Secured Party upon
request new UCC-1 Financing Statements describing the same
Collateral specified herein for recordation where necessary
in Secured Party's sole discretion to perfect Secured
Party's security interest in the Collateral, and Debtor
shall pay all filing and recording fees and filing and
recording taxes in connection with the filing and/or
recordation of such Statements, and, if paid by the Secured
Party, Debtors will reimburse Secured Party therefor upon
demand of Secured Party.
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<PAGE>
<PAGE>
H. Debtor hereby irrevocably appoints Secured Party as Debtor's
attorney-in-fact to do all acts and things which Secured
Party may deem necessary or appropriate to perfect and
continue perfected the security interest created by this
Security Agreement and to protect and, in case of an Event
of Default hereunder, sell the Collateral, including, but
not limited to, the execution in Debtor's name as Debtor's
irrevocable attorney-in-fact:
1. notifications and agreements to sell where sale is
permitted,
2. any documents or papers necessary or helpful to comply
with the terms of any agreements relative to any of
the Collateral, and
3. UCC-1 (and other) Financing Statements covering the
Collateral and filing and recordation of same wherever
Secured Party deems appropriate, with Debtor to
reimburse Secured Party for all filing and recording
fees, taxes and other expenses in connection therewith
upon demand of Secured Party.
Provided, however, the power of attorney granted hereby shall
survive the disability of the principal but when all the Indebtedness is
fully paid and performed and Debtor has no obligation to or commitment
for loan(s) from Secured Party, this power of attorney shall become null
and void upon Secured Party's receipt of written notification from
Debtor to such effect.
I. The Indebtedness shall be paid to Secured Party in
accordance with the terms thereof.
J. Debtor shall comply in all respects with any other agreement
between Debtor and Secured Party.
K. Debtor shall permit Secured Party and/or its agents to
inspect and appraise the Collateral and inspect the books
and records of Debtor at all reasonable times and from time
to time, and shall pay all expenses Secured Party may incur
in connection with any such inspection(s) and appraisal(s).
VI. Upon the occurrence of any "Event of Default," which, for the
purposes of this Security Agreement means any default in, or
breach of, any covenant, agreement, representation or warranty by
Debtor under the provisions of any document evidencing any of the
Indebtedness or other obligations of Debtor to Secured Party or of
any other agreement regarding any of the Indebtedness, this
Security Agreement, the Note, the Loan Agreement of even date, the
Guaranty dated December 30, 1997, and any mortgage(s) or other
security agreement(s) securing or otherwise relating to any of the
Indebtedness, Secured Party shall have all rights and remedies in
and against the Collateral and otherwise of a secured party under
the Uniform Commercial Code and the other applicable law of
Kentucky (and all such other states where any part of the
Collateral may be located, if applicable) and all other applicable
laws and all rights provided herein, in all other documents
evidencing, securing or related to any of the Indebtedness, or in
any other applicable security or loan agreement, all of which
rights and remedies shall, to the full extent permitted by law, be
cumulative. In addition, Secured Party may require Debtor, at
Debtor's sole expense, to assemble the Collateral and make it
available to Secured Party at the place or places to be designated
by Secured Party and Debtor. Secured Party shall have the right
to sell the Collateral at public or private sale. Debtor agrees
to pay to Secured Party, as part of the Indebtedness, all amounts
paid by Secured Party, including, but not limited to:
3
<PAGE>
<PAGE>
A. Secured Party's attorney's fees, to the extent not
prohibited by applicable law, in connection with the
enforcement of any of Debtor's obligations hereunder or
contained in the documents evidencing the Indebtedness, with
interest thereon at the highest rate provided for in any of
the Indebtedness;
B. taxes, levies and prior liens and insurance on, repairs to,
maintenance of, or transporting or otherwise caring for, the
Collateral; and
C. expenses incurred in taking possession of or preserving the
Collateral.
VII. The requirement of reasonable notice of the time and place of
disposition of Collateral by Secured Party shall be conclusively
deemed to have been met if such notice is mailed, postage prepaid,
to Debtor's address specified above at least ten (10) days before
the time of the sale or disposition. Secured Party may bid upon
and purchase any or all of the Collateral at any public sale
thereof. Secured Party may dispose of all or any part of the
Collateral at one or more times and from time to time and in one
or more lots or parcels, and upon such terms and conditions,
including a credit sale, as Secured Party determines in its sole
discretion. Secured Party shall apply the net proceeds of any
such disposition of the Collateral (after deducting therefrom all
costs incurred in connection therewith, or incidental to the
holding, preparing for sale, in whole or in part, of the
Collateral, including Secured Party's attorney's fees and court
costs) to the Indebtedness and any other obligations of Debtor to
Secured Party in the order elected by Secured Party in its sole
discretion, and any remaining proceeds shall be paid to the Debtor
or such other party as is entitled thereto.
VIII. This is a continuing Security Agreement and all the rights, powers
and remedies hereunder shall apply to all past, present and future
indebtedness of Debtor to Secured Party, including any
indebtedness arising under subsequent transactions which shall
either continue the Indebtedness, increase or decrease it, or from
time to time create new indebtedness or additional indebtedness
whether or not all or any prior indebtedness has been satisfied,
and notwithstanding the death, incapacity or bankruptcy of Debtor,
or any other event or proceeding affecting Debtor.
IX. The rights, powers and remedies given to Secured Party by this
Security Agreement shall be in addition to all rights, powers and
remedies given to the Secured Party by virtue of any other
agreement now existing or subsequently entered into by and between
the parties hereto and any statute or rule of law. Secured Party
may exercise its right of set off with respect to the Indebtedness
in the same manner as if the Indebtedness were unsecured. Any
waiver, forbearance, failure or delay by Secured Party in
exercising any right, power or remedy hereunder shall not be
deemed to be a waiver of such right, power or remedy, and any
single or partial exercise of any right, power or remedy hereunder
shall not preclude the further exercise thereof; and every right,
power and remedy of Secured Party shall continue in full force and
effect until such right, power or remedy is specifically waived by
an instrument in writing executed by Secured Party.
X. DEBTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY
RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
SECURITY AGREEMENT OR ANY OTHER DOCUMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN)
OR ACTIONS OF SECURED PARTY, DEBTOR AND ANY GUARANTORS. DEBTOR
ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
4
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<PAGE>
CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A
MATERIAL INDUCEMENT TO SECURED PARTY.
XI. The Debtor agrees that the sole proper venue for the determination
of any litigation commenced by either Debtor or Secured Party on
any basis shall be in a court of competent jurisdiction which is
located in Fayette County, Kentucky, and the parties hereby
expressly declare that any other venue shall be improper and
Debtor expressly waives any right to a determination of any such
litigation against Debtor by a court in any other venue. Debtor
further agrees that service of process by any judicial officer or
by registered or certified U.S. mail shall establish personal
jurisdiction over Debtor, and Debtor waives any rights under the
laws of any state to object to jurisdiction within the
Commonwealth of Kentucky. The aforesaid means of obtaining
personal jurisdiction and perfecting service of process are not
intended to be exclusive, but are cumulative and in addition to
all other means of obtaining personal jurisdiction and perfecting
service of process now or hereafter provided by the laws of the
Commonwealth of Kentucky or by any other state in an action
brought by Secured Party in such state.
XII. The laws of the Commonwealth of Kentucky shall govern the
construction of this Security Agreement and the rights, remedies
and duties of the parties hereto, unless the laws of the state
where the Collateral or part thereof is situated dictate that the
laws of such other state shall govern with respect thereto.
XIII. This Security Agreement shall bind Debtor and Debtor's heirs,
successors and assigns and shall inure to the benefit of Security
Party and its successors and assigns.
XIV. Time shall be of the essence in the performance of each of the
Debtor's obligations under this Security Agreement.
XV. A judicial decree, order or judgment holding any provision herein
invalid or unenforceable shall not in any way impair or preclude
enforcement of the remaining provisions herein, and shall not in
any way impair or preclude enforcement of rights or remedies of
Secured Party under Chapter 355 of the Kentucky Revised Statutes,
or other applicable law.
XVI. This Security Agreement may, in the sole discretion of Secured
Party, be filed as a financing statement and Debtor agrees to also
execute any additional financing statements with respect hereto
which may be requested by Secured Party. Secured Party may, in
its sole discretion, attach this Security Agreement or any other
document executed pursuant hereto or in connection herewith with
any person or organization which registers, sells or is in any
manner involved with any or all of the Collateral. Secured Party
shall be entitled to notify the person in possession of the
Collateral, or any other person Secured Party deems appropriate of
the security interest herein granted and to notify such person or
entity to forward all documents with respect to the Collateral to
Secured Party and otherwise as Secured Party deems appropriate.
5
<PAGE>
<PAGE>
IN TESTIMONY WHEREOF, witness the signature of the parties hereto,
to be effective the day, month and year first above written.
EQUITY INSURANCE MANAGERS, INC.
BY: /s/ John R. Owens
------------------------------------
TITLE: President
---------------------------------
BANK ONE, KENTUCKY, NA
BY: /s/ R. J. Heiple
------------------------------------
TITLE: Executive Vice President
---------------------------------
6
<PAGE>
EXHIBIT 10.30
SECURITY AGREEMENT
------------------
THIS SECURITY AGREEMENT is made and entered into effective as of
the 30th day of December, 1997, by 21ST CENTURY CLAIM SERVICE, INC., a
Kentucky corporation, with address of 3201 Nicholasville Road,
Lexington, Kentucky 40503 (hereinafter referred to as "Debtor"); and
BANK ONE, KENTUCKY, NA, a National Banking Association, 416 West
Jefferson Street, Louisville, Kentucky 40202 (hereinafter referred to as
"Secured Party").
IT IS AGREED BY THE PARTIES AS FOLLOWS:
1. For value received, Debtor does hereby grant unto Secured Party a
security interest in and to all the collateral described in numerical
Paragraph two (2) hereof to secure all of the indebtedness referred to
in numerical Paragraph three (3) hereof.
2. The collateral covered by this Security Agreement is (a) all of
Debtor's property described in Schedule A hereto and any supplemental
exhibits thereto, and (b) all proceeds and products thereof (all of
which collateral is hereinafter collectively referred to as the
"Collateral").
3. This Security Agreement is made as collateral security for:
a. The payment of all sums due to Secured Party from Debtor and
the other makers under the terms of that certain $200,000.00
Term Note dated as of December 30, 1997 (the "Note"); and
b. All other liabilities and obligations of whatever kind or
type of Debtor to Secured Party, including any guarantees of
the Debtor to Secured Party, whether created directly or
acquired by Secured Party by assignment or otherwise,
whether now existing or hereafter created, arising or
acquired, absolute or contingent, joint or several, due or
to become due (the foregoing obligations are herein
collectively referred to as "Indebtedness").
4. Debtor represents and warrants to Secured Party that:
a. All of the Collateral is used or will be used for business.
b. Debtor is absolute owner of the legal and beneficial title
to the Collateral, (exclusive of hereafter acquired, replacement
or hereafter created items), and is in full possession thereof.
c. Except as previously disclosed in writing, the Collateral is
free and clear of all liens, encumbrances and adverse claims
whatsoever.
d. Debtor has the right to enter into this Security Agreement.
5. Debtor covenants and agrees that:
a. Debtor shall defend the Collateral against the claims and
demands of all persons.
b. Debtor shall not:
<PAGE>
<PAGE>
i. permit any loan or security interest (other than
Secured Party's security interest granted herein and
those liens previously disclosed in writing) to attach
to any of the Collateral;
ii. permit any of the Collateral to be levied upon under
any legal process; or
iii. dispose of or enter or agree to enter into any sale of
any of the Collateral, whether or not inventory,
without prior written consent of Secured Party.
c. Debtor shall insure or have insured the tangible Collateral
for the benefit of Secured Party (who shall be the loss payee) in such
amounts, for such risks and with such company as Secured Party may
request, and promptly deliver all policies with respect thereto to
Secured Party, or in the event Debtor at any time has not maintained and
delivered to Secured Party such requested policies of insurance, Secured
Party shall, in its sole and absolute discretion, whether or not any
Event of Default, as defined in this Security Agreement, has occurred,
have the right to place and effect such insurance as Secured Party deems
appropriate at the Debtor's expense and in the event Secured Party
elects to pay for such insurance coverage, Debtor shall reimburse
Secured Party for the amount(s) so paid plus interest thereon at the
default rate of interest due under the Note.
d. Debtor shall keep the Collateral consisting of tangible
property in good condition.
e. Debtor shall advise Secured Party in writing, at least
thirty (30) days prior thereto, of any change in Debtor's place of
business or mailing address.
f. Debtor shall not conduct business under any other name than
that given above nor change or reorganize the type of business entity
under which it does business except upon prior written approval of
Secured Party. If such approval is given, Debtor agrees that all
documents, instruments and agreements demanded by Secured Party shall be
prepared and filed at Debtor's expense before such change of name or
business entity occurs.
g. Debtor shall execute and deliver to Secured Party upon
request new UCC-1 Financing Statements describing the same Collateral
specified herein for recordation where necessary in Secured Party's sole
discretion to perfect Secured Party's security interest in the
Collateral, and Debtor shall pay all filing and recording fees and
filing and recording taxes in connection with the filing and/or
recordation of such Statements, and, if paid by the Secured Party,
Debtors will reimburse Secured Party therefor upon demand of Secured
Party.
h. Debtor hereby irrevocably appoints Secured Party as Debtor's
attorney-in-fact to do all acts and things which Secured Party may deem
necessary or appropriate to perfect and continue perfected the security
interest created by this Security Agreement and to protect and, in the
case of an Event of Default hereunder, sell the Collateral, including,
but not limited to, the execution in Debtor's name as Debtor's
irrevocable attorney-in-fact:
i. notifications and agreements to sell where sale is
permitted,
ii. any documents or papers necessary or helpful to comply
with the terms of any agreements relative to any of
the Collateral, and
iii. UCC-1 (and other) Financing Statements covering the
Collateral and filing and recordation of same wherever
Secured Party deems appropriate, with Debtor to
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<PAGE>
reimburse Secured Party for all filing and recording
fees, taxes and other expenses in connection therewith
upon demand of Secured Party.
Provided, however, the power of attorney granted hereby shall
survive the disability of the principal but when all the indebtedness is
fully paid and performed and Debtor has no obligation to or commitment
for loan(s) from Secured Party, this power of attorney shall become null
and void upon Secured Party's receipt of written notification from
Debtor to such effect.
i The Indebtedness shall be paid to Secured Party in
accordance with the terms thereof.
j. Debtor shall comply in all respects with any other agreement
between Debtor and Secured Party.
k. Debtor shall permit Secured Party and/or its agents to
inspect and appraise the Collateral and inspect the books and records of
Debtor at all reasonable times and from time to time, and shall pay all
expenses Secured Party may incur in connection with any such
inspection(s) and appraisal(s).
6. Upon the occurrence of any "Event of Default," which, for the
purposes of this Security Agreement means any default in, or breach of,
any covenant, agreement, representation or warranty by Debtor under the
provisions of any document evidencing any of the Indebtedness or other
obligations of Debtor to Secured Party or of any other agreement
regarding any of the Indebtedness, this Security Agreement, the Note,
and any mortgage(s) or other security agreement(s) securing or otherwise
relating to any of the Indebtedness, Secured Party shall have all rights
and remedies in and against the Collateral and otherwise of a secured
party under the Uniform Commercial Code and the other applicable law of
Kentucky (and all such other states where any part of the Collateral may
be located, if applicable) and all other applicable laws and all rights
provided herein, in all other documents evidencing, securing or related
to any of the Indebtedness, or in any other applicable security or loan
agreement, all of which rights and remedies shall, to the full extent
permitted by law, be cumulative. In addition, Secured Party may require
Debtor, at Debtor's sole expense, to assemble the Collateral and make it
available to Secured Party at the place or places to be designated by
Secured Party and Debtor. Secured Party shall have the right to sell
the Collateral at public or private sale. Debtor agrees to pay to
Secured Party, as part of the Indebtedness, all amounts paid by Secured
Party, including, but not limited to:
a. Secured Party's attorney's fees, to the extent not
prohibited by applicable law, in connection with the
enforcement of any of Debtor's obligations hereunder or
contained in the documents evidencing the Indebtedness, with
interest thereon at the highest rate provided for in any of
the Indebtedness;
b. taxes, levies and prior liens and insurance on, repairs to,
maintenance of, or transporting or otherwise caring for, the
Collateral; and
c. expenses incurred in taking possession of or preserving the
Collateral.
7. The requirement of reasonable notice of the time and place of
disposition of Collateral by Secured Party shall be conclusively deemed
to have been met if such notice is mailed, postage prepaid, to Debtor's
address specified above at least ten (10) days before the time of the
sale or disposition. Secured Party may bid upon and purchase any or all
of the Collateral at any public sale thereof. Secured Party may dispose
of all or any part of the Collateral at one or more times and from time
to time and in one or more lots or parcels, and upon such terms and
conditions, including a credit sale, as Secured Party determines in its
sole discretion. Secured Party shall apply the net proceeds of any such
disposition of the Collateral (after deducting therefrom all costs
incurred in connection therewith, or incidental to the
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<PAGE>
<PAGE>
holding, preparing for sale, in whole or in part, of the Collateral,
including Secured Party's attorney's fees and court costs) to the
Indebtedness and any other obligations of Debtor to Secured Party in the
order elected by Secured Party in its sole discretion, and any remaining
proceeds shall be paid to the Debtor or such other party as is entitled
thereto.
8. This is a continuing Security Agreement and all the rights, powers
and remedies hereunder shall apply to all past, present and future
indebtedness of Debtor to Secured Party, including any indebtedness
arising under subsequent transactions which shall either continue the
Indebtedness, increase or decrease it, or from time to time create new
indebtedness or additional indebtedness whether or not all or any prior
indebtedness has been satisfied, and notwithstanding the death,
incapacity or bankruptcy of Debtor, or any other event or proceeding
affecting Debtor.
9. The rights, powers and remedies given to Secured Party by this
Security Agreement shall be in addition to all rights, powers and
remedies given to the Secured Party by virtue of any other agreement now
existing or subsequently entered into by and between the parties hereto
and any statute or rule of law. Secured Party may exercise its right of
set off with respect to the Indebtedness in the same manner as if the
Indebtedness were unsecured. Any waiver, forbearance, failure or delay
by Secured Party in exercising any right, power or remedy hereunder
shall not be deemed to be a waiver of such right, power or remedy, and
any single or partial exercise of any right, power or remedy hereunder
shall not preclude the further exercise thereof; and every right, power
and remedy of Secured Party shall continue in full force and effect
until such right, power or remedy is specifically waived by an
instrument in writing executed by Secured Party.
10. DEBTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY
RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS SECURITY
AGREEMENT OR ANY OTHER DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF SECURED
PARTY, DEBTOR AND ANY GUARANTORS. DEBTOR ACKNOWLEDGES AND AGREES THAT
IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND
THAT THIS PROVISION IS A MATERIAL INDUCEMENT TO SECURED PARTY.
11. The Debtor agrees that the sole proper venue for the determination
of any litigation commenced by either Debtor or Secured Party on any
basis shall be in a court of competent jurisdiction which is located in
Fayette County, Kentucky, and the parties hereby expressly declare that
any other venue shall be improper and Debtor expressly waives any right
to a determination of any such litigation against Debtor by a court in
any other venue. Debtor further agrees that service of process by any
judicial officer or by registered or certified U.S. mail shall establish
personal jurisdiction over Debtor, and Debtor waives any rights under
the laws of any state to object to jurisdiction within the Commonwealth
of Kentucky. The aforesaid means of obtaining personal jurisdiction and
perfecting service of process are not intended to be exclusive, but are
cumulative and in addition to all other means of obtaining personal
jurisdiction and perfecting service of process now or hereafter provided
by the laws of the Commonwealth of Kentucky or by any other state in an
action brought by Secured Party in such state.
12. The laws of the Commonwealth of Kentucky shall govern the
construction of this Security Agreement and the rights, remedies and
duties of the parties hereto, unless the laws of the state where the
Collateral or part thereof is situated dictate that the laws of such
other state shall govern with respect thereto.
13. This Security Agreement shall bind Debtor and Debtor's heirs,
successors and assigns and shall inure to the benefit of Secured Party
and its successors and assigns.
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<PAGE>
<PAGE>
14. Time shall be of the essence in the performance of each of the
Debtor's obligations under this Security Agreement.
15. A judicial decree, order or judgment holding any provision herein
invalid or unenforceable shall not in any way impair or preclude
enforcement of the remaining provisions herein, and shall not in any way
impair or preclude enforcement of rights or remedies of Secured Party
under Chapter 355 of the Kentucky Revised Statutes, or other applicable
law.
16. This Security Agreement may, in the sole discretion of Secured
Party, be filed as a financing statement and Debtor agrees to also
execute any additional financing statements with respect hereto which
may be requested by Secured Party. Secured Party may, in its sole
discretion, attach this Security Agreement or any other document
executed pursuant hereto or in connection herewith with any person or
organization which registers, sells or is in any manner involved with
any or all of the Collateral. Secured Party shall be entitled to notify
the person in possession of the Collateral, or any other person Secured
Party deems appropriate of the security interest herein granted and to
notify such person or entity to forward all documents with respect to
the Collateral to Secured Party and otherwise as Secured Party deems
appropriate.
IN TESTIMONY WHEREOF, witness the signature of the parties hereto,
to be effective the day, month and year first above written.
21ST CENTURY CLAIM SERVICE, INC.
BY: /s/ John R. Owens
--------------------------------
TITLE: Secretary/Treasurer
-----------------------------
BANK ONE, KENTUCKY, NA
BY: /s/ R. J. Heiple
--------------------------------
TITLE: Executive Vice President
-----------------------------
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<PAGE>
<PAGE>
EXHIBIT A TO FINANCING STATEMENT AND/OR SECURITY AGREEMENT
----------------------------------------------------------
This property covered by this Financing Statement and/or Security
Agreement includes all of the Debtor's right, title and interest in, to
and under the following described property, whether now owned or
hereafter acquired by the Debtor, and whether now existing or hereafter
created, arising, accruing, incurred or entered into (all of which
hereinafter collectively called the "Collateral"):
1. Each and every "Account", as such term is defined in the Uniform
Commercial Code of the State of Kentucky, and in any event shall
include, but not be limited to, all of the Debtor's rights to payment
for goods sold or leased or services performed by the Debtor whether now
in existence or arising from time to time hereafter, including, without
imitation, rights evidenced by an account, accounts receivables, note,
contract, security agreement, chattel paper, or other evidence of
indebtedness or security, whether or not such right(s) to payment has
been earned by performance, and whether or not such right(s) to payment
is evidenced by any document, instrument or chattel paper, together with
(a) all security pledged, assigned, hypothecated or granted to or held
by the Debtor to secure the foregoing, (b) all of the Debtor's right,
title and interest in and to any goods, the sale of which gave rise
thereto, (c) all guarantees, endorsements and indemnifications on, or
of, any of the foregoing, (d) all powers of attorney for the execution
of any evidence of indebtedness or security or other writing in
connection therewith, (e) all books, correspondence, credit files,
records, ledger cards, invoices, and other papers relating thereto,
including, without limitation, all tapes, cards, computer runs and other
papers and documents in the possession or under the control of the
Debtor or any computer bureau from time to time acting for the Debtor,
(f) all evidences of the filing of financing statement and other
statements and the registration of other instruments in connection
therewith and amendments thereto, notices to other creditors or secured
parties, and certificates from filing or other registration officers,
(g) all credit information, reports and memoranda relating thereto, and
(h) all other writings related in any way to the foregoing.
2. All "Chattel Paper", as such term is defined in the Uniform
Commercial Code and in the State of Kentucky, in which Debtor now has or
hereafter acquires any rights and wherever located and, in any event,
shall include a writing or writings which evidence both a monetary
obligation and a security interest in or lease of specific goods; any
returned, rejected or repossessed goods covered by any such writing or
writings and all proceeds (in any form including, without limitation,
accounts, contract rights, documents, chattel paper, instruments and
general intangibles) of such returned, rejected or repossessed goods.
3. All of the inventory of the Debtor of every type or description,
now owned or hereafter acquired and wherever located, whether raw, in
process or finished, all materials usable in processing the same and all
documents of title covering any inventory, including, but not limited
to, work in process, materials used or consumed in the Debtor's
business, now owned or hereafter acquired or manufactured by the Debtor
and held for sale or lease or to be furnished under a contract of
service in the ordinary course of its business; all present and future
substitutions therefor, parts and accessories thereof and all additions
thereto; all proceeds thereof and products of such inventory in any form
whatsoever; specifically including all "inventory", as such term is
defined in the Uniform Commercial Code of the State of Kentucky.
4. All "Instruments" of Debtor, as such term is defined in the
Uniform Commercial Code of the State of Kentucky and in Kentucky Revised
Statutes Subsection 355.9-105(1)(g), and shall include but not be
limited to any and all negotiable instruments (defined in Kentucky
Revised Statutes 355.8-102) or any other writings which evidence a right
to payment of money and are not themselves security agreements or leases
and are of the type which are in the ordinary course of business
transferred by delivery with any necessary endorsement or assignment.
<PAGE>
<PAGE>
5. All "Equipment", as such term is defined in the Uniform Commercial
Code of the State of Kentucky, now or hereafter owned or leased by the
Debtor and, in any event, shall include, but shall not be limited to,
all machinery, tools, equipment, office equipment, furniture,
furnishings, fixtures, trade fixtures, goods which are to become
fixtures, and any materials, instructions, blueprints, computer software
and similar items which relate to the above, and any and all additions,
substitutions and replacements of any of the foregoing, wherever
located, together with all improvements thereon and all attachments,
components, parts, equipment and accessories installed thereon or
affixed thereto (all of the foregoing in this section collectively, the
"Equipment").
6. All "General Intangibles", as such term is defined in the Uniform
Commercial Code of Kentucky and in Kentucky Revised Statutes Subsection
355.9-106, now or hereafter owned by the Debtor and shall include, but
not be limited to, all (a) Marks, Patents and Copyrights (as such terms
are hereinafter defined), (b) goodwill of the Debtor's business
symbolized by any of the foregoing, (c) license rights, license
agreements, leases, permits, franchises, patents, computer software and
customer lists, and (d) any rights to tax refunds to which the Debtor is
now or hereafter may be entitled.
7. All trademarks, trademark registrations and trademark applications
pending, now held or hereafter acquired by the Debtor, including,
without limitation, registrations, recordings and applications in the
United States Patent and Trademark Office or any similar governmental
agency in any foreign country (which the Debtor has adopted and used and
is using or hereafter acquires or under which the Debtor is licensed),
as well as all other trademarks, trade names, fictitious business names,
business names, company names, business identifiers, prints, labels,
trade styles and service marks not registered, and trade dress,
including logos and/or designs (all of the foregoing in this section
collectively, the "Marks") together with the registrations and right to
all renewals, reissues and extensions thereof, the goodwill of the
business of the Debtor symbolized by the Marks, and any and all causes
of action which may exist by reason of infringement or dilution thereof,
or injury to the associated goodwill with the right to sue for and
collect said damages and the right to collect all royalties under any
license agreements with respect to any such Marks.
8. All copyrights, copyright registrations and copyright applications
now held or hereafter acquired by the Debtor including, without
limitation, any United States copyright to which the Debtor now or
hereafter has an interest as well as any application for a United States
copyright made by the Debtor (all of the foregoing in this section
collectively, the "Copyrights"), together with any renewals, reissues
and extensions thereof, and any and all causes of action which may exist
by reason of infringement thereof with the right to sue for and collect
said damages and the right to collect all royalties under any license
agreements with respect to any such Copyrights.
9. All letters patent and any patent registrations, and any patent
applications pending, including, without limitation, registrations,
recordings and applications registered or recorded in the United States
Patent and Trademark Office or any similar governmental agency in any
foreign country (all of the foregoing in this section collectively, the
"Patents"), in respect of which the Debtor possesses any rights
whatsoever, together with any renewals, reissues, continuations and
extensions thereof, any and all causes of action which may exist by
reason of infringement thereof with the right to sue for and collect
said damages and the right to collect all royalties under any license
agreements with respect to any such Patents.
10. Each and every contract to which the Debtor is a party, is bound
or is a beneficiary or assignee, and all exhibits to such contracts and
all other instruments, agreements and documents executed and delivered
with respect to such contracts and all revenues, rentals, Proceeds (as
hereinafter defined) and other sums of money due and to become due
thereunder from any of the foregoing, as the same may be
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<PAGE>
modified, supplemented or amended from time to time in accordance with
its terms, as well as all contracts to which the Debtor may hereafter
from time to time become a party, become bound, or become a beneficiary
or assignee (all of the foregoing in this section collectively the
"Contracts"), including with limitation, (a) the leases relating to the
Inventory, the Equipment, any licenses, any personal property and assets
in the nature of personal property wheresoever situated to which the
Debtor is a party or is bound, as well as all renewals, substitutions
and replacements therefor and all other leases to which the Debtor may
hereafter from time to time become a party or become bound
(collectively, the "Leases"), (b) (1) all payments due and to become due
under any Contract, whether as contractual obligations, damages or
otherwise; (2) all of the Debtor's claims, rights, powers, or privileges
and remedies under any Contract and under any Lease and, to the extent
permitted by the lessor under any such Lease, the right to cure a
default by Debtor under any such Lease; (3) all of its rights under any
Contract or under any Lease to make determinations, to exercise any
election (including, but not limited to, election of remedies) or option
or to give or receive any notice, consent, waiver or approval together
with full power and authority with respect to any Contract to demand,
receive, enforce, collect or receipt for any of the foregoing rights or
any property the subject of any of the Contracts, to enforce or execute
any checks, or other instruments or orders, to file any claims and to
take any action which may be necessary or advisable in connection with
any of the foregoing and (c) all contract rights thereunder.
11. All amounts from time to time held in any checking, savings,
deposit or other account of the Debtor, which amounts are "cash
collateral" as defined in the U.S. Bankruptcy Code, 11 U.S.C.
Section 363.
12. All licenses and permits issued by any federal, state, municipal,
or other governmental department, commission, board, bureau, agency,
court, tribunal or other instrumentality, domestic or foreign, and any
arbitrator.
13. All computer programs of the Debtor, and all intellectual property
rights therein and all other proprietary information of the Debtor
including, but not limited to, trade secrets.
14. All books, records, ledger cards, data processing records,
computer software and other property at any time evidencing or relating
to any of the foregoing.
15. Without limiting the generality of the foregoing, all other
personal property, goods (including without limitation consumer goods),
"farm products", "documents" (as such terms are defined in the Uniform
Commercial Code of the State of Kentucky), credits, claims, demands and
assets of the Debtor, whether now existing or hereafter acquired from
time to time.
16. All "Proceeds", as such term is defined in the Uniform Commercial
Code of the State of Kentucky, and in any event shall include, but not
be limited to, (a) any and all proceeds of any insurance, indemnity,
warranty or guaranty payable to Secured Party or the Debtor, from time
to time, and claims for insurance, indemnity, warranty or guaranty
effected or held for the benefit of the Debtor, with respect to any of
the Collateral (as hereinafter defined), (b) any and all payments (in
any form whatsoever) made or due and payable to the Debtor, from time to
time in connection with any requisition, confiscation, condemnation,
seizure or forfeiture of all or any part of the Collateral by any
governmental authority (or any person acting under color of governmental
authority) and (c) any and all other amounts from time to time paid or
payable under or in connection with any of the Collateral (all of the
foregoing in this section 16, collectively, the "Proceeds").
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<PAGE>
17. Any and all additions and accessions to any of the foregoing, all
improvements thereto, all substitutions and replacements thereof and all
products and Proceeds thereof.
The undersigned confirms that this
Exhibit is part of a financing
statement and security agreement signed
by it:
21ST CENTURY CLAIMS SERVICE, INC.
BY: /s/ John R. Owens
------------------------------------
TITLE: Secretary/Treasurer
---------------------------------
"DEBTOR"
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<PAGE>
EXHIBIT 10.31
FIRST AMENDMENT TO LOAN AGREEMENT
---------------------------------
This First Amendment to Loan Agreement (the "Amendment") is dated
and effective as of July 23, 1998, by, between and among EQUITY
UNDERWRITING GROUP, INC., EQUITY INSURANCE MANAGERS, INC. and 21ST
CENTURY CLAIM SERVICES, all Kentucky corporations (collectively referred
to herein as "Borrowers"); JOHN ROBERT OWENS and D. RICHARD MEYER,
individuals, (referred to herein as the "Guarantors" or individually as
a "Guarantor"); and BANK ONE, KENTUCKY, NA, a national banking
association (referred to herein as "Bank").
RECITALS
--------
1. Borrowers, Guarantors and Bank are parties to that certain
Loan Agreement dated as of January 20, 1998 (the "Loan Agreement").
2. Borrowers, Guarantors and Bank have agreed to an extension
of the maturity date of the Revolving Credit Note dated December 30,
1997, in the principal amount of $400,000.00 (as defined in the Loan
Agreement), and further desire to enter into this Amendment to document
other amendments in the terms of the Loan Agreement.
NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants and agreements contained herein and in the Loan Agreement, and
intending to be legally bound hereby, covenant and agree as follows:
1. Amendment of Section 5.08 Reporting Requirements. Section
------------------------------------------------
5.08 of the Loan Agreement is hereby deleted and replaced with the
following:
Section 5.08 Reporting Requirements
Borrowers shall furnish to Bank:
a. Quarterly Reporting. Within sixty (60) days after the end
-------------------
of each fiscal quarter, Borrowers shall provide Bank with balance
sheets as of the end of each quarter, statements of income and retained
earnings as of the end of such fiscal quarter, and properly completed
calculations necessary to test compliance with all of the financial
covenants set forth herein, in form and content reasonably acceptable to
Bank, and all in reasonable detail, and all such financial statements
shall be prepared in accordance with GAAP consistently applied and
certified as correct by Borrowers' chief financial officer. Provided,
however, Borrowers shall not be obligated to deliver the Borrowers'
internally prepared balance sheet and income statement for the last
month of Borrowers' fiscal year.
b. Annual Financial Statements. Within one hundred twenty
---------------------------
(120) days after the end of their fiscal year, and for all fiscal years
thereafter so long as any Obligations remain unpaid, a complete,
unqualified, annual audit report of EIMI and 21st Century. The audited
report shall consist of balance sheet, statement of profit and loss,
application of funds, change in financial position and the like,
prepared and certified by a firm of independent public accountants of
recognized standing acceptable to the Bank. EUGI shall also provide an
internally prepared annual financial statement which shall be on a
consolidated basis. All of the foregoing shall be in reasonable detail
and stating in comparative form the respective figures for the
corresponding date and period in the prior fiscal year and all such
financial statements shall be prepared in accordance with GAAP
consistently applied and certified as correct by Borrowers' chief
financial officer.
<PAGE>
<PAGE>
c. Notice of Litigation. Promptly after the commencement
--------------------
thereof, notice of all actions, suits, and proceedings before any court
or governmental department, commission, board, bureau, agency, or
instrumentality, domestic or foreign, affecting Borrowers or either
Guarantor which, if determined adversely, could have a material, adverse
effect on Borrowers or a Guarantor's financial condition, properties, or
operations.
d. Notice of Defaults and Events of Default. As soon as
----------------------------------------
possible and in any event within ten (10) days after the occurrence of
each Default or Event of Default, a written notice setting forth the
details of such Default or Event of Default and the action which is
proposed to be taken with respect thereto.
e. Compliance Base Certificates. EIMI shall provide Bank with
----------------------------
a Compliance Certificate in the same form as attached hereto as Exhibit
"A" within sixty (60) days after the end of the first three calendar
quarters of each year which are internally prepared and then provide a
Covenant Compliance Certificate within one hundred twenty (120) days
after the end of the fiscal year based on the audited consolidated
financial statement.
f. Guarantors' Financial Statements and Tax Returns. Within
------------------------------------------------
thirty (30) days after filing, copies of each Guarantor's federal and
state income tax returns, amendments and schedules. Within ninety (90)
days after the anniversary date of receipt of the last financial
statement, Guarantors shall provide a financial statement of assets,
liabilities and net worth for each Guarantor, in form and content
reasonably acceptable to Bank, and all in reasonable detail.
g. Fiscal Year Projections. EIMI shall provide the Bank with
-----------------------
its fiscal year projections within one hundred twenty (120) days of
fiscal year end.
h. General Information. Such other information respecting
-------------------
the condition or operations, financial or otherwise, of Borrowers or any
Guarantor, as Bank may from time to time reasonably request.
2. Amendment of Article VIII of the Loan Agreement. Article
-----------------------------------------------
VIII of the Loan Agreement is amended as follows:
8.19 Year 2000 Provisions
(a) Representation and Warranties. Borrowers represent
-----------------------------
and warrant as follows to Bank that: (i) as of the date of any request
for an advance under the Loan Documents, (ii) as of the date of any
renewal, extension or modification of the Loan Documents, and (iii) at
all times the Loan Documents or Bank's commitment to make advances under
the Loan Documents is outstanding:
i. Borrowers will use good faith efforts to ensure
that by December 31, 1998, all devices, systems, machinery,
information technology, computer software and hardware, and other
date sensitive technology (jointly and severally the "Systems")
necessary for Borrowers to carry on its business as presently
conducted and as contemplated to be conducted in the future are
Year 2000 Compliant or will be Year 2000 Compliant with a period
of time calculated to result in no material disruption of any of
Borrowers' business operations. For purposes of these provisions,
"Year 2000 Compliant" means that such Systems are designed to be
used prior to, during and after the Gregorian calendar year 2000
A.D. and will operate during such time period without error
relating to date data, specifically including any error relating
to, or the product of, date data which represents or referenced
different centuries or more than on century.
- 2 -
<PAGE>
<PAGE>
ii. Borrowers will: (1) undertake a detailed
inventory, review and assessment of all areas within their
businesses and operations that could be adversely affected by the
failure of Borrowers to be Year 2000 Compliant on a timely basis;
(2) develop a detailed plan and time line for becoming Year 2000
Compliant on a timely basis; and (3) implement that plan in
accordance with that timetable in all material respects.
iii. By December 31, 1998, Borrowers will make
written inquiry of each of their key suppliers, vendors, and
customers, and will obtain in writing confirmations from all such
persons, as to whether such persons have initiated programs to
become Year 2000 Compliant and on the basis of such confirmations,
Borrowers will make a good faith effort to ensure that all such
persons will be or become so compliant. For purposes hereof, "key
suppliers, vendors and customers" refers to those suppliers,
vendors, and customers of Borrowers whose business failure would,
with reasonable probability, result in a material adverse change
in the business, properties, condition (financial or otherwise),
or prospects of Borrowers. For purposes of this paragraph, Bank,
as lender of funds under the terms of the Loan Documents, confirms
to Borrowers that Bank has initiated its own corporate-wide Year
2000 program with respect to its lending activities.
iv. Borrowers will make a good faith effort to
ensure that the fair market value of all real and personal
property, if any, pledged to Bank as Collateral to secure the Loan
Documents is not and shall not be less than currently anticipated
or subject to substantial deterioration in value because of the
failure of such Collateral to be Year 2000 Compliant.
(b) Affirmative Covenants. Borrowers covenant and agree
---------------------
with Bank that, while any Loan Documents is in effect, Borrowers will:
i Furnish such additional information, statements
and other reports with respect to Borrowers' activities, course of
action and progress towards becoming Year 2000 Compliant as Bank
may request from time to time.
ii. In the event of any change in circumstances that
causes or will likely cause any of Borrowers' representations and
warranties with respect to its being or becoming Year 2000
Compliant to no longer be true (hereinafter referred to as a
"Change in Circumstances") then Borrowers shall promptly, and in
any event within ten (10) days of receipt of information regarding
a Change in Circumstances, provide Bank with written notice (the
"Notice") that describes in reasonable detail the Change in
Circumstances and how such Change in Circumstances caused or will
likely cause Borrowers' representations and warranties with
respect to being or becoming Year 2000 Compliant to no longer be
true. Borrowers shall, within ten (10) days of a request, also
provide Bank with any additional information Bank requests of
Borrowers in connection with the Notice and/or Change of
Circumstances.
iii. Give any representative of Bank access during
all business hours to, and permit such representative to examine,
copy or make excerpts from, any and all books, records and
documents in the possession of Borrowers and relating to its
affairs, and to inspect any of the properties and Systems of
Borrowers, and to project test the Systems to determine if they
are Year 2000 Compliant in an integrated environment, all at the
sole cost and expense of Bank.
3. Continuing Security. The Indebtedness as evidenced by the
-------------------
Note shall continue to be secured by all of the Loan Documents and
collateral described in the Loan Agreement.
- 3 -
<PAGE>
<PAGE>
4. No Defenses or Setoffs. As of the date hereof, neither
----------------------
Borrowers nor Guarantors are aware of any defenses, credits or setoffs
to the payment of the Indebtedness evidenced by the Note, or to the
enforceability of the Note, the Loan Agreement, or the Loan Documents
against the Borrowers or Guarantors, nor are there any claims, actions
or causes of action which could be asserted against the Bank relating to
the transactions evidenced by the Note, the Loan Agreement, this
Amendment or any of the transactions relating thereto.
5. Limited Effect of Amendment. Except as specifically
---------------------------
amended herein, the terms and conditions of the Note, the Loan
Agreement, the Guaranties, the Loan Documents, and all other existing
agreements between the parties are unaffected by this Amendment and
shall continue to be binding upon Borrowers, Guarantors and the Bank.
Further, the term "Note" shall include the Revolving Credit Note dated
effective as of July 23, 1998, with a maturity date of June 30, 1999, in
the amount of $400,000.00 between the Bank and Borrowers.
6. Full Force and Effect of Loan Documents. The Loan
---------------------------------------
Documents as defined in the Loan Agreement, including the Amended and
Restated Revolving Credit Note dated effective as of July 23, 1998, in
the amount of $400,000.00, between the Bank and Borrowers, are valid and
enforceable in accordance with their terms and shall continue to remain
in full force and effect.
BANK ONE, KENTUCKY, NA
BY: /s/ Rhonda Lenney
------------------------------------
TITLE: Officer
---------------------------------
EQUITY INSURANCE MANAGERS, INC.
BY: /s/ John R. Owens
------------------------------------
TITLE: President
---------------------------------
EQUITY UNDERWRITING GROUP, INC.
BY: /s/ John R. Owens
------------------------------------
TITLE: President
---------------------------------
21ST CENTURY CLAIM SERVICES, INC.
BY: /s/ John R. Owens
------------------------------------
TITLE: President
---------------------------------
/s/ John R. Owens
---------------------------------------
JOHN ROBERT OWENS
/s/ D. Richard Meyer
---------------------------------------
D. RICHARD MEYER
- 4 -
<PAGE>
EXHIBIT 10.32
AMENDED AND RESTATED REVOLVING CREDIT NOTE
------------------------------------------
("Note")
EQUITY INSURANCE MANAGERS, INC.
a Kentucky corporation
3201 Nicholasville Road
Lexington, Kentucky 40503
$400,000.00
DATE: July 23, 1998
Executed at Lexington, Kentucky
1. FOR VALUE RECEIVED, EQUITY INSURANCE MANAGERS, INC.
("Borrower"), promises to pay to the order of BANK ONE, KENTUCKY, NA, a
national banking association (the "Bank"), the principal sum of FOUR
HUNDRED THOUSAND DOLLARS ($400,000.00) or so much thereof as may be
advanced by Bank and outstanding from time to time under this Note, and
to pay interest from the date hereof on such principal amount from time
to time outstanding at the per annum rate equal to the Prime rate of
interest as declared by Bank from time to time and adjusted daily, all
of such payments to be made in lawful money of the United States of
America in immediately available funds, without defalcation. "Prime"
rate of interest as used herein means a variable rate of interest
announced from time to time by Bank as its prime rate whether or not
such rate if otherwise published, which rate may not be Bank's lowest or
best rate; provided, that in the event this Note is assigned to another
holder which is a commercial bank, Prime rate shall mean the reference
rate of interest established by such subsequent holder from and after
the date of such assignment, as its prime rate from time to time. The
Prime rate shall be adjusted each time and at the time the Bank's Prime
rate changes.
2. This Note is an amendment and restatement of the Note dated
December 30, 1997. This Note evidences indebtedness of Borrower to Bank
which indebtedness may increase or decrease from time to time and the
total amount advanced pursuant hereto may exceed the face amount hereof;
provided, however, the aggregate principal amount outstanding hereunder
shall not exceed the face amount of this Note at any time. It is
further contemplated that, by reason of payments hereon, there may be
times when no indebtedness is owing hereunder, but notwithstanding such
occurrences, this Note shall remain valid and shall continue to be in
full force and effect as to Advances made subsequent to each such
occurrence.
3. Borrower shall repay this Note by paying all accrued
interest monthly beginning on June 30, 1998 and continuing on the
thirtieth day of each month until July 30, 1999 (the "Maturity Date") at
which time all outstanding principal and accrued interest shall be due
and payable in full. Interest on this Note will be computed on the
basis of the actual number of days elapsed over an assumed year of 360
days. Borrower shall make each payment under this Note not later than
12:00 p.m. (Noon), Louisville, Kentucky, Eastern time, on the date when
due, in lawful money of the United States of America, to Bank at
416 West Jefferson Street, Louisville, Kentucky 40202-3244, in
immediately available funds. Borrower hereby authorizes Bank to charge
against any account of Borrower with Bank containing unrestricted funds
any amount so due. Whenever any payment to be made under this Note
shall be stated to be due on a Saturday, Sunday or a public holiday or
banking holiday, such payment
<PAGE>
<PAGE>
shall be made on the next succeeding Domestic Business Day, and such
extension of time shall be in such case included in the computation of
the payment of interest.
4. If any amount due hereunder is past due for more than
fifteen (15) days (whether by lapse of time or by reason of acceleration
under the provisions hereof), or upon the occurrence of any Event of
Default defined hereinbelow, the interest rate on the entire principal
balance and all matured interest installments outstanding shall increase
by three percent (3%) per annum and shall continue at that rate as long
as any amount due is more than fifteen (15) days late; provided,
however, that the total interest rate charged Borrower shall not exceed
the maximum rate of interest allowed by law and if such increased rate
of interest exceeds the maximum amount permitted under applicable law in
such circumstances, the amount of the increased interest rate shall be
increased by such lesser maximum amount as legally may be allowed, and
Bank's entitlement to such sum shall be in addition to, and not in lieu
of, all other rights and remedies available to Bank as a result of such
overdue payment. If a law which applies to this Note is interpreted so
that the interest collected or to be collected hereunder exceeds the
legal amount, then the interest rate charged hereunder shall be reduced
by the amount necessary to reduce the interest charged to the maximum
legal amount and this Note and all sums due hereunder shall immediately
become due and payable in full at the election of the holder hereof. It
is agreed that all matured interest installments outstanding shall also
bear interest until paid at the same rate that continues to accrue on
the principal outstanding. Any payment on this Note that is overdue for
more than fifteen (15) days from its due date shall be increased by an
amount equal to the lesser of $250.00 or five percent (5%) of the
overdue payment.
5. Bank and Borrower agree that upon the written demand of
either party, whether made before or after the institution of any legal
proceedings, but prior to the rendering of any judgment in that
proceeding, all disputes, claims and contract disputes and tort claims,
shall be resolved by binding arbitration pursuant to the Commercial
Rules of the American Arbitration Association. Any arbitration
proceeding held pursuant to this arbitration provision shall be
conducted in the city nearest the Borrower's address having an AAA
regional office, or at any other place selected by mutual agreement of
the parties. No act to take or dispose of any Collateral shall
constitute a waiver of this arbitration agreement or be prohibited by
this arbitration agreement. This arbitration provision shall not limit
the right of either party during any dispute, claim or controversy to
seek, use and employ ancillary, or preliminary rights and/or remedies,
judicial or otherwise, for the purposes of realizing upon, preserving,
protecting, foreclosing upon or proceeding under forcible entry and
detainer for possession of, any real or personal property, and any such
action shall not be deemed an election of remedies. Such remedies
include, without limitation, obtaining injunctive relief or a temporary
restraining order, invoking power of sale under any deed of trust or
mortgage, obtaining a writ of attachment or imposition of a
receivership, or exercising any rights relating to personal property
including taking or disposing of such property with or without judicial
process pursuant to Article 9 of the Uniform Commercial Code or when
applicable, a judgment by confession of judgment. Any disputes, claims
or controversies concerning the lawfulness or reasonableness of an act,
or exercise of any right or remedy concerning any Collateral, including
any claim to rescind, reform or otherwise modify any agreement relating
to the Collateral, shall also be arbitrated, provided, however, that no
arbitrator shall have the right or the power to enjoin or restrain any
act of either party. Judgment upon any award rendered by any arbitrator
may be entered in any court having jurisdiction. Nothing in this
arbitration provision shall preclude either party from seeking equitable
relief from a court of competent jurisdiction. The status of
limitations, estoppel, waiver, laches and similar doctrines which would
otherwise be applicable in an action brought by a party shall be
applicable in any arbitration proceeding, and the commencement of an
arbitration proceeding shall be deemed the commencement of any action
for these purposes. The Federal Arbitration Act (Title 9 of the United
States Code) shall apply to the construction, interpretation, and
enforcement of this arbitration provision.
2
<PAGE>
<PAGE>
6. Borrower will be in default if any of the following happens:
(a) Borrower fails to make any payment or principal or interest when due
under this Note or any other indebtedness owing now or hereafter by
Borrower to Bank; (b) failure of Borrower or any other party to comply
with or perform any term, obligation, covenant or condition contained in
this Note or in any other promissory note, credit agreement, loan
agreement, guaranty, security agreement, mortgage, deed of trust or any
other instrument, agreement or document, whether now or hereafter
existing, executed in connection with this Note (the Note and all such
other instruments, agreements, and documents shall be collectively known
herein as the "Related Documents"); (c) any representation or statement
made or furnished to Lender herein, in any of the Related Documents or
in connection with any of the foregoing is false or misleading in any
material respect; (d) Borrower dissolves (regardless of whether election
to continue is made), any member withdraws from Borrower, any member
dies, or any of the members or Borrower or any other party liable for
the payment of this Note, whether as maker, endorser, guarantor, surety
or otherwise, becomes insolvent or bankrupt, has a receiver or trustee
appointed for any part of its property, makes an assignment for the
benefit of its creditors, or any proceeding is commenced either by any
such party or against it under any bankruptcy or insolvency laws;
(e) the occurrence of any event of default specified in any of the other
Related Documents or in any other agreement now or hereafter arising
between Borrower and Bank; (f) the occurrence of any event which permits
the acceleration of the maturity of any indebtedness owing now or
hereafter by Borrower to any third party; or (g) the liquidation,
termination, dissolution, death or legal incapacity of Borrower or any
other party liable for the payment of this Note, whether as maker,
endorser, guarantor, surety, or otherwise.
7. The occurrence of any Event of Default shall entitle the
holder hereof to declare the entire principal balance of this Note,
together with all accrued interest, and all other liabilities,
indebtedness and obligations of Borrower to Bank, whether now existing
or hereafter created, to be immediately due and payable, and to take any
and all action allowed the holder by law or equity, under the terms of
this Note and under the terms of any other agreements between Borrower
and Bank. Upon default, including failure to pay upon final maturity,
Bank, at its option, may also, if permitted under applicable law, do one
or both of the following: (a) increase the applicable interest rate on
this Note 3.00 percentage points, and (b) add any unpaid accrued
interest to principal and such sum will bear interest therefrom until
paid at the rate provided in this Note (including any increased rate).
The interest rate will not exceed the maximum rate permitted by
applicable law.
8. All rights and remedies of Bank under this Note, any
document securing or relating thereto, and under any other applicable
law or at equity, are and shall be cumulative to the greatest extent
permitted by law. The delay or failure of Bank or the holder hereof to
insist upon strict performance of any of the terms of this Note, or to
exercise any rights herein confirmed shall not be construed as a waiver
or relinquishment to any extent of Bank's or the holder's right to
assert or rely upon such terms or rights at any subsequent time or in
any other instance.
9. The Borrower and all endorsers, guarantors and all other
parties to this Note hereby:
(a) consent to the negotiation or assignment of this Note
to any other person at any time;
(b) waive presentment and demand, notice of demand, notice
of dishonor, protest and notice of protest and non-
payment thereof and all other notices or demands in
connection with the delivery, acceptance, performance,
default, enforcement, endorsement or guarantee hereof;
3
<PAGE>
<PAGE>
(c) waive all exemptions to which they may now or
hereafter be entitled under the laws of this or any
other state or of the United States;
(d) waive any requirement of marshaling of assets and all
other legal or equitable doctrines which might
otherwise require the holder hereof to proceed against
any persons or any collateral or any other property or
with respect to any other rights in any particular
order and agree that the holder may elect not to
proceed against any collateral securing this note and
may instead seek to enforce and collect this note
through whatever means may otherwise be available at
law or equity;
(e) agree that Bank shall have the right, but not the
obligation, without notice to Borrower or any other
party, to renew this Note, grant the Borrower
extensions of time for, or changes in the amounts of,
payment of this Note or any other indulgence or
forbearance by Bank, and Bank may release any or all
of the security and collateral for this Note, and
modify the terms of any of the Loan Documents or any
other document securing or relating to this Note, and
may release any guarantors, endorsers or any party to
this Note, and otherwise deal in any way, at any time,
with Borrower, or any guarantor of this Note or with
any other party who may become primarily or
secondarily liable for any of the obligations of
Borrower under this Note, in every instance without
the consent of Borrower or any such other parties and
without in any way affecting the continuing liability
of the Borrower or any such other parties hereunder or
under any of the other Loan Documents.
10. Bank shall have the right to set off, at all times and
without notice to Borrower, and Borrower hereby grants Bank a security
interest in, any and all deposits, credits, accounts, securities,
certificates of deposit, cash, instruments, documents, general
intangibles and any other property or other sums of Borrower at any time
or times held by Bank or credited by or due from Bank to Borrower,
whether held by Bank in a fiduciary capacity or otherwise, and all
products and proceeds thereof, as additional security for all sums due
hereunder and all other liabilities of Borrower to Bank, whether now
existing or hereafter arising or acquired and whether absolute or
contingent.
11. The Borrower agrees that it will pay to the Bank or the
holder hereof all costs and expenses, including without limitation
reasonable attorneys' fees, incurred by Bank in connection with the
preparation of this Note and all related documentation, the enforcement
thereof, and the collection or attempted collection of the sums due
hereunder or in securing or attempting to secure or protecting and
defending or attempting to protect and defend holder's interest in any
property securing this Note.
12. BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS NOTE OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF BANK AND BORROWER. BORROWER
ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL
INDUCEMENT TO BANK.
13. The Borrower agrees that the sole proper venue for the
determination of any litigation commenced by either Borrower or Bank on
any basis shall be in a court of competent jurisdiction which is located
in Fayette County, Kentucky, and the parties hereby expressly declare
that any other venue
4
<PAGE>
<PAGE>
shall be improper and Borrower expressly waives any right to a
determination of any such litigation against Bank by a court in any
other venue. Borrower further agrees that service of process by any
judicial officer or by registered or certified U.S. mail shall establish
personal jurisdiction over Borrower, and Borrower waives any rights
under the laws of any state to object to jurisdiction within the
Commonwealth of Kentucky. Borrower acknowledges that this Note was
executed and delivered in the Commonwealth of Kentucky and shall be
governed and construed in accordance with the laws thereof. The
aforesaid means of obtaining personal jurisdiction and perfecting
service of process are not intended to be exclusive, but are cumulative
and in addition to all other means of obtaining personal jurisdiction
and perfecting service of process now or hereafter provided by the laws
of the Commonwealth of Kentucky or by any other state in an action
brought by Bank in such state.
14. The substantive laws of the Commonwealth of Kentucky
(without regard to provisions governing conflicts of laws) shall govern
the construction of this Note and the rights and remedies of the parties
hereto.
15. Time is of the essence in the payment and performance of all
of Borrower's obligations under this Note and all documents securing
this Note or relating hereto.
16. This Note cannot be modified, altered or amended except by
an agreement in writing duly signed and acknowledged by authorized
representatives of Bank and Borrower.
17. If any one or more of the provisions of this Note, or the
applicability of any such provision to a specific situation, shall be
held invalid or unenforceable, such provision shall be modified to the
minimum extent necessary to make it or its application valid and
enforceable, and the validity and enforceability of all other provisions
of this Note and all other applications of any such provision shall not
be affected thereby. In the event such provision(s) cannot be modified
to make it or them enforceable, the invalidity or unenforceability of
any such provision(s) of this Note shall not impair the validity or
enforceability of any other provision of this Note.
18. This Note shall bind the heirs, successors and assigns of
Borrower and shall inure to the benefit of Bank and its successors and
assigns. Borrower shall not assign or allow the assumption of its
rights and obligations hereunder without Bank's prior written consent.
DATED as of the day and year first above written.
EQUITY INSURANCE MANAGERS, INC.
BY: /s/ D. R. Meyer
----------------------------
TITLE: President
-------------------------
5
<PAGE>
EXHIBIT 10.33
SECOND AMENDMENT TO LOAN AGREEMENT
----------------------------------
This Second Amendment to Loan Agreement (the "Amendment") is dated
and effective as of February 25, 1999, by, between and among EQUITY
UNDERWRITING GROUP, INC., EQUITY INSURANCE MANAGERS, INC. and 21ST
CENTURY CLAIM SERVICES, all Kentucky corporations (collectively referred
to herein as the "Borrowers"); UNIFIED FINANCIAL SERVICES, INC., a
Delaware corporation (referred to herein as the "Guarantor"); and BANK
ONE, KENTUCKY, NA, a national banking association (referred to herein as
the "Bank").
RECITALS
--------
1. The Borrowers, the Guarantor and the Bank desire to amend
the Loan Agreement dated as of January 20, 1998 (the "Loan Agreement")
as amended by the First Amendment to Loan Agreement dated as of July 23,
1998 (the "First Amendment").
2. The parties herein have agreed to enter into this Second
Amendment in order to further amend the terms and conditions as set
forth in the Loan Agreement and the First Amendment.
3. The loan documents described in the Loan Agreement and the
First Amendment and this Agreement and the other documents and notes
referred to herein shall collectively be referred to as the "Loan
Documents". All of the present notes and the notes referred to herein
are collectively referred to as the "Notes" and the aggregate amount
owed to the Bank under the Notes and the other Loan Documents shall be
referred to as the "Indebtedness".
NOW, THEREFORE, the parties, in consideration of the mutual
covenants and agreements contained herein, covenant and agree as
follows:
1. Modification of Term Loan. The term loan as defined in
-------------------------
the Loan Agreement shall be amended to provide for a maturity date of
June 20, 1999, with payments due on the 20th day of each month. The
amended term loan shall be evidenced by the Amended and Restated Term
Note dated February 25, 1999.
2. Extension of Additional Credit. The Bank shall provide
------------------------------
the Borrowers with an additional loan in the principal amount of
$800,000.00, which shall have a maturity date of June 30, 1999. It
shall be evidenced by the Term Note dated February 25, 1999.
3. Renewal of 21st Century Note. The Bank agrees to renew
----------------------------
the 21st Century Note to June 30, 1999, which shall be evidenced by the
Renewal 21st Century Note dated as of January 30, 1999.
4. Substitution of Guaranties. The Bank hereby agrees to
--------------------------
accept the Guaranty of the Guarantor as evidenced by the Guaranty dated
February 18, 1999 (the "Guaranty"), in substitution of the Guaranties of
John Robert Owens and D. Richard Meyer, and the Bank further agrees that
John Robert Owens and D. Richard Meyer are hereby deemed to be released
of their obligations as Guarantors of the aforementioned Loans which
they have guaranteed upon execution and delivery of all documents
required herein.
5. Additional Reporting Requirements. In addition to the
---------------------------------
reporting requirements contained in the Loan Agreement, as amended, the
Guarantor shall, within sixty (60) days after the end of each fiscal
quarter (and beginning with the March 31, 1999 quarter end), provide
Bank with balance sheets,
<PAGE>
<PAGE>
statements of income and retained earnings as of the end of such fiscal
quarter, and properly completed calculations necessary to test
compliance with all of the financial covenants set forth herein, in form
and content reasonably acceptable to Bank, and all in reasonable detail,
and all such financial statements shall be internally prepared in
accordance with GAAP consistently applied and certified as correct by
Guarantor's chief financial officer. Provided, however, the Guarantor
shall not be obligated to deliver the Guarantor's internally prepared
balance sheet and income statement for the last month of the Guarantor's
fiscal year.
6. Collateral. The Indebtedness shall continue to be secured
----------
by the Security Agreements dated January 20, 1998, from the Borrowers
whereby the Borrowers pledged to the Bank a valid and enforceable
security interest in all of their assets as described in each of the
Security Agreements. Further, the Guarantor shall execute and deliver
to the Bank its Stock Pledge and Security Agreement whereby the
Guarantor pledges and assigns to the Bank all of its interest in the
Common Stock of Equity Underwriting Group, Inc. and Commonwealth Premium
Finance Corporation (the "Stock") as shown on Schedule A attached to the
Stock Pledge and Security Agreement dated February 25, 1999.
7. Conditions Precedent. The obligation of the Bank to enter
--------------------
into this Agreement and the other Loan Documents is subject to the
condition precedent that the Bank shall have received and approved on or
before the closing each of the following, in form and substance
reasonably satisfactory to the Bank:
a. This Agreement, the Amended and Restated Term Note,
the Term Note, the Renewal 21st Century Note, the Guaranty and the Stock
Pledge and Security Agreement shall be duly executed and delivered by
the Borrowers and the Guarantor to the Bank.
b. Lien Report. A lien report from the counsel for the
-----------
Guarantor, which states that the Bank has first and prior lien on the
Stock.
c. Articles and By-Laws; Evidence of Existence/Good
-------------------------------------------------
Standing of the Guarantor. Certified copies of the Guarantor's
- -------------------------
Articles and By-Laws and the Certificate of Existence/Good Standing of
the Guarantor issued by the Secretary of State of Delaware.
d. Evidence of Corporate Action by the Borrowers and the
------------------------------------------------------
Guarantor. Certified copies of all corporate action taken by the
- ---------
Borrowers and the Guarantor, including resolutions of the Borrowers and
the Guarantor authorizing the execution, delivery and performance of the
Loan Documents. A certificate of the Secretary of the Guarantor
certifying the names and true signatures of officers of the Guarantor
authorized to sign the aforementioned documents to which it is a party.
e. Opinion of Counsel. The Borrowers and the Guarantor
------------------
shall provide the Bank with an opinion of counsel satisfactory to the
Bank regarding such matters as the validity and enforceability of the
Loan Documents.
8. Representations and Warranties of the Borrowers. Each of
-----------------------------------------------
the Borrowers represents and warrants to the Bank as follows:
a. Good Standing and Due Qualification. Each Borrower
-----------------------------------
is a corporation, duly incorporated, validly existing and is duly
qualified and in good standing under the laws of each jurisdiction in
which such qualification is required by law.
- 2 -
<PAGE>
<PAGE>
b. Corporate Power and Authority. The execution,
-----------------------------
delivery and performance by the Borrowers of the Loan Documents have
been duly authorized by all necessary corporate action.
c. Legally Enforceable Loan Documents. The Loan
----------------------------------
Documents executed and/or delivered in connection with this Agreement
are legal, valid and binding obligations of each Borrower and
enforceable in accordance with their respective terms, except to the
extent that such enforcement may be limited by applicable bankruptcy,
insolvency and other similar laws affecting creditors rights generally.
d. No Adverse Change. No material adverse change has
-----------------
occurred in any of the businesses of either of the Borrowers and no
material adverse change has occurred in the financial condition of
either of the Borrowers since the date of the most current financial
information provided to the Bank.
e. No Defenses or Setoffs. As of the date hereof, the
----------------------
Borrowers are not aware of any defenses, credits or setoffs to the
payment of the Indebtedness evidenced by the Notes, or to the
enforceability of the Notes, or the Loan Documents, nor are there any
claims, actions or causes of action which could be asserted against the
Bank relating to the transactions evidenced by any of the Loan
Documents.
f. Limited Effect of Amendment. Except as specifically
---------------------------
amended herein, the terms and conditions of the Notes, the Loan
Documents and all other existing agreements between the parties are
unaffected by this Amendment and shall continue to be binding upon the
Borrowers and the Bank and continue to remain in full force and effect.
9. Representations and Warranties of the Guarantor. The
-----------------------------------------------
Guarantor represents and warrants to the Bank as follows:
a. Good Standing and Due Qualification. The Guarantor
-----------------------------------
is a corporation, duly incorporated, validly existing and is duly
qualified and in good standing under the laws of Delaware.
b. Corporate Power and Authority. The execution,
-----------------------------
delivery and performance by the Guarantor of the Loan Documents to which
it is a party have been duly authorized by all necessary corporate
action.
c. Legally Enforceable Loan Documents. The Loan
----------------------------------
Documents executed and/or delivered by the Guarantor are legal, valid
and binding obligations of the Guarantor and enforceable in accordance
with their respective terms, except to the extent that such enforcement
may be limited by applicable bankruptcy, insolvency and other similar
laws affecting creditors rights generally.
10. Affirmative Covenants. So long as any portion of the
---------------------
Notes shall remain unpaid, the Borrowers each agree to fully comply with
all of the affirmative convents contained in the Loan Agreement and the
First Amendment. Further, the Borrowers shall fully comply with the
negative covenants contained in the Loan Agreement and the First
Amendment.
11. Notices. All notices and other communications given to or
-------
made upon any party hereto in connection with this Security Agreement,
the Notes or any other Loan Documents shall, except as herein or therein
otherwise expressly provided, be in writing, sent by certified or
registered mail return receipt requested, as follows:
- 3 -
<PAGE>
<PAGE>
If to Borrower: 220 Lexington Green Circle
Lexington, Kentucky 40503
ATTN: Robert Owens
with a copy to: Robert M. Beck, Jr.
Stites & Harbison
2300 Lexington Financial Center
Lexington, Kentucky 40507
If to Guarantor: Unified Financial Services, Inc.
1104 Buttonwood Court
Lexington, Kentucky 40515
ATTN: President and CEO
with a copy to: Charles H. Binger
Thompson Coburn
One Mercantile Center, Suite 34007
St. Louis, Missouri 63101
If to Bank: Bank One, Kentucky, NA
416 West Jefferson Street
Louisville, Kentucky 40202
with a copy to: Mark Boison
Bank One, Kentucky, NA
201 East Main Street
Lexington, Kentucky 40507
12. Entire Agreement. This Amendment and the other Loan
----------------
Documents constitute the entire understanding among the parties with
respect to the subject matter hereof and supersede any prior agreements,
written or oral, with respect thereto. This Agreement may not be
amended without the prior written consent of all parties herein.
BANK ONE, KENTUCKY, NA
BY: /s/ Rhonda Lenney
--------------------------------------
TITLE: Officer
-----------------------------------
EQUITY INSURANCE MANAGERS, INC.
BY: /s/ John R. Owens
--------------------------------------
TITLE: President
-----------------------------------
- 4 -
<PAGE>
<PAGE>
EQUITY UNDERWRITING GROUP, INC.
BY: /s/ John R. Owens
--------------------------------------
TITLE: President
-----------------------------------
21ST CENTURY CLAIM SERVICES, INC.
BY: /s/ John R. Owens
--------------------------------------
TITLE: Secretary/Treasurer
-----------------------------------
UNIFIED FINANCIAL SERVICES, INC.
BY: /s/ Timothy L. Ashburn
--------------------------------------
TITLE: Chairman, CEO, President
-----------------------------------
- 5 -
<PAGE>
EXHIBIT 10.34
AMENDED AND RESTATED TERM NOTE
------------------------------
("Note")
EQUITY UNDERWRITING GROUP, INC.
a Kentucky corporation
220 Lexington Green Circle
Lexington, Kentucky 40503
EQUITY INSURANCE MANAGERS, INC.
a Kentucky corporation
220 Lexington Green Circle
Lexington, Kentucky 40503
$1,250,000.00
DATE: February 25, 1999
Executed at Lexington, Kentucky
1. FOR VALUE RECEIVED, EQUITY UNDERWRITING GROUP, INC. and
EQUITY INSURANCE MANAGERS, INC. (collectively the "Borrower"), promises
to pay to the order of BANK ONE, KENTUCKY, NA, a national banking
association (the "Bank"), the principal sum of One Million Two Hundred
Fifty Thousand Dollars ($1,250,000.00) or so much thereof as may be
advanced by Bank and outstanding from time to time under this Note, and
to pay interest from the date hereof on such principal amount from time
to time outstanding at the per annum rate equal to the Prime rate of
interest as declared by Bank from time to time and adjusted daily, all
of such payments to be made in lawful money of the United States of
America in immediately available funds, without defalcation. "Prime"
rate of interest as used herein means a variable rate of interest
announced from time to time by Bank as its prime rate whether or not
such rate if otherwise published, which rate may not be Bank's lowest or
best rate; provided, that in the event this Note is assigned to another
holder which is a commercial bank, Prime rate shall mean the reference
rate of interest established by such subsequent holder from and after
the date of such assignment, as its prime rate from time to time. The
Prime rate shall be adjusted each time and at the time the Bank's Prime
rate changes.
2. Borrower shall repay this Note by paying a fixed principal
payment of $26,041.67 per month plus accrued interest monthly beginning
on March 20, 1999 and continuing on the 20th day of each month until
June 20, 1999 (the "Maturity Date") at which time all outstanding
principal and accrued interest shall be due and payable in full.
Interest on this Note will be computed on the basis of the actual number
of days elapsed over an assumed year of 360 days. Borrower shall make
each payment under this Note not later than 12:00 p.m. (Noon),
Lexington, Kentucky, Eastern time, on the date when due, in lawful money
of the United States of America, to Bank at its Lexington Office, in
immediately available funds. Borrower hereby authorizes Bank to charge
against any account of Borrower with Bank containing unrestricted funds
any amount so due. Whenever any payment to be made under this Note shall
be stated to be due on a Saturday, Sunday or a public holiday or banking
holiday, such payment shall be made on the next succeeding Domestic
Business Day, and such extension of time shall be in such case be
included in the computation of the payment of interest.
<PAGE>
<PAGE>
3. This Note is mentioned in a Loan Agreement dated January 20,
1998, which has been amended by the First Amendment to Loan Agreement
dated July 23, 1998 and by the Second Amendment to Loan Agreement dated
of even date. This Note, the Loan Agreement, as amended, and all other
documents defined in the Loan Agreement, as amended, as loan documents
shall be collectively referred to herein as the "Loan Documents".
4. The obligations evidenced by this Note or the Loan
Agreement, as amended, are secured by the Security Agreements dated
January 20, 1998, and the Stock Pledge and Security Agreement dated of
even date from Unified Financial Services, Inc., which secures its
Guaranty dated of even date, in favor of the Bank.
5. If any amount due hereunder is past due for more than ten
(10) days Borrower will be charged five percent (5%) of the regularly
scheduled payment up to the maximum amount of $1,500.00 with a minimum
of $25.00 per late charge. Upon the occurrence of any Event of Default
defined hereinbelow, the interest rate on the entire principal balance
and all matured interest installments outstanding shall increase by
three percent (3%) per annum; provided, however, that the total interest
rate charged Borrower shall not exceed the maximum rate of interest
allowed by law and if such increased rate of interest exceeds the
maximum amount permitted under applicable law in such circumstances, the
amount of the increased interest rate shall be increased by such lesser
maximum amount as legally may be allowed, and Bank's entitlement to such
sum shall be in addition to, and not in lieu of, all other rights and
remedies available to Bank as a result of such overdue payment. If a law
which applies to this Note is interpreted so that the interest collected
or to be collected hereunder exceeds the legal amount, then the interest
rate charged hereunder shall be reduced by the amount necessary to
reduce the interest charged to the maximum legal amount and this Note
and all sums due hereunder shall immediately become due and payable in
full at the election of the holder hereof. It is agreed that all matured
interest installments outstanding shall also bear interest until paid at
the same rate that continues to accrue on the principal outstanding.
6. Bank and Borrower agree to binding arbitration as provided
in Section 8.18 of the Loan Agreement.
7. Borrower will be in default if any of the following happens:
(a) Borrower fails to make any payment or principal or interest within
ten (10) days of its due date under this Note or any other indebtedness
owing now or hereafter by Borrower to Bank; (b) failure of Borrower or
any other party to comply with or perform any term, obligation, covenant
or condition contained in this Note or in any other promissory note,
credit agreement, loan agreement, guaranty, security agreement,
mortgage, deed of trust or any other instrument, agreement or document,
within thirty (30) days after receipt of written notice, whether now or
hereafter existing, executed in connection with this Note or the other
Loan Documents; (c) any representation or statement made or furnished to
Lender herein, in any of the Loan Documents or in connection with any of
the foregoing is false or misleading in any material respect and said
default shall continue unremedied for a period of thirty (30) days after
date of written notice; (d) Borrower dissolves, becomes insolvent or
bankrupt, has a receiver or trustee appointed for any part of its
property, makes an assignment for the benefit of its creditors, or any
proceeding is commenced either by any such party or against it under any
bankruptcy or insolvency laws; (e) the occurrence of any event of
default specified in any of the other Loan Documents or in any other
agreement now or hereafter arising between Borrower and Bank; (f) the
occurrence of any event which permits the acceleration of the maturity
of any indebtedness owing now or hereafter by Borrower to any third
party; or (g) the liquidation, termination, dissolution, death or legal
incapacity of Borrower or any other party liable for the payment of this
Note, whether as maker, endorser, guarantor, surety, or otherwise.
<PAGE>
<PAGE>
8. The occurrence of any Event of Default shall entitle the
holder hereof to declare the entire principal balance of this Note,
together with all accrued interest, and all other liabilities,
indebtedness and obligations of Borrower to Bank, whether now existing
or hereafter created, to be immediately due and payable, and to take any
and all action allowed the holder by law or equity, under the terms of
this Note and under the terms of any other agreements between Borrower
and Bank. Upon default, including failure to pay upon final maturity,
Bank, at its option, may also, if permitted under applicable law, do one
or both of the following: (a) increase the applicable interest rate on
this Note by 3%, and (b) add any unpaid accrued interest to principal
and such sum will bear interest therefrom until paid at the rate
provided in this Note (including any increased rate). The interest rate
will not exceed the maximum rate permitted by applicable law.
9. All rights and remedies of Bank under this Note, any
document securing or relating thereto, and under any other applicable
law or at equity, are and shall be cumulative to the greatest extent
permitted by law. The delay or failure of Bank or the holder hereof to
insist upon strict performance of any of the terms of this Note, or to
exercise any rights herein confirmed shall not be construed as a waiver
or relinquishment to any extent of Bank's or the holder's right to
assert or rely upon such terms or rights at any subsequent time or in
any other instance.
10. The Borrower and all endorsers, guarantors and all other
parties to this Note hereby:
(a) consent to the negotiation or assignment of this Note
to any other person at any time;
(b) waive presentment and demand, notice of demand, notice
of dishonor, protest and notice of protest and non-
payment thereof and all other notices or demands in
connection with the delivery, acceptance, performance,
default, enforcement, endorsement or guarantee hereof;
and
(c) waive any requirement of marshaling of assets and all
other legal or equitable doctrines which might
otherwise require the holder hereof to proceed against
any persons or any collateral or any other property or
with respect to any other rights in any particular
order and agree that the holder may elect not to
proceed against any collateral securing this note and
may instead seek to enforce and collect this note
through whatever means may otherwise be available at
law or equity.
11. Upon and Event of Default, Bank shall have the right to set
off, at all times and without notice to Borrower, and Borrower hereby
grants Bank a security interest in, any and all deposits, credits,
accounts, securities, certificates of deposit, cash, instruments,
documents, general intangibles and any other property or other sums of
Borrower at any time or times held by Bank or credited by or due from
Bank to Borrower, except those held by Bank in a fiduciary capacity or
otherwise, and all products and proceeds thereof, as additional security
for all sums due hereunder and all other liabilities of Borrower to
Bank, whether now existing or hereafter arising or acquired and whether
absolute or contingent.
12. The Borrower agrees that it will pay to the Bank or the
holder hereof all costs and expenses, including without limitation
reasonable attorneys' fees, incurred by Bank in connection with the
preparation of this Note and all related documentation, the enforcement
thereof, and the collection or attempted collection of the sums due
hereunder or in securing or attempting to secure or protecting and
defending or attempting to protect and defend holder's interest in any
property securing this Note.
<PAGE>
<PAGE>
13. BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS NOTE OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF BANK AND BORROWER. BORROWER
ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL
INDUCEMENT TO BANK.
14. The Borrower agrees that the sole proper venue for the
determination of any litigation commenced by either Borrower or Bank on
any basis shall be in a court of competent jurisdiction which is located
in Fayette County, Kentucky, and the parties hereby expressly declare
that any other venue shall be improper and Borrower expressly waives any
right to a determination of any such litigation against Bank by a court
in any other venue. Borrower further agrees that service of process by
any judicial officer or by registered or certified U.S. mail shall
establish personal jurisdiction over Borrower, and Borrower waives any
rights under the laws of any state to object to jurisdiction within the
Commonwealth of Kentucky. Borrower acknowledges that this Note was
executed and delivered in the Commonwealth of Kentucky and shall be
governed and construed in accordance with the laws thereof. The
aforesaid means of obtaining personal jurisdiction and perfecting
service of process are not intended to be exclusive, but are cumulative
and in addition to all other means of obtaining personal jurisdiction
and perfecting service of process now or hereafter provided by the laws
of the Commonwealth of Kentucky or by any other state in an action
brought by Bank in such state.
15. The substantive laws of the Commonwealth of Kentucky
(without regard to provisions governing conflicts of laws) shall govern
the construction of this Note and the rights and remedies of the parties
hereto.
16. Time is of the essence in the payment and performance of all
of Borrower's obligations under this Note and all documents securing
this Note or relating hereto.
17. This Note cannot be modified, altered or amended except by
an agreement in writing duly signed and acknowledged by authorized
representatives of Bank and Borrower.
18. If any one or more of the provisions of this Note, or the
applicability of any such provision to a specific situation, shall be
held invalid or unenforceable, such provision shall be modified to the
minimum extent necessary to make it or its application valid and
enforceable, and the validity and enforceability of all other provisions
of this Note and all other applications of any such provision shall not
be affected thereby. In the event such provision(s) cannot be modified
to make it or them enforceable, the invalidity or unenforceability of
any such provision(s) of this Note shall not impair the validity or
enforceability of any other provision of this Note.
19. This Note shall bind the heirs, successors and assigns of
Borrower and shall inure to the benefit of Bank and its successors and
assigns. Borrower shall not assign or allow the assumption of its rights
and obligations hereunder without Bank's prior written consent.
<PAGE>
<PAGE>
DATED as of the day and year first above written.
EQUITY UNDERWRITING GROUP, INC.
BY: /s/ John R. Owens
----------------------------------
TITLE: President
-------------------------------
EQUITY INSURANCE MANAGERS, INC.
BY: /s/ John R. Owens
----------------------------------
TITLE: President
-------------------------------
<PAGE>
EXHIBIT 10.35
TERM NOTE
---------
("Note")
EQUITY UNDERWRITING GROUP, INC.
a Kentucky corporation
220 Lexington Green Circle
Lexington, Kentucky 40503
EQUITY INSURANCE MANAGERS, INC.
a Kentucky corporation
220 Lexington Green Circle
Lexington, Kentucky 40503
$800,000.00
DATE: February 25, 1999
Executed at Lexington, Kentucky
1. FOR VALUE RECEIVED, EQUITY UNDERWRITING GROUP, INC. and
EQUITY INSURANCE MANAGERS, INC. (collectively the "Borrower"), promises
to pay to the order of BANK ONE, KENTUCKY, NA, a national banking
association (the "Bank"), the principal sum of Eight Hundred Thousand
Dollars ($800,000.00) or so much thereof as may be advanced by Bank and
outstanding from time to time under this Note, and to pay interest from
the date hereof on such principal amount from time to time outstanding
at the per annum rate equal to the Prime rate of interest as declared by
Bank from time to time and adjusted daily, all of such payments to be
made in lawful money of the United States of America in immediately
available funds, without defalcation. "Prime" rate of interest as used
herein means a variable rate of interest announced from time to time by
Bank as its prime rate whether or not such rate if otherwise published,
which rate may not be Bank's lowest or best rate; provided, that in the
event this Note is assigned to another holder which is a commercial
bank, Prime rate shall mean the reference rate of interest established
by such subsequent holder from and after the date of such assignment, as
its prime rate from time to time. The Prime rate shall be adjusted each
time and at the time the Bank's Prime rate changes.
2. Borrower shall repay this Note by paying accrued interest
monthly beginning on March 20, 1999 and continuing on the 20th day of
each month until June 20, 1999 (the "Maturity Date") at which time all
outstanding principal and accrued interest shall be due and payable in
full. Interest on this Note will be computed on the basis of the actual
number of days elapsed over an assumed year of 360 days. Borrower shall
make each payment under this Note not later than 12:00 p.m. (Noon),
Lexington, Kentucky, Eastern time, on the date when due, in lawful money
of the United States of America, to Bank at its Lexington Office, in
immediately available funds. Borrower hereby authorizes Bank to charge
against any account of Borrower with Bank containing unrestricted funds
any amount so due. Whenever any payment to be made under this Note
shall be stated to be due on a Saturday, Sunday or a public holiday or
banking holiday, such payment shall be made on the next succeeding
Domestic Business Day, and such extension of time shall be in such case
be included in the computation of the payment of interest.
<PAGE>
<PAGE>
3. This Note is mentioned in the Second Amendment to Loan
Agreement dated of even date. This Note, the Second Amendment to Loan
Agreement and all other documents defined therein shall be collectively
referred to herein as the "Loan Documents".
4. The obligations evidenced by this Note or the other Loan
Documents are secured by the Security Agreements dated January 20, 1998,
and the Stock Pledge and Security Agreement dated of even date from
Unified Financial Services, Inc., which secures its Guaranty dated of
even date, in favor of the Bank.
5. If any amount due hereunder is past due for more than ten
(10) days Borrower will be charged five percent (5%) of the regularly
scheduled payment up to the maximum amount of $1,500.00 with a minimum
of $25.00 per late charge. Upon the occurrence of any Event of Default
defined hereinbelow, the interest rate on the entire principal balance
and all matured interest installments outstanding shall increase by
three percent (3%) per annum; provided, however, that the total interest
rate charged Borrower shall not exceed the maximum rate of interest
allowed by law and if such increased rate of interest exceeds the
maximum amount permitted under applicable law in such circumstances, the
amount of the increased interest rate shall be increased by such lesser
maximum amount as legally may be allowed, and Bank's entitlement to such
sum shall be in addition to, and not in lieu of, all other rights and
remedies available to Bank as a result of such overdue payment. If a
law which applies to this Note is interpreted so that the interest
collected or to be collected hereunder exceeds the legal amount, then
the interest rate charged hereunder shall be reduced by the amount
necessary to reduce the interest charged to the maximum legal amount and
this Note and all sums due hereunder shall immediately become due and
payable in full at the election of the holder hereof. It is agreed that
all matured interest installments outstanding shall also bear interest
until paid at the same rate that continues to accrue on the principal
outstanding.
6. Bank and Borrower agree to binding arbitration as provided
in Section 8.18 of the Loan Agreement.
7. Borrower will be in default if any of the following happens:
(a) Borrower fails to make any payment or principal or interest within
ten (10) days of its due date under this Note or any other indebtedness
owing now or hereafter by Borrower to Bank; (b) failure of Borrower or
any other party to comply with or perform any term, obligation, covenant
or condition contained in this Note or in any other promissory note,
credit agreement, loan agreement, guaranty, security agreement,
mortgage, deed of trust or any other instrument, agreement or document,
within thirty (30) days after receipt of written notice, whether now or
hereafter existing, executed in connection with this Note or the other
Loan Documents; (c) any representation or statement made or furnished to
Lender herein, in any of the Loan Documents or in connection with any of
the foregoing is false or misleading in any material respect and said
default shall continue unremedied for a period of thirty (30) days after
date of written notice; (d) Borrower dissolves, becomes insolvent or
bankrupt, has a receiver or trustee appointed for any part of its
property, makes an assignment for the benefit of its creditors, or any
proceeding is commenced either by any such party or against it under any
bankruptcy or insolvency laws; (e) the occurrence of any event of
default specified in any of the other Loan Documents or in any other
agreement now or hereafter arising between Borrower and Bank; (f) the
occurrence of any event which permits the acceleration of the maturity
of any indebtedness owing now or hereafter by Borrower to any third
party; or (g) the liquidation, termination, dissolution, death or legal
incapacity of Borrower or any other party liable for the payment of this
Note, whether as maker, endorser, guarantor, surety, or otherwise.
8. The occurrence of any Event of Default shall entitle the
holder hereof to declare the entire principal balance of this Note,
together with all accrued interest, and all other liabilities,
2
<PAGE>
<PAGE>
indebtedness and obligations of Borrower to Bank, whether now existing
or hereafter created, to be immediately due and payable, and to take any
and all action allowed the holder by law or equity, under the terms of
this Note and under the terms of any other agreements between Borrower
and Bank. Upon default, including failure to pay upon final maturity,
Bank, at its option, may also, if permitted under applicable law, do one
or both of the following: (a) increase the applicable interest rate on
this Note by 3%, and (b) add any unpaid accrued interest to principal
and such sum will bear interest therefrom until paid at the rate
provided in this Note (including any increased rate). The interest rate
will not exceed the maximum rate permitted by applicable law.
9. All rights and remedies of Bank under this Note, any
document securing or relating thereto, and under any other applicable
law or at equity, are and shall be cumulative to the greatest extent
permitted by law. The delay or failure of Bank or the holder hereof to
insist upon strict performance of any of the terms of this Note, or to
exercise any rights herein confirmed shall not be construed as a waiver
or relinquishment to any extent of Bank's or the holder's right to
assert or rely upon such terms or rights at any subsequent time or in
any other instance.
10. The Borrower and all endorsers, guarantors and all other
parties to this Note hereby:
(a) consent to the negotiation or assignment of this Note
to any other person at any time;
(b) waive presentment and demand, notice of demand, notice
of dishonor, protest and notice of protest and non-
payment thereof and all other notices or demands in
connection with the delivery, acceptance, performance,
default, enforcement, endorsement or guarantee hereof;
and
(c) waive any requirement of marshaling of assets and all
other legal or equitable doctrines which might
otherwise require the holder hereof to proceed against
any persons or any collateral or any other property or
with respect to any other rights in any particular
order and agree that the holder may elect not to
proceed against any collateral securing this note and
may instead seek to enforce and collect this note
through whatever means may otherwise be available at
law or equity.
11. Upon an Event of Default, Bank shall have the right to set
off, at all times and without notice to Borrower, and Borrower hereby
grants Bank a security interest in, any and all deposits, credits,
accounts, securities, certificates of deposit, cash, instruments,
documents, general intangibles and any other property or other sums of
Borrower at any time or times held by Bank or credited by or due from
Bank to Borrower, except those held by Bank in a fiduciary capacity or
otherwise, and all products and proceeds thereof, as additional security
for all sums due hereunder and all other liabilities of Borrower to
Bank, whether now existing or hereafter arising or acquired and whether
absolute or contingent.
12. The Borrower agrees that it will pay to the Bank or the
holder hereof all costs and expenses, including without limitation
reasonable attorneys' fees, incurred by Bank in connection with the
preparation of this Note and all related documentation, the enforcement
thereof, and the collection or attempted collection of the sums due
hereunder or in securing or attempting to secure or protecting and
defending or attempting to protect and defend holder's interest in any
property securing this Note.
13. BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS
3
<PAGE>
<PAGE>
NOTE OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
ORAL OR WRITTEN) OR ACTIONS OF BANK AND BORROWER. BORROWER ACKNOWLEDGES
AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR
THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT TO BANK.
14. The Borrower agrees that the sole proper venue for the
determination of any litigation commenced by either Borrower or Bank on
any basis shall be in a court of competent jurisdiction which is located
in Fayette County, Kentucky, and the parties hereby expressly declare
that any other venue shall be improper and Borrower expressly waives any
right to a determination of any such litigation against Bank by a court
in any other venue. Borrower further agrees that service of process by
any judicial officer or by registered or certified U.S. mail shall
establish personal jurisdiction over Borrower, and Borrower waives any
rights under the laws of any state to object to jurisdiction within the
Commonwealth of Kentucky. Borrower acknowledges that this Note was
executed and delivered in the Commonwealth of Kentucky and shall be
governed and construed in accordance with the laws thereof. The
aforesaid means of obtaining personal jurisdiction and perfecting
service of process are not intended to be exclusive, but are cumulative
and in addition to all other means of obtaining personal jurisdiction
and perfecting service of process now or hereafter provided by the laws
of the Commonwealth of Kentucky or by any other state in an action
brought by Bank in such state.
15. The substantive laws of the Commonwealth of Kentucky
(without regard to provisions governing conflicts of laws) shall govern
the construction of this Note and the rights and remedies of the parties
hereto.
16. Time is of the essence in the payment and performance of all
of Borrower's obligations under this Note and all documents securing
this Note or relating hereto.
17. This Note cannot be modified, altered or amended except by
an agreement in writing duly signed and acknowledged by authorized
representatives of Bank and Borrower.
18. If any one or more of the provisions of this Note, or the
applicability of any such provision to a specific situation, shall be
held invalid or unenforceable, such provision shall be modified to the
minimum extent necessary to make it or its application valid and
enforceable, and the validity and enforceability of all other provisions
of this Note and all other applications of any such provision shall not
be affected thereby. In the event such provision(s) cannot be modified
to make it or them enforceable, the invalidity or unenforceability of
any such provision(s) of this Note shall not impair the validity or
enforceability of any other provision of this Note.
19. This Note shall bind the heirs, successors and assigns of
Borrower and shall inure to the benefit of Bank and its successors and
assigns. Borrower shall not assign or allow the assumption of its rights
and obligations hereunder without Bank's prior written consent.
4
<PAGE>
<PAGE>
DATED as of the day and year first above written.
EQUITY UNDERWRITING GROUP, INC.
BY: /s/ John R. Owens
---------------------------------
TITLE: President
------------------------------
EQUITY INSURANCE MANAGERS, INC.
BY: /s/ John R. Owens
---------------------------------
TITLE: President
------------------------------
5
<PAGE>
EXHIBIT 10.36
RENEWAL TERM NOTE
-----------------
("Note")
21ST CENTURY CLAIM SERVICE, INC.
a Kentucky corporation
220 Lexington Green Circle
Lexington, Kentucky 40503
$160,004.00
DATE: January 30, 1999
Executed at Lexington, Kentucky
1. FOR VALUE RECEIVED, 21ST CENTURY CLAIM SERVICE, INC.
("Borrower"), promises to pay to the order of BANK ONE, KENTUCKY, NA, a
national banking association (the "Bank"), the principal sum of One
Hundred Sixty Thousand Four Dollars ($160,004.00) or so much thereof as
may be advanced by Bank and outstanding from time to time under this
Note, and to pay interest from the date hereof on such principal amount
from time to time outstanding at the per annum rate equal to one percent
(1%) greater than the Prime rate of interest as declared by Bank from
time to time and adjusted daily, all of such payments to be made in
lawful money of the United States of America in immediately available
funds, without defalcation. "Prime" rate of interest as used herein
means a variable rate of interest announced from time to time by Bank as
its prime rate whether or not such rate if otherwise published, which
rate may not be Bank's lowest or best rate; provided, that in the event
this Note is assigned to another holder which is a commercial bank,
Prime rate shall mean the reference rate of interest established by such
subsequent holder from and after the date of such assignment, as its
prime rate from time to time. The Prime rate shall be adjusted each time
and at the time the Bank's Prime rate changes.
2. This Note is mentioned in a Loan Agreement dated January 20,
1998, which has been amended by the First Amendment to Loan Agreement
dated July 23, 1998 and by the Second Amendment to Loan Agreement dated
of even date. The Note, the Loan Agreement, as amended, and all other
documents defined in the Loan Agreement, as amended, as loan documents
shall be collectively referred to herein as the "Loan Documents".
3. Borrower shall repay this Note by paying a fixed principal
payment of $3,333.00 per month plus accrued interest monthly beginning
on February 28, 1999 and continuing on the thirtieth day of each month
until June 30, 1999 (the "Maturity Date") at which time all outstanding
principal and accrued interest shall be due and payable in full.
Interest on this Note will be computed on the basis of the actual number
of days elapsed over an assumed year of 360 days. Borrower shall make
each payment under this Note not later than 12:00 p.m. (Noon),
Lexington, Kentucky, Eastern time, on the date when due, in lawful money
of the United States of America, to Bank at its Lexington Office, in
immediately available funds. Borrower hereby authorizes Bank to charge
against any account of Borrower with Bank containing unrestricted funds
any amount so due. Whenever any payment to be made under this Note shall
be stated to be due on a Saturday, Sunday or a public holiday or banking
holiday, such payment shall be made on the next succeeding Domestic
Business Day, and such extension of time shall be in such case be
included in the computation of the payment of interest.
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4. This is a renewal of the note dated December 30, 1997 and is
not a novation of said note. This Note shall continue to be secured by
the Security Agreements dated January 20, 1998 and by the Stock Pledge
and Security Agreement dated of even date from Unified Financial
Services, Inc. which secures its Guaranty dated of even date, in favor
of the Bank.
5. If any amount due hereunder is past due for more than ten
(10) days, the Borrower will be charged five percent (5%) of the
regularly scheduled payment up to the maximum amount of $1,500.00 with a
minimum of $25.00 per late charge. Upon the occurrence of any Event of
Default defined hereinbelow, the interest rate on the entire principal
balance and all matured interest installments outstanding shall increase
by three percent (3%) per annum; provided, however, that the total
interest rate charged Borrower shall not exceed the maximum rate of
interest allowed by law and if such increased rate of interest exceeds
the maximum amount permitted under applicable law in such circumstances,
the amount of the increased interest rate shall be increased by such
lesser maximum amount as legally may be allowed, and Bank's entitlement
to such sum shall be in addition to, and not in lieu of, all other
rights and remedies available to Bank as a result of such overdue
payment. If a law which applies to this Note is interpreted so that the
interest collected or to be collected hereunder exceeds the legal
amount, then the interest rate charged hereunder shall be reduced by the
amount necessary to reduce the interest charged to the maximum legal
amount and this Note and all sums due hereunder shall immediately become
due and payable in full at the election of the holder hereof. It is
agreed that all matured interest installments outstanding shall also
bear interest until paid at the same rate that continues to accrue on
the principal outstanding.
6. Bank and Borrower agree to binding arbitration as provided
in Section 8.18 of the Loan Agreement.
7. Borrower will be in default if any of the following happens:
(a) Borrower fails to make any payment or principal or interest within
ten (10) days of its due date under this Note or any other indebtedness
owing now or hereafter by Borrower to Bank; (b) failure of Borrower or
any other party to comply with or perform any term, obligation, covenant
or condition contained in this Note or in any other promissory note,
credit agreement, loan agreement, guaranty, security agreement,
mortgage, deed of trust or any other instrument, agreement or document,
within thirty (30) days after receipt of written notice, whether now or
hereafter existing, executed in connection with this Note or the other
Loan Documents; (c) any representation or statement made or furnished to
Lender herein, in any of the Loan Documents or in connection with any of
the foregoing is false or misleading in any material respect and said
default shall continue unremedied for a period of thirty (30) days after
date of written notice; (d) Borrower dissolves, becomes insolvent or
bankrupt, has a receiver or trustee appointed for any part of its
property, makes an assignment for the benefit of its creditors, or any
proceeding is commenced either by any such party or against it under any
bankruptcy or insolvency laws; (e) the occurrence of any event of
default specified in any of the other Loan Documents or in any other
agreement now or hereafter arising between Borrower and Bank; (f) the
occurrence of any event which permits the acceleration of the maturity
of any indebtedness owing now or hereafter by Borrower to any third
party; or (g) the liquidation, termination, dissolution, death or legal
incapacity of Borrower or any other party liable for the payment of this
Note, whether as maker, endorser, guarantor, surety, or otherwise.
8. The occurrence of any Event of Default shall entitle the
holder hereof to declare the entire principal balance of this Note,
together with all accrued interest, and all other liabilities,
indebtedness and obligations of Borrower to Bank, whether now existing
or hereafter created, to be immediately due and payable, and to take any
and all action allowed the holder by law or equity, under the terms of
this Note and under the terms of any other agreements between Borrower
and Bank. Upon default, including failure to pay upon final maturity,
Bank, at its option, may also, if permitted under
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applicable law, do one or both of the following: (a) increase the
applicable interest rate on this Note 3%, and (b) add any unpaid accrued
interest to principal and such sum will bear interest therefrom until
paid at the rate provided in this Note (including any increased rate).
The interest rate will not exceed the maximum rate permitted by
applicable law.
9. All rights and remedies of Bank under this Note, any
document securing or relating thereto, and under any other applicable
law or at equity, are and shall be cumulative to the greatest extent
permitted by law. The delay or failure of Bank or the holder hereof to
insist upon strict performance of any of the terms of this Note, or to
exercise any rights herein confirmed shall not be construed as a waiver
or relinquishment to any extent of Bank's or the holder's right to
assert or rely upon such terms or rights at any subsequent time or in
any other instance.
10. The Borrower and all endorsers, guarantors and all other
parties to this Note hereby:
(a) consent to the negotiation or assignment of this Note
to any other person at any time;
(b) waive presentment and demand, notice of demand, notice
of dishonor, protest and notice of protest and non-
payment thereof and all other notices or demands in
connection with the delivery, acceptance, performance,
default, enforcement, endorsement or guarantee hereof;
and
(c) waive any requirement of marshaling of assets and all
other legal or equitable doctrines which might
otherwise require the holder hereof to proceed against
any persons or any collateral or any other property or
with respect to any other rights in any particular
order and agree that the holder may elect not to
proceed against any collateral securing this note and
may instead seek to enforce and collect this note
through whatever means may otherwise be available at
law or equity.
11. Upon an Event of Default, Bank shall have the right to set
off, at all times and without notice to Borrower, and Borrower hereby
grants Bank a security interest in, any and all deposits, credits,
accounts, securities, certificates of deposit, cash, instruments,
documents, general intangibles and any other property or other sums of
Borrower at any time or times held by Bank or credited by or due from
Bank to Borrower, except those held by Bank in a fiduciary capacity or
otherwise, and all products and proceeds thereof, as additional security
for all sums due hereunder and all other liabilities of Borrower to
Bank, whether now existing or hereafter arising or acquired and whether
absolute or contingent.
12. The Borrower agrees that it will pay to the Bank or the
holder hereof all costs and expenses, including without limitation
reasonable attorneys' fees, incurred by Bank in connection with the
preparation of this Note and all related documentation, the enforcement
thereof, and the collection or attempted collection of the sums due
hereunder or in securing or attempting to secure or protecting and
defending or attempting to protect and defend holder's interest in any
property securing this Note.
13. BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS NOTE OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF BANK AND BORROWER. BORROWER
ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
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<PAGE>
CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL
INDUCEMENT TO BANK.
14. The Borrower agrees that the sole proper venue for the
determination of any litigation commenced by either Borrower or Bank on
any basis shall be in a court of competent jurisdiction which is located
in Fayette County, Kentucky, and the parties hereby expressly declare
that any other venue shall be improper and Borrower expressly waives any
right to a determination of any such litigation against Bank by a court
in any other venue. Borrower further agrees that service of process by
any judicial officer or by registered or certified U.S. mail shall
establish personal jurisdiction over Borrower, and Borrower waives any
rights under the laws of any state to object to jurisdiction within the
Commonwealth of Kentucky. Borrower acknowledges that this Note was
executed and delivered in the Commonwealth of Kentucky and shall be
governed and construed in accordance with the laws thereof. The
aforesaid means of obtaining personal jurisdiction and perfecting
service of process are not intended to be exclusive, but are cumulative
and in addition to all other means of obtaining personal jurisdiction
and perfecting service of process now or hereafter provided by the laws
of the Commonwealth of Kentucky or by any other state in an action
brought by Bank in such state.
15. The substantive laws of the Commonwealth of Kentucky
(without regard to provisions governing conflicts of laws) shall govern
the construction of this Note and the rights and remedies of the parties
hereto.
16. Time is of the essence in the payment and performance of all
of Borrower's obligations under this Note and all documents securing
this Note or relating hereto.
17. This Note cannot be modified, altered or amended except by
an agreement in writing duly signed and acknowledged by authorized
representatives of Bank and Borrower.
18. If any one or more of the provisions of this Note, or the
applicability of any such provision to a specific situation, shall be
held invalid or unenforceable, such provision shall be modified to the
minimum extent necessary to make it or its application valid and
enforceable, and the validity and enforceability of all other provisions
of this Note and all other applications of any such provision shall not
be affected thereby. In the event such provision(s) cannot be modified
to make it or them enforceable, the invalidity or unenforceability of
any such provision(s) of this Note shall not impair the validity or
enforceability of any other provision of this Note.
19. This Note shall bind the heirs, successors and assigns of
Borrower and shall inure to the benefit of Bank and its successors and
assigns. Borrower shall not assign or allow the assumption of its rights
and obligations hereunder without Bank's prior written consent.
DATED as of the day and year first above written.
21ST CENTURY CLAIM SERVICE, INC.
BY: /s/ John R. Owens
----------------------------------
TITLE: Secretary/Treasurer
-------------------------------
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EXHIBIT 10.37
429 PENNSYLVANIA BUILDING OFFICE LEASE
--------------------------------------
THIS INDENTURE ("Lease") WITNESSETH that 429 Penn Partners, an
Indiana partnership (hereinafter referred to as "Landlord"), in
consideration of the rent herein reserved and the covenants to be
performed by Unified Holdings, Inc., An Delaware Corporation
(hereinafter referred to as "Tenant"), does hereby grant, demise, and
lease to Tenant the following described premises upon the terms and
conditions hereinafter set out:
ARTICLE I
PREMISES
Section 1.1 Initial Premises. Landlord hereby leases to Tenant
----------------------------
and Tenant hereby leases from Landlord, a portion of the First floor,
consisting of approximately 9,959 rentable square feet of space,
(hereinafter referred to as "Premises") of the building situated at 429
N. Pennsylvania, Indianapolis, Marion County, Indiana 46204, (the entire
building with its appurtenances is hereinafter referred to as the "Real
Estate"). The Premises are shown and designated on the attached Exhibit
A which is incorporated herein by reference. Tenant will also retain
approximately 861 rentable square feet of space located on the 3rd floor
of the "Real Estate" and designated on the attached floor plan as shown
on Exhibit B which is incorporated herein by reference.
Section 1.2 Storage Space. Provided that Tenant is not in default
-------------------------
hereunder, Landlord hereby grants to Tenant the right to approximately
1,500 rentable square feet located in the Lower Level of the "Real
Estate" and designated on the attached floor plan as shown on Exhibit C
which is incorporated herein by reference.
ARTICLE II
TERM
Section 2.1 Term. The term of this Lease (hereinafter referred to
----------------
as "term" or "Term") shall be as herein provided, for a period of one
hundred (120) months, commencing on January 1, 1998 and ending on
December 31, 2007. In the event Landlord is unable to deliver
possession of the Premises at the commencement of the term, Landlord
shall not be liable for any damage thereby nor shall this Lease be void
or voidable, but Tenant shall not be liable for any rent until either
(i) the day any of Tenant's personnel first occupy a part of the
Premises for carrying on the normal functions of Tenant's business in
the Premises, or (ii) the 30th day following the giving by Landlord to
Tenant of written notice stating that the Premises are ready for
occupancy by Tenant -- whichever event occurs first.
ARTICLE III
OCCUPANCY AND USE
Section 3.1 Use and Occupancy. Tenant shall use and occupy the
-----------------------------
Premises for general office use and for no other purposes except with
the prior written consent of the Landlord. Tenant shall be allowed the
non-exclusive use of the common tenant areas including, without
limitation, lobby, hallways, entryways, restrooms, stairways, elevators
(including freight elevators), corridors and sidewalks of the Real
Estate owned by Landlord (hereinafter referred to as "Common Areas") in
conjunction with and so as not to interfere with the other tenants in
the building. Tenant shall use the Premises for no unlawful purpose or
act; shall commit or permit no waste or damage to the Premises or common
areas; shall comply with and obey all laws, regulations, or orders of
any governmental authority or agency, directions of the Landlord,
including building rules and regulations as changed or modified from
time to time by Landlord on reasonable notice to Tenant, all of which
are and will be a part of this Lease; shall not do or
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permit anything to be done in or about the Premises which will in any
way obstruct or interfere with the rights of other Tenants or occupants
of the building or injure or annoy them; and shall not do or permit
anything to be done which will increase the rate of fire insurance upon
the building. Landlord shall not be responsible to Tenant for the non-
performance by any other Tenant or occupant of the Real Estate of any of
the rules and regulations, but agrees to take reasonable measures to
assure such other Tenant's performance.
Section 3.2 Condition of Premises. Landlord shall make, at its
---------------------------------
sole expense, the following improvements to the "Premises" as designated
on the attached Exhibit D "Workletter", which is incorporated herein by
reference.
ARTICLE IV
RENT
Section 4.1 Base Rent. Tenant shall pay the following amounts as
Base Rent for said Premises without relief from valuation and
appraisement laws and without offset or deduction:
First Floor Space
-----------------
Number of Monthly
Period Months Installments
------ --------- ------------
1/1/98-12/31/03 72 $14,523.55
1/1/04-12/31/07 48 $15,353.47
Storage Space
Lower Level
-------------
1/198-12/31/07 120 $313.00
Third Floor Space
-----------------
1/l/98-12/31/98 12 $1,165.94
The above monthly installments are due, without notice or demand, in
advance on or before the first day of each calendar month of the Term at
429 North Pennsylvania Street, Lower Level, Indianapolis, Indiana 46204,
or such other place as Landlord may from time to time designate in
writing. In the event the obligation to pay rental or any sum hereunder
commences on a day other than the first day of any calendar month,
Tenant shall pay the pro-rata share of rent or other sum due for the
unexpired portion of the month in addition to and concurrently with
payment of the rental or other sum due for the first full month
following such partial month.
Section 4.2 Additional Rent. Commencing January 1, 1998 and
---------------------------
continuing for the balance of the Term, in addition to the Base Rent set
out in Section 4.1, the Tenant agrees to pay its proportionate share, as
defined below, of any annual increase in total actual Operating Costs
for the Real Estate over the Landlord's Share of Operating Costs,
without relief from valuation and appraisement laws and without offset
or deduction.
a) Operating Costs - shall mean the annual aggregate of those
expenses incurred by the Landlord during a particular calendar
year in connection with the operation, maintenance, and repair of
the
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Real Estate in accordance with sound management and accounting
principles and practices generally accepted with respect to the
operation, maintenance, and repair of first-class office
buildings, which expenses shall include (i) Uncontrollable Costs,
i.e., real estate taxes, insurance premiums and utility charges,
and (ii) Controllable Costs, including but not limited to repair
and maintenance costs, security costs, janitorial costs, legal and
accounting costs, management fees and capital improvements
required by new governmental laws or regulations, but excluding
expenditures for other capital improvements for rebuilding of
office space for other tenants. Operating Costs shall not include
the costs of the Additional services provided by Landlord to
Tenant (if any) under Section 5.1 (a) hereof, which costs shall be
deducted from the annual aggregate of Operating costs for purposes
of computing the Tenants proportionate share of Operating Costs
under subsection (c) below.
b) Landlord's Share of Operating Costs - Shall be an amount equal to
$4.75 time the rentable square feet in the Premises.
c) Tenant's Proportionate Share of Operating Costs - Shall be the
amount (if any) by which the product of Operating Costs during a
particular calendar year times (10.84), (the current ratio of the
rentable square feet in the Premises to the rentable square feet
in the Real Estate) exceeds the Landlord's Share of Operating
costs. Landlord represents that the rentable square feet in the
Real Estate is 102,200 as of the date of this Lease.
d) Payment of Tenant's Proportionate Share of Operating Costs - The
amount of Tenant's proportionate share of Operating Costs for each
calendar year (herein referred to as the "Annual Rental
Adjustment") shall be estimated annually by Landlord, and written
notice thereof (including documentation supporting such estimates)
shall be given to Tenant at least thirty (30) days prior to the
beginning of each month, at the same time the Base Rent
installment is due, an amount equal to one-twelfth (1/12) of the
estimated Annual Rental Adjustment.
e) Increases in Estimated Annual Rental Adjustment - If real estate
taxes, utility charges, or janitorial costs increase during a
calendar year, Landlord may, only once per year, increase the
estimated Annual Rental Adjustment during such year by giving
Tenant written notice to that effect, and thereafter Tenant shall
pay to Landlord, in each of the remaining months of such year, an
amount equal to the amount of such increase in the estimated
Annual Rental Adjustment divided by the number of months remaining
in such year.
f) Provisions Concerning Actual Rental Adjustment - Within ninety
(90) days after the end of each calendar year, Landlord shall
prepare and deliver to Tenant a statement showing Tenants actual
Annual Rental Adjustment. Within thirty (30) days after receipt
of the aforementioned statement, Tenant shall pay to Landlord, or
Landlord shall credit (refunded if at the end of the Term) against
the next rent Tenant's actual Annual Rental Adjustment for the
preceding calendar year and the last day of a calendar year, then
Tenant shall pay a daily pro-rata proportionate share of such
Operating Costs for said partial calendar year.
g) Tenant Verification - During the thirty (30) day period following
the delivery of Landlord's statement of the Tenant's actual Annual
Rental Adjustment, Tenant audit, at reasonable times and in a
reasonable manner, such of Landlord's books of account and records
as pertain to and contain information concerning Operating Costs
in order to verify the amounts thereof. If any such audit shall
disclose an inaccuracy in Landlord's statement of actual
adjustment less than three percent (3%) of such adjustments,
prompt payment of a deficiency by Tenant or refund of an
overpayment by Landlord, as appropriate, shall be made, and if any
such audit, shall disclose any such inaccuracy which exceeds three
percent (3%) of such acceptable independent certified
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public accountant to verify the inaccuracy or resolve any other
issue arising from such audit, whose opinion on such matters shall
be binding on both parties whose fees shall be paid by the party
which is responsible for any such inaccuracy.
Section 4.3 Delinquency Charges and Interest. If any portion of
--------------------------------------------
the Base Rent, the Annual Rental Adjustment, or any other charges to
Tenant are not paid within ten (10) days of date due, a delinquency
service charge equal to five percent (5%) of the total delinquent amount
will be added as Additional Rent and paid by Tenant upon demand by
Landlord. All amounts past due for more than thirty (30) days will bear
interest from due date thereof to the date of payment at the rate of
eighteen percent (18%) per year until paid. All such interest shall be
deemed payable by Tenant as Additional Rent.
ARTICLE V
SERVICES, ALTERATIONS AND REPAIRS
Section 5.1 Services. Provided that Tenant shall not be in
--------------------
default hereunder and subject to the provisions elsewhere contained in
this Lease, Landlord will furnish the following services:
a) Heating, ventilation, and air-conditioning between the hours of
8:00 a.m. to 6:00 p.m. Monday through Friday and 9:00 a.m. to 1:00
p.m. on Saturday of each week except on all generally recognized
holidays. Landlord will also furnish, or cause to be furnished,
to Tenant such services ("Additional Services") at such other
times specified by Tenant, and Tenant agrees to pay the cost
thereof (as determined by Landlord) as Additional Rent at the same
time Base Rent and other Additional Rent is due. However, if
Landlord decides in its sole discretion that such services should
be provided by way of a separate power meter for the Premises,
Tenant agrees to pay the cost of such services directly to the
involved utility and the Base Rental and Additional Rental amounts
shall be adjusted to delete any charges for such services.
b) Electrical current (an annual rate of four (4) watts per square
foot in the Premises) sufficient for the operation of standard
lighting, typewriters, calculators, small office copying machines,
personal computers, and other machines of similar low electrical
consumption, but not including electrical current for data
processing equipment or any other item of electrical equipment
which singly consumes more than five hundred (500) watts per hour
at rated capacity or requires a voltage other than one hundred
twenty (120) volts single phase, and provided that if the
installation of any of Tenant's equipment, or any special
electrical equipment installed by Landlord to service Tenant's
equipment, requires any modifications to the Real Estate's
electrical system or any additional air conditioning or
ventilating capacity above that provided by the Real Estate's
standard systems, then the electrical modifications and/or
additional air conditioning and/or ventilating equipment shall be
provided by Tenant and the installation and operating costs of
such additional modifications and/or equipment will be the
obligation of the Tenant;
c) Water at those points of supply provided for the general use of
Tenants;
d) Automatic elevator service;
e) Cleaning and janitorial services on Monday through Friday of each
week, excluding generally recognized holidays, to provide standard
cleaning only;
f) Washing Tenant's exterior windows at reasonable intervals
established by Landlord;
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g) Replacement of all lamps, bulbs, tubes and ballasts for the
standard lighting fixtures as required from time to time as a
result of normal usage;
h) Security is provided weekday after-hours and 24-hour basis on
weekends; provided however, Landlord shall not be liable to
Tenant for losses due to theft or burglary, or for damages done
by persons in the Real Estate;
i) Repair and maintenance to the extent specified elsewhere in this
Lease.
No interruptions or suspensions of such services when necessary by
reason of governmental regulation, labor disputes, civil commotion or
riot, accident or emergency, or for repairs, alterations or improvements
considered desirable or necessary by Landlord or for any other reason
beyond the control of Landlord shall be construed as an eviction of
Tenant or work an abatement or diminution of rent or render Landlord or
its agents or employees liable for damages either to person, business or
property suffered by Tenant, its employees, licensees or invitees by
reason of any such interruptions, or release Tenant from any of its
obligations under this Lease. In the event Landlord believes that
Tenant's use of electricity is in excess of four (4) watts per square
foot, Landlord shall employ an electrical expert who will perform a
survey of electricity usage and who will render an opinion as to the
quantity of electricity used by Tenant. If the survey indicates that
Tenant's annual electrical consumption is in excess of four (4) watts
per square foot in the Premises, Tenant shall pay as Additional Rent the
cost of the survey together with the cost to the Landlord of such excess
electrical consumption. In the event an electrical current can no
longer be furnished by Landlord via a common meter and included with the
rent set out in Article IV, Tenant shall procure its own electricity
direct from Indianapolis Power and Light, and the rent set out in
Article IV shall be adjusted by Landlord in an amount equal to the
tenant's monthly electrical expense.
Landlord shall not in any way be liable or responsible to Tenant
for any loss or damage or expense which Tenant may sustain or incur if,
during the term of this Lease and beyond Landlord's control, either the
quality or character of electrical current is changed or is no longer
available or suitable for Tenant's requirements.
Section 5.2 Alterations to Premises. Landlord shall not be
-----------------------------------
obligated to make any alterations, additions, improvements or
decorations to the Premises, except as specifically agreed by and
between Landlord and Tenant as provided in Section 3.2. In the event
any such alterations, additions, improvements or decorations are made
following written request by Tenant and approval by Landlord, such
alterations, additions, improvements or decorations shall be made at
Tenant's sole expense by Landlord or by someone under Landlord's
supervision and control, and upon billing therefor by Landlord, Tenant
shall promptly remit the amount of such expense. However, Tenant may
retain outside vendors to perform alterations, additions or improvements
if said vendors are approved by Landlord. Such approval shall not be
unreasonably withheld. No alterations, improvements, or additions shall
be made to the Premises by Tenant nor shall Tenant affix or cause to be
affixed to the Real Estate or Premises, including the windows, any sign,
advertisement or notice without the prior written consent of Landlord.
In the absence of a written agreement to the contrary, all alterations,
repairs or improvements except unattached movable trade fixtures, office
furniture and equipment of Tenant shall be and remain the property of
Landlord. The removal of Tenant's property upon termination or
expiration of the Lease shall be governed by Article XVI hereof.
Section 5.3 Repairs. Subject to the provisions of Article XV,
-------------------
Landlord shall maintain and make necessary repairs to the foundation,
roof, the atrium windows and walls, exterior walls, and the structural
elements of the Real Estate, to the electrical, plumbing, heating,
ventilation and air-conditioning systems of the Real Estate and to the
Common Areas of the Real Estate, provided that (a) Landlord shall not be
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responsible for the maintenance or repair of any such systems which are
located within the Premises and are supplemental or special to the Real
Estate's standard systems; and (b) the cost of performing any of said
maintenance or repairs caused by the negligence of Tenant, its
employees, agents, servants, licensees, subtenants, contractors or
invitees, shall be paid by Tenant, except to the extent of insurance
proceeds, if any, actually collected by Landlord with regard to the
damage necessitating such repairs. Landlord shall repair and maintain
such items in a condition comparable to first-class office space in
Indianapolis, Indiana, except for damage caused by Tenant, its employees
or invitees in excess of ordinary wear and tear.
Tenant, at its expense, shall keep and maintain the Premises in
good order, condition and repair and in accordance with all applicable
legal, governmental and quasi-governmental requirements, ordinances and
rules (including the Board of Fire Underwriters). Tenant shall promptly
and adequately repair all damage to the Premises and replace or repair
all damaged or broken glass in the interior of the Premises, fixtures or
appurtenances. If Tenant fails to perform any of its obligations set
forth in this Section 5.3, Landlord may, in its sole discretion, perform
the same, and Tenant shall pay to Landlord the cost therefor upon
demand. Tenant's obligation to repair under this paragraph shall not
include (a) damages caused by Landlord or its employees, agents or
invitees, or (b) damages or losses caused by fire or other casualty not
caused by Tenant, or by other causes beyond Tenant's reasonable control.
ARTICLE VI
LIENS
Tenant shall keep the premises demised hereunder free from any
liens, including but not limited to mechanics' liens. If any Statement
of Intention to hold a mechanic's lien shall be filed, Landlord at its
option may compel the prosecution of an action for the foreclosure of
such mechanic's lien by the lienor. If any such Statement of Intention
to hold a mechanic's lien shall be filed and an action commenced to
foreclose the lien, Tenant, upon demand by Landlord, shall cause the
lien to be released by the filing of a written undertaking with a surety
approved by the court and obtaining an order from the court releasing
the property from such lien. In the event any lien attaches to the
Premises by virtue of an act or failure to act on the part of Tenant,
Landlord shall have the right, but no obligation, to pay the amount of
such lien to cause its release and such amount shall be considered
additional rent to be paid to it by Tenant on demand with interest at
twelve percent (12%) per year from the date that Landlord pays such
lien, provided, however, that if an undertaking is filed with the court
and the Real Estate is released from said lien, as hereinabove provided,
Landlord's right to pay such lien shall be suspended until a final
judgment is entered in such action against Tenant. Nothing provided
herein shall preclude Tenant from contesting in good faith the assertion
of any lien. All liens and encumbrances created or suffered by Tenant
shall attach to Tenant's interest only.
ARTICLE VII
ASSIGNMENT AND SUBLETTING
Tenant shall not assign this lease nor sublet the Premises in
whole or in part without the Landlord's written consent, which consent
shall not be unreasonably withheld. Any sublease executed by Tenant
shall be expressly subject to the terms and conditions of this Lease,
and Tenant shall continue to be liable for the performance of the terms
and conditions of this Lease, including, but not limited to, the payment
of rent set out in Article IV. Landlord shall have the right to assign
this Lease without Tenant's consent.
6
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ARTICLE VIII
LANDLORD'S NON-LIABILITY AND INDEMNIFICATION OF LANDLORD
Section 8.1 Non-Liability of Landlord. Landlord and its partners,
-------------------------------------
employees, servants and agents shall not be liable for any injury or
damage to persons or property resulting from any cause whatsoever in the
Premises, unless caused by or due to the sole negligence of Landlord,
its agents, servants, or employees or a breach or default in the
performance by Landlord of any covenant or agreement on its part to be
performed under this Lease. Landlord or its agents shall not be liable
for any damage or loss caused by or due to the negligence of Landlord,
its agents, servants or employees or a breach or default in the
performance by Landlord of any covenant or agreement on its part to be
performed under this Lease.
Section 8.2 Indemnification of Landlord. Tenant agrees to assume
---------------------------------------
the risk of, be responsible for, have the obligation to insure against,
and to indemnify and save Landlord and its partners, employees, and
agents, harmless from and against any and all liabilities, damages,
expenses, fees, penalties, actions, causes of actions, suits, costs
(including attorneys' fees), claims or judgments arising from injury
during the term to persons or property within or without the Premises
occasioned wholly or in part by any act or acts, omission or omissions
of Tenant, its agents, servants, contractors, employees, invitees or
licensees.
ARTICLE IX
INSURANCE
Tenant, in order to enable it to meet its obligation to insure
against the liabilities specified in this lease, agrees to place and
maintain, at Tenant's own expense, with insurance companies qualified to
do business in the State of Indiana and acceptable to Landlord, public
liability and property damage insurance naming Landlord as an additional
named insured, protecting the Landlord and Tenant from all causes,
including their own negligence, and having a minimum combined single
limit coverage for bodily injury and property damage of not less than
One Million Dollars ($1,000,000.00). Such policy or policies shall
contain a clause that the insurer will not cancel or change the
insurance without thirty (30) days prior written notice to Landlord.
Tenant shall furnish Landlord with certificates of insurance evidencing
such coverage. Should Tenant fail to carry such insurance after a
request to do so, Landlord shall have the right to obtain such insurance
and collect the cost thereof from the Tenant as Additional Rent payable
hereunder.
Tenant shall not conduct or permit to be conducted any activity,
or place any equipment, materials or other items in, on or about the
Premises or the Real Estate, which will in any way increase the rate of
fire or liability or casualty insurance on the Real Estate. Should
Tenant fail to comply with the foregoing covenant on its part to be
performed, Tenant shall reimburse Landlord for such increased amount
upon written demand therefor from Landlord, the same to be considered
Additional Rent payable hereunder.
ARTICLE X
WAIVER OF SUBROGATION
Tenant and Landlord agree that insurance carried by either of them
against loss or damage by fire or other casualty shall contain a clause
whereby the insurer waives its rights to subrogation against the other
party. Upon request, each party agrees to furnish evidence of such
waiver to the other party.
ARTICLE XI
HOLDING OVER
Tenant shall pay Landlord for each day Tenant retains possession
of the Premises or part thereof after termination hereof, by lapse of
time or otherwise, 1.25 times the amount of the daily fixed rental,
7
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<PAGE>
based upon the rent in effect on the last day prior to the date of such
termination, as adjusted in accordance with the terms of this Lease, and
also pay all damages sustained by Landlord by reason of such retention,
including reasonable attorney's fees, or, if Landlord gives notice to
Tenant of Landlord's election thereof, such holding over shall
constitute a renewal of this Lease for a period from month to month, but
if the Landlord does not so elect, acceptance by Landlord of rent after
such termination shall not constitute a renewal; this provision shall
not be deemed to waive Landlord's right of re-entry or any other right
hereunder or at law.
ARTICLE XII
RIGHTS RESERVED TO LANDLORD
Landlord shall have the following rights exercisable without
notice (except as expressly provided to the contrary in this Lease) and
without liability to Tenant for damage or injury to property, person or
business (all claims for damage being hereby released) and without
effecting an eviction or disturbance of Tenant's use or possession or
giving rise to any claim for offset or abatement of rent:
a) To change the name or street address of Tenant's space upon one
hundred and eighty (180) days prior written notice to Tenant;
b) To install and maintain signs and other facilities on the
exterior and interior or the Real Estate except Landlord;
c) To design and/or approve or disapprove, prior to installation,
all types of window coverings of the Premises and to control all
interior lighting and other facilities that may be visible from
outside the Premises;
d) To have pass-keys to Premises, and all portions thereof;
e) To grant anyone the exclusive right to conduct any business or
render any service in the Real Estate, provided such exclusive
right shall not operate to exclude Tenant from the use expressly
permitted by Section 3.1;
f) To decorate, remodel, repair, alter or otherwise prepare the
Premises for reoccupancy during the last six (6) months of the
term hereof, if during or prior to such time Tenant vacates the
Premises, or at any time after Tenant abandons the Premises;
g) To enter the Premises to make inspections, repairs, alterations
or additions in or to the Premises or the Real Estate or to
exhibit the Premises to prospective tenants, purchasers of the
Real Estate, or others at reasonable hours and at any time in
the event of an emergency, and to perform any acts related to
the safety, protection, preservation, reletting, sale or
improvement of the Premises or the Real Estate. In the exercise
of its right under this subparagraph, Landlord shall not
unreasonably interfere with the conduct of Tenant's business;
h) To have access to all mailchutes (if any) according to the rules
of the United States Post office;
i) To require all persons entering or leaving the Real Estate
during such hours as Landlord may from time to time reasonably
determine, to identify themselves to a security person by
registration or otherwise; to establish the right to enter or
leave and to exclude or expel any peddler, solicitor or unruly
or loud person at any time from the Premises or the Real Estate;
8
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<PAGE>
j) To close the Real Estate during times of emergency and, subject
to Tenant's right to admittance (24 hours per day, seven days
per week) under such reasonable regulations as shall be
prescribed from time to time by Landlord, after regular business
hours, provided, however, that Landlord shall give written or
oral notice to Tenant at least one hour before closing the
Building under such circumstances, except in cases life-
threatening circumstances in which case no notice shall be
required;
k) To approve or disapprove the weight, size and location of safes,
files, bookshelves, and other heavy equipment and articles in
and about the Premises, and to require all such items to be
moved in and out of the Estate and the Premises only at such
times and in such manner as Landlord shall direct and in all
events at Tenant's sole risk and responsibility;
l) To decorate, alter, repair or improve the Real Estate at any
time, and Landlord and its representatives for that purpose may
enter on or about the Premises with such material as Landlord
may deem necessary, may erect scaffolding and other necessary
structures on or about the Premises and may close or temporarily
suspend operation of entrances, doors, corridors, elevators or
other common facilities. Tenant waives any claim for damages,
including the loss of business resulting there from. In the
exercise of its rights under this subparagraph, Landlord shall
not unreasonably interfere with the conduct of Tenant's
business;
m) To do or to permit to be done any work in or about any adjacent
or nearby building, land, street, or alley.
ARTICLE XIII
INSOLVENCY OR BANKRUPTCY
The appointment of a receiver to take possession of all or
substantially all of the assets of Tenant, or an assignment by Tenant
for the benefit of creditors or any action taken or suffered by Tenant
under any insolvency, bankruptcy, or reorganization act, shall
constitute a breach of this Lease by Tenant, unless any such action or
proceeding is dismissed or discharged within sixty (60) days after the
same is filed. In no event shall this Lease be assigned by operation of
law or by voluntary or involuntary bankruptcy proceedings or otherwise
and in no event shall this Lease or any rights or privileges hereunder
be an asset of Tenant under any bankruptcy, insolvency, or
reorganization proceedings.
ARTICLE XIV
DEFAULT
In the event of any breach of this Lease by Tenant, after receipt
by Tenant of fifteen (15) days written notice of default (except there
shall be no notice requirement for Tenant's failure to pay rent),
Landlord, independent of any other rights or remedies it may have by law
or otherwise, shall have the immediate right of re-entry and may remove
all persons and property from the Premises. Such property may be
removed and stored at the cost of and for the account of Tenant. Should
Landlord elect to re-enter as herein provided, or should Landlord take
possession pursuant to legal proceedings or pursuant to any notice
provided for by law, Landlord may either terminate this Lease or may
terminate the right of Tenant to possession of the Premises without
terminating the Lease, in which latter event, Landlord shall be
obligated to mitigate its damages by actively seeking to relet said
Premises or any part thereof for the account of Tenant (as hereinbelow
provided) for such term or terms (which may be for a term extending
beyond the term of this Lease) and at such rental or rentals and upon
such other terms and conditions as Landlord in the exercise of
Landlord's sole discretion may deem advisable with the right to make
alterations and repairs to said Premises. Upon each such reletting (a)
Tenant shall be immediately liable to pay to Landlord, in addition to
any indebtedness other than rent due hereunder, the cost and expense of
such reletting and of such alterations and repairs incurred by Landlord,
and the amount, if any, by which
9
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<PAGE>
the rent reserved in this Lease for the period of such reletting (up to
but not beyond the term of this Lease) exceeds the amount agreed to be
paid as rent for the Premises for such period of such reletting; or (b)
at the option of Landlord, rents received by Landlord from such
reletting shall be applied first, to the payment of any indebtedness,
other than rent due hereunder from Tenant to Landlord; second, to the
payment of any reasonable costs and expenses of such reletting and of
such alterations and repairs; third, to the payment of rent due and
unpaid hereunder; and the residue, if any, shall be held by Landlord and
applied in payment of future rent as the same may become due and payable
hereunder.
If Tenant should breach this Lease, in addition to any other remedy
Landlord may have, Landlord may recover from Tenant all damages Landlord
may incur by reason of such breach, including the cost of recovering the
Premises, and including the rent reserved and charged in this Lease for
the remainder of the stated term, all of which amounts shall be
immediately due and payable (together with attorney's fees) from Tenant
to Landlord. Landlord's remedies hereunder are cumulative and not
intended to be exclusive of any other remedies or other means of redress
to which Landlord may be lawfully entitled in case of a breach of this
Lease by Tenant.
ARTICLE XV
DAMAGE BY FIRE AND EMINENT DOMAIN
If, during the term of this Lease, the Premises are damaged or
made untenantable by fire or other casualty, cause, condition or thing
whatsoever, or the Real Estate in which the Premises are located is
substantially damaged or made untenantable from fire or other casualty,
cause, condition or thing whatsoever, whether or not the Premises are
damaged, and the Landlord shall determine not to restore it, Landlord
may, by notice to Tenant given within thirty (30) days after such
damage, terminate this Lease. In such case Tenant shall pay the rent
apportioned to the time of damage and shall immediately surrender the
Premises to the Landlord upon Landlord's request therefor. Unless the
Lease is terminated as hereinabove provided, Landlord shall
substantially restore the Premises (to the extent of the Building
Standard improvements), with reasonable promptness. Tenant's rent shall
abate proportionately to the area of usable space during the period of
repair. If, as a result of a fire or other casualty, cause, condition
or thing whatsoever, a substantial portion of the Real Estate or the
Common Areas is damaged to such extent as to substantially interfere
with Tenant's use of the Premises, or if the Premises are made partially
or wholly untenantable, and in either case if the Landlord's architect
determines that the Premises cannot be restored within one hundred and
eighty (180) days after Landlord is able to take possession of the
damaged space and Premises, then either party may terminate this Lease
by written notice to the other given not later than thirty (30) days
after the date of certification by Landlord's architect. In all cases,
due allowance shall be made for reasonable delays caused by adjustment
or insurance loss, strikes, labor difficulties or any cause beyond the
Landlord's reasonable control. Landlord shall have no duty to restore,
repair or replace Tenant's above-building-standard fixtures or leasehold
improvements, including but not limited to, wall and floor coverings,
light fixtures, built-in cabinets and bookshelves.
If, during the term of this Lease, all or a substantial part of the
Premises, or if a substantial part of the Real Estate (Including the
Common Areas and Parking Garage) in which the Premises are located
(whether or not the Premises are affected) shall be taken or condemned
by any competent authority for any public or quasi-public use or purpose
and, as a result, Tenant is unable to conduct its normal business
activities from the Premises, the Term of this Lease shall end upon and
not before the date when the possession of the part so taken shall be
required for such use or purpose. If any condemnation proceeding shall
be instituted in which it is sought to take or damage any part of the
Real Estate is changed by any competent authority and such partial
taking or change of grade makes it necessary or desirable to remodel the
Real Estate to conform to the taking or changed grade, Landlord shall
have the right to cancel this Lease upon not less than thirty (30) days
prior written notice to Tenant. In either of the events above referred
to, rent at the then current rate shall be apportioned as of the date of
the termination.
10
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ARTICLE XVI
SURRENDER OF PREMISES
At the end of the term or any renewal thereof or other sooner
termination of this Lease, the Tenant will peaceably deliver up to the
Landlord possession of the Premises, together with all improvements or
additions upon or belonging to the same, by whomsoever made, in the same
condition as received or first installed, ordinary wear and tear and
damage by fire, earthquake, Act of God, Landlord's breach, other
conditions beyond Tenant's reasonable control or the elements alone
excepted. Upon the termination of this Lease, Tenant shall, at Tenant's
sole cost, remove all counters, trade fixtures, office furniture and
equipment installed by Tenant, unless otherwise agreed to in writing by
Landlord. Tenant shall also repair any damage caused by such removal.
Property not so removed shall be deemed abandoned at the termination of
this Lease by the Tenant and title to the same shall thereupon pass to
Landlord. Tenant shall indemnify the Landlord against any loss or
liability resulting from delay by Tenant in so surrendering the
Premises, including without limitation, any claims made by any
succeeding tenant based on such delay.
ARTICLE XVII
WAIVER
The waiver by Landlord of any term, covenant, or condition herein
contained shall not be deemed to be a waiver of such term, covenant, or
condition or any subsequent breach of the same or any other term,
covenant or condition herein contained. The subsequent acceptance of
rent hereunder by Landlord shall not be deemed to be a waiver of any
preceding breach by Tenant of any term, covenant, or condition of this
Lease, other than the failure of Tenant to pay the particular rental so
accepted, regardless of Landlord's knowledge of such preceding breach at
the time of acceptance of such rent.
ARTICLE XVIII
NOTICES
All notices and demands which may or are required to be given by
either party to the other hereunder shall be in writing and shall be
sent by United States certified or registered mail, postage prepaid,
addressed to Tenant at:
429 North Pennsylvania Street
First Floor
Indianapolis, Indiana 46204
and addressed to the Landlord at:
429 Penn Partners
429 North Pennsylvania Street
Lower Level
Indianapolis, Indiana 46204
or to such other firm or to such other place as Landlord may from time
to time designate in writing.
11
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<PAGE>
ARTICLE XIX
ABANDONMENT
If Tenant shall abandon or vacate the Premises before the end of
the term or any other event shall happen entitling Landlord to take
possession thereof, Landlord may take possession of said Premises, relet
the same without such action being deemed an acceptance of a surrender
of this Lease or in any way terminating the Tenant's liability
hereunder, and Tenant shall remain liable to pay the rent herein
reserved and any other damages suffered by Landlord, less the net amount
actually realized from such reletting after deduction of any expenses
incident to such repossessions and reletting.
ARTICLE XX
SUBORDINATION
In consideration of the execution of this Lease by Landlord,
Tenant accepts this Lease subject to any deeds of conveyance and any
existing or future deeds of trust, master leases, security interests or
mortgages and all renewals, modifications, extensions, consolidations
and replacements of the foregoing which might now or hereafter
constitute a lien upon the Real Estate (or the land upon which it is
situated or improvements therein or thereon) or upon the Premises, and
to zoning ordinances and other building and fire ordinances and
governmental regulations relating to the use of the property. Although
no instrument or act on the part of Tenant shall be necessary to
effectuate such subordination, Tenant shall, nevertheless, for the
purpose of confirmation at any time hereafter, on demand in the form(s)
prescribed by Landlord, execute any instruments, estoppel certificates,
release or other documents that may be requested or required by any
purchaser or any holder of any superior interest for the purposes of
subjecting and subordinating this Lease to such deed or conveyance or to
the lien of any such deed in trust, master lease, security interest,
mortgage, or superior interest Tenant hereby appoints Landlord attorney-
in-fact, irrevocably, to execute and deliver any such instrument or
document for Tenant should Tenant fail or refuse to do so.
ARTICLE XXI
MISCELLANEOUS PROVISIONS
Section 21.1 Governing Law. This Lease shall be governed by the
--------------------------
laws of the State of Indiana.
Section 21.2 Writing Controls. It is agreed that Landlord has not
-----------------------------
made any statement, promise or agreement or taken upon itself any
engagement whatsoever verbally or in writing in conflict with the terms
of this Lease or that in any way modifies, varies, alters, enlarges, or
invalidates any of its provisions and that no obligations of Landlord
shall be implied in addition to the obligations herein stated.
Section 21.3 Air and Light. This Lease does not grant or
--------------------------
guarantee Tenant a continuance of light and air over any property
adjoining the Leased Premises.
Section 21.4 Landlord's Covenants. Landlord covenants that (a) it
---------------------------------
has full power and authority to perform its obligations under the Lease
and (b) Tenant, upon paying the rent herein provided and performing all
the covenants of this Lease by it to be performed, shall have quiet
possession of the Premises, and the use with other persons of the Common
Areas and Parking Garage, during the term hereof.
Section 21.5 No Option. Submission of this Lease for examination
----------------------
or signature by Tenant does not constitute a reservation or option for
the Premises. This instrument becomes effective as a Lease only upon
execution and delivery by both Landlord and Tenant.
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Section 21.6 Time. Time is of the essence of this Lease and each
-----------------
and all of its provisions.
Section 21.7 Binding Effect. This Lease shall be binding upon and
---------------------------
inure to the benefit of the respective parties hereto and their heirs,
administrators, successors and assigns. This provision does not allow
Tenant's assignment of the Lease except as provided under Article VII.
Section 21.8 Severability. The invalidity or unenforceability of
-------------------------
any particular provision of this Lease, in whole or in part, shall not
affect the other provisions of this Lease and in such an event, this
Lease shall be construed in all other aspects as if the invalid or
unenforceable provision or part thereof was omitted.
Section 21.9 Modification of Lease. This Lease cannot be modified
----------------------------------
unless evidenced by a written agreement signed by both parties hereto.
Section 21.10 Memorandum of Lease. The parties agree not to
---------------------------------
record a copy of this Lease, but Tenant may, at its expense, prepare and
record a Memorandum of Lease in a form mutually agreeable to the
parties.
IN WITNESS WHEREOF. the parties have caused this Lease to be executed by
their duly authorized representatives this 7th day of November 1997
TENANT:
UNIFIED HOLDINGS, INC.
Witness:
By: /s/ Carol J. Highsmith By: /s/ Lynn E. Wood
----------------------------- -------------------------------
Printed: Carol J. Highsmith Printed: Lynn E. Wood
------------------------ --------------------------
Title: President
----------------------------
LANDLORD:
Witness: 429 PENN PARTNERS
By: /s/ John MacPherson By: /s/ Leo Stenz
----------------------------- -------------------------------
Printed: John MacPherson Printed: Leo Stenz
------------------------ --------------------------
Title: General Partner
----------------------------
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EXHIBIT D
WORKLETTER
----------
This workletter is attached to and forms a part of the certain
office lease between 429 Penn Partners ("Landlord") and Unified
Holdings, Inc. ("Tenant") dated January 1, 1998 (" Lease"), pursuant to
which Landlord had leased to Tenant office space in the building
situated at 429 N. Pennsylvania, Indianapolis.
Landlord desires to make improvements to the premises, and Tenant
desires to have Landlord make them, upon the terms and conditions in
this Workletter.
SYSTEMS WORK
------------
Unified will provide licensed contractors and supervise the
following:
Wiring Voice and Data Move Prime Computer
Pershing Line Move Dictaphone
SunGard line Move T1 Circuits
Nasdaq line Install Digital Lines
Quotron Security System Re-install
Landlord will pay from invoice, for the above work, with a not to
exceed limit of $27,600.00. Any savings from the not to exceed amount
would be retained by the Landlord.
ELECTRICAL/HVAC WORK
--------------------
Stenz Construction will perform and supervise the following work,
with the sole cost the responsibility of the Landlord.
All necessary Power, PBX, Prime to computer room.
Dedicated circuit for Xerox Copier.
Dedicated HVAC unit and controls for Computer Room.
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CONSTRUCTION WORK
-----------------
Stenz Construction will perform the following work, with the sole
cost the responsibility of the Landlord.
Remove wall in computer room.
Paint all wood trim and door frames.
Replace carpet with linoleum in computer room.
Install door from breakroom to vending area.
Install door in hall leading from reception area to rear of space.
(Under existing bulkhead )
MOVING EXPENSE
--------------
Will be the sole responsibility of the Tenant, with Landlord
contributing 50% of invoiced amount not to exceed $3,500.00.
MAINTENANCE WORK
----------------
Stenz Management will provide necessary cleaning and carpet
shampooing.
ADDITIONALLY
------------
Landlord will retain the use of all portable partitions and
workstations currently used by Unified, that are located on the 4th
floor, for the Term of Unified's Lease Agreement.
15
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EXHIBIT 10.38
FIRST ADDENDUM TO LEASE
-----------------------
This First Addendum is entered into this 25th day of June, 1998,
by and between 429 Penn Partners, an Indiana Partnership ("Landlord")
and Unified Financial Services, Inc. (formerly known as Unified
Holdings, Inc.) a Delaware Corporation ("Tenant").
WHEREAS, on the 1st day of January, 1998, Landlord and Tenant
entered into a Lease for Premises in the building community known as 429
Pennsylvania Center ("Building"), upon the terms and conditions set
forth therein ("Lease"); and
WHEREAS, Tenant desires to add to the Premises Additional Space on
the first floor consisting of approximately 877 rentable square feet of
the Building, all on the terms and conditions set forth in the Lease,
except as hereinafter provided;
NOW, THEREFORE, in consideration of the Premises and each act
performed by either party with respect hereto, the parties agree as
follows:
1. Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord that certain building space shown and designated as Area
(B) on the plot plan attached hereto and made a part hereof as Exhibit
"E" subject to all of the terms, provisions, conditions and covenants of
the Lease, the same as if the Additional Space had been a part of the
original Premises described therein, subject, however, to the terms and
conditions of this First Addendum, which shall not be contingent of any
corporate acquisitions.
2. Commencing on September 1, 1998, and continuing for the
period ending December 31, 2003, the Base Rent for the Additional space
shall be One Thousand Two Hundred and Seventy Eight Dollars 96/100
($1,278.96) per month. For the period January 1, 2004 thru December 31,
2007, the Base rent for the Additional space shall be One Thousand Three
Hundred Fifty Two Dollars and 05/100 ($1,352.05) per month in advance on
or before the first day of each calendar month.
3. Additional Space is offered in its current condition except
for the following: New carpet, painting, install (2) two single glass
entry doors, similar to existing style (designated on Exhibit "E"),
electrical, voice and data wiring for general office use, expand
existing security system similar to general office usage, remove circuit
board as indicated on (Exhibit "E"), add dedicated circuit for copier
and reconstructing up to 12 feet of Tenant Walls. All work will be
completed in accordance with Building Standard Allocations which is
attached and made a part hereof as Exhibit "D".
4. Provided that Tenant is not in default hereunder, Tenant
shall have, during the Term hereof, continuing Right of Assignment and
Subletting as outlined in Article VII of the Lease.
5. In all other respects, the Terms and Provisions of the Lease
shall remain the same and in full force and effect.
<PAGE>
<PAGE>
6. Tenant will be released from a portion of the Lease
consisting of 1,116 rentable square feet located on the 3rd floor at a
rental rate of $1,165.94. Tenant must remove all equipment and Tenant
installed upgrades on or before June 30, 1998.
Executed on the day and year first above written.
UNIFIED FINANCIAL
SERVICES, INC.
(formerly known as)
UNIFIED HOLDINGS INC.
429 PENN PARTNERS
By: /s/ Leo Stenz By: /s/ Tony Ghoston; /s/ Carol J. Highsmith
--------------------- -------------------------------------------
Printed: Leo Stenz Printed: Tony Ghoston; Carol J. Highsmith
---------------- --------------------------------------
Title: General Partner Title: CIO; Secretary
------------------ ----------------------------------------
"LANDLORD" "TENANT"
- 2 -
<PAGE>
EXHIBIT 10.39
OFFICE LEASE AGREEMENT
for
EQUITY INSURANCE MANAGERS, INC.
<PAGE>
<PAGE>
<TABLE>
INDEX
<CAPTION>
Section Name Page
- ------- ---- ----
<S> <C>
1. Definitions and Certain Basic Provisions 1
----------------------------------------
2. Lease and Demise 2
----------------
3. Term 2
----
4. Use 3
---
5. Base Rental 3
-----------
6. Base Rental Adjustment 4
----------------------
7. Basic Costs Defined 4
-------------------
8. Completion of Leasehold Improvements 6
------------------------------------
9. Acceptance of Premises and Building By Tenant 6
---------------------------------------------
10. Services to Be Furnished By Landlord 6
------------------------------------
11. Keys and Locks 7
--------------
12. Graphics 8
--------
13. Maintenance and Repairs by Landlord 8
-----------------------------------
14. Repairs by Tenant 8
-----------------
15. Care of Premises 8
----------------
16. Peaceful Enjoyment 8
------------------
17. Holding Over 8
------------
18. Alterations, Additions, and Improvements 9
----------------------------------------
19. Legal Use and Violations of Insurance 9
-------------------------------------
20. Laws and Regulations; Building Rules 9
------------------------------------
21. Nuisance 10
--------
22. Entry by Landlord 10
-----------------
23. Assignment and Subletting 10
-------------------------
24. Transfers by Landlord 12
---------------------
25. Subordination to Mortgage 12
-------------------------
26. Mechanic's Lien 13
---------------
27. Estoppel Certificate 13
--------------------
28. Events of Default 13
-----------------
29. Lien for Rent 15
-------------
30. Attorneys' Fees 15
---------------
31. No Implied Waiver 16
-----------------
32. Casualty Insurance 16
------------------
33. Liability Insurance 16
-------------------
34. Indemnity 16
---------
35. Waiver of Subrogation Rights 17
----------------------------
36. Casualty Damage 17
---------------
37. Condemnation 18
------------
38. Damages from Certain Causes 18
---------------------------
39. Notice and Cure 18
---------------
40. Personal Liability 19
------------------
41. Notice 19
------
42. Captions 19
--------
43. Entirety and Amendments 19
-----------------------
44. Severability 19
------------
45. Binding Effect 19
--------------
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<PAGE>
<PAGE>
46. Number and Gender of Words 19
--------------------------
47. Recordation 19
-----------
48. Governing Law 19
-------------
49. Interest Rate 20
-------------
50. Force Majeure 20
-------------
51. Rules and Regulations 20
---------------------
52. Reserved Rights 20
---------------
53. Approval by Landlord's Mortgagees 21
---------------------------------
54. Brokers 21
-------
55. Substitute Space 21
----------------
56. Time of Essence 22
---------------
57. Best Efforts 22
------------
58. No Reservation 22
--------------
59. Consents 22
--------
60. Legal Authority 22
---------------
61. Hazardous Materials 22
-------------------
62. Exhibits, Riders and Addenda 23
----------------------------
63. Waiver of Jury Trial 23
--------------------
<CAPTION>
EXHIBITS:
- --------
<S> <C>
EXHIBIT A DESCRIPTION OF LAND
EXHIBIT B FLOOR PLAN OF PREMISES
EXHIBIT C BUILDING RULES AND REGULATIONS
EXHIBIT D WORK LETTER
EXHIBIT E RIGHT OF REFUSAL
</TABLE>
- ii -
<PAGE>
<PAGE>
OFFICE LEASE AGREEMENT
(Kentucky)
THIS LEASE AGREEMENT ("Lease") is entered into as of the 4th day
of November, 1996, between MIF REALTY L.P., a Delaware limited
partnership doing business in Kentucky as MIF Realty Limited Partnership
("Landlord"), whose address is c/o GE Capital Realty Group, Inc., 16479
Dallas Parkway, Suite 400, Dallas, Texas 75248, Attention: Asset
Management and Legal Department, and Equity Insurance Managers, Inc.
("Tenant"), whose address is 3201 Nicholasville Road, Suite 600,
Lexington, Kentucky 40503.
W I T N E S S E T H:
1. Definitions and Certain Basic Provisions. The following
----------------------------------------
capitalized terms shall have the meaning indicated for purposes of this
Lease:
(a) Tenant's Guarantor (if applicable, attach Guaranty as
an exhibit): N/A
(b) "Building": Landlord's property known as Lexington
Green II located at 3201 Nicholasville Road in the City of
Lexington Fayette County, Kentucky, the land on which such property
is located being described or shown on Exhibit A attached hereto.
---------
(c) "Premises": the leased premises located in the
Building and being conclusively deemed to contain 18,370 square
feet of Net Rentable Area (as hereinafter defined), as shown on
the floor plans attached as Exhibit B hereto.
---------
(d) "Commencement Date": The earlier of sixty days after
receipt by Landlord of a fully executed copy of this Lease or
January 1, 1997, which date may be extended in accordance with
Section 3 below. See Section 1 of the Addendum.
(e) "Lease Term": Commencing on the Commencement Date and
continuing for five (5) years and zero (0) months after the
Commencement Date; provided that if the Commencement Date is a
date other than the first day of a calendar month, the Lease Term
shall be extended by the number of days remaining in the calendar
month in which the Commencement Date occurs. See Section 2 of the
Addendum.
(f) "Base Rental":
Year Rent/SF Annual Rent Monthly Rent
------------------------------------------------------
1-2 $14.00 $257,180 $21,431.67
3-5 $15.00 $275,550 $22,962.50
Base Rental is subject to adjustment in accordance with
Section 6 of this Lease.
(g) "Security Deposit": $0.00, such Security Deposit
being due and payable upon execution of this Lease.
(h) "Net Rentable Area": (i) in the case of a single
tenancy floor, all floor area measured from the inside surface of
the outer glass or exterior wall of the Building to the inside
surface of the opposite outer glass wall or exterior wall of the
Building, excluding only the areas ("service areas") within the
outside walls used for elevator mechanical rooms, building stairs,
fire towers, elevator shafts, flues, vents, stacks, vertical pipe
shafts and vertical ducts, but including
<PAGE>
<PAGE>
any such areas which are for the specific use of a particular
tenant such as special stairs or elevators, plus an allocation of
the square footage of the Building's elevator and main mechanical
rooms and ground floor lobby, and (ii) in the case of a partial
floor, all floor areas within the inside surface of the outer
glass or exterior wall enclosing the portion of the Premises on
such floor and measured to the midpoint of the walls separating
areas leased by or held for lease to other tenants or from areas
devoted to corridors, elevator foyers, restrooms, mechanical
rooms, janitor closets, vending areas and other similar facilities
for the use of all tenants on the particular floor ("common
areas"), but including a proportionate part of the common areas
located on such floor based upon the ratio which the tenant's Net
Rentable Area on such floor bears to the aggregate Net Rentable
Area on such floor, plus an allocation of the square footage of
the Building's elevator and main mechanical rooms and ground floor
lobby. No deductions from Net Rentable Area are made for columns
or projections necessary to the Building. If Landlord and Tenant
shall at any time disagree regarding any calculation of the Net
Rentable Area of any space required to be made hereunder for any
purpose, the Net Rentable Area of such space shall be determined
in good faith and in accordance with the provisions of this
Paragraph by Landlord's architect (the "Architect"), whose
determination thereof shall be conclusive upon each of the
parties. Landlord and Tenant shall each pay fifty percent of the
Architect's fees and expenses in respect of any such
determination. See Section 1(h) of the Addendum.
2. Lease and Demise. Subject to the terms and conditions
----------------
hereinafter set forth, and each in consideration of the duties,
covenants, and obligations of the other hereunder, Landlord does hereby
lease to Tenant, and Tenant does hereby lease from Landlord, the
Premises.
3. Term. (a) Subject to the terms and conditions set forth
----
herein, this Lease shall continue in force for the Lease Term.
(b) If the Premises are not ready for occupancy by Tenant
on the Commencement Date, Landlord shall not be liable for any costs,
claims, damages, or liabilities incurred by Tenant as a result thereof,
and the Lease Term and the obligations of Tenant hereunder shall
nonetheless commence and continue in full force and effect; provided,
however, if the Premises are not ready for occupancy on the Commencement
Date due to omission, delay, or default on the part of Landlord, the
Lease Term shall not commence until the Premises are ready for occupancy
by Tenant. In such event, the Commencement Date shall be deemed to be
postponed to the date the Premises are ready for occupancy, whereupon
the Lease Term shall commence. Such postponement of rent and of the
Commencement Date of this Lease shall constitute full settlement of all
claims that Tenant might otherwise have against Landlord by reason of
the Premises not being ready for occupancy by Tenant on the stated
Commencement Date. Should the Lease Term commence on a date other than
that specified in Paragraph 1(d) above, Landlord will send Tenant a
written statement of such adjusted Commencement Date, and Tenant will,
if Landlord requests, confirm such adjusted date in writing. The
Premises shall be deemed to be ready for occupancy on the first to occur
of (i) the date that all work required to be completed pursuant to the
terms of the Work Letter attached hereto as Exhibit D has been
---------
substantially completed (except for minor finishing jobs); provided,
however, that if such work is delayed because of a default or failure,
or both of Tenant, then the Premises shall also be deemed ready for
occupancy when such work would have been substantially completed if
Tenant's default or failure had not occurred; such date shall be deemed
to have occurred on the date there is delivered to Tenant a certificate
from Landlord's architect that all improvements required to be
constructed by Landlord in the Premises under the terms of this Lease
are substantially complete (except for minor finishing jobs) (or would
have been complete but for the default or failure of Tenant), which
certificate shall be binding and conclusive upon Tenant in the absence
of bad faith and collusion on the part of or between Landlord and
Landlord's architect, or (ii) the date on which Tenant begins occupancy
of the Premises. See Section 4 of the Addendum.
- 2 -
<PAGE>
<PAGE>
4. Use. The Premises are to be used and occupied by Tenant
---
solely for office purposes and for no other purpose or use without the
prior written consent of Landlord.
5. Base Rental. (a) Tenant hereby agrees to pay to Landlord,
-----------
without any set off or deduction whatsoever, the Base Rental. Tenant
shall also pay, as additional rent, all other sums of money that become
due and payable by Tenant to Landlord under this Lease (Base Rental, any
adjustment thereto pursuant to Paragraph 6 hereof, any basic parking
charge or adjustment thereto, and all other sums of money due and
payable by Tenant to Landlord under this Lease are sometimes hereinafter
collectively called "rent"). Tenant shall also pay with each Base
Rental payment the amount of any transaction privilege, sales, or
similar taxes incurred by Landlord on the rent transactions. The annual
Base Rental, as adjusted from time to time pursuant to Paragraph 6
hereof, shall be due and payable in advance in twelve (12) equal
installments on the first (1st) day of each calendar month during the
term of this Lease and any extensions or renewals thereof, and Tenant
hereby agrees to pay Base Rental as so adjusted to Landlord at
Landlord's address provided herein (or such other address as may be
designated by Landlord in writing from time to time) monthly, in
advance, and without demand. If the term of this Lease commences on a
day other than the first (1st) day of a month, then the first
installment of Base Rental as adjusted pursuant hereto shall be
prorated, based on thirty (30) days per month, and such installment so
prorated shall be paid in advance on the Commencement Date.
(b) Upon the execution of this Lease, Tenant agrees to pay
to Landlord the Security Deposit, to be held by Landlord as security for
the performance by Tenant of Tenant's covenants and obligations under
this Lease, it being expressly understood that the Security Deposit
shall not be considered an advance payment of rental or measure of
Landlord's damages in case of default by Tenant. Upon default by
Tenant, Landlord, from time to time, without prejudice to any other
remedy, may (but shall not be required to) apply the Security Deposit
against any arrearages of Base Rental, or other rent, or any other
damage, injury, expense or liability caused to Landlord by such default
on the part of Tenant. Should all or any portion of the Security
Deposit be used for the purposes described above during the Lease Term,
then Tenant shall remit to Landlord on the first day of the month
following notice of such use the amount necessary to restore Security
Deposit to its original balance. Tenant's failure to restore the
Security Deposit upon notice from Landlord shall be a material breach of
this Lease.
No interest shall be payable on the Security Deposit and
Landlord shall have no obligation to keep the security deposit separate
from its general funds unless otherwise required by applicable law. See
Section 5 of the Addendum.
(c) If Tenant fails to pay any regular monthly installment
of rent by the tenth (10th) day of the month in which the installment is
due, or any other amount constituting rent within ten (10) days after
accrual thereof or billing therefor, there shall be added to such unpaid
amount a late charge of five percent (5%) of the installment or amount
due in order to compensate Landlord for the extra administrative
expenses incurred. See Section 6 of the Addendum.
(d) Notwithstanding anything to the contrary contained
herein, Landlord hereby grants Tenant a rental abatement in the amount
of $15,000.00 to be applied to Base Rental in the second month of the
Lease Term. Except for the rental abatement specified above, Tenant
shall be obligated to make all other payments which Tenant is obligated
to make pursuant to the terms of this Lease. Tenant agrees that if, at
any time during the term of this Lease, there is a default or event of
default under this Lease by Tenant, the value of the rental abatement
shall be deemed an additional obligation payable by Tenant. Upon the
occurrence of a default or an event of default by Tenant under the terms
of the Lease,
- 3 -
<PAGE>
<PAGE>
Tenant shall be required to pay the value of the rental abatement upon
demand of Landlord and any other amounts owed under the terms of this
Lease. See Section 7 of the Addendum.
6. Base Rental Adjustment. The Base Rental payable hereunder
----------------------
shall be adjusted from time to time in accordance with the following
provisions:
(a) Tenant shall pay Tenant's Proportionate Share
(hereinafter defined) of Basic Costs in excess of the Basic Costs for
calendar year 1997 ("Excess Basic Costs"). Prior to January 1 of each
calendar year during the Lease Term, Landlord shall provide an estimate
of Excess Basic Costs for the forthcoming calendar year. Tenant shall
pay Base Rental for such forthcoming calendar year adjusted upward by
Tenant's Proportionate Share of the amount of such forthcoming year's
estimated Excess Basic Costs, or downward if the estimate of Excess of
Basic Costs for such forthcoming calendar year is less than the prior
year's estimate, but in no event shall Base Rental be less than the
amount specified in Paragraph 1.
(b) By June 1 of each calendar year during the Lease Term
commencing June 1, 1999, or as soon thereafter as possible, Landlord
shall furnish to Tenant a statement of Landlord's Basic Costs for the
previous calendar year or partial calendar year, if applicable. If
actual Basic Costs are greater than Landlord's estimate thereof, a lump
sum payment (which payment shall be deemed a payment of rent hereunder
for all purposes) will be made from Tenant to Landlord within thirty
(30) days of the delivery of such statement equal to Tenant's
Proportionate Share of the amount by which actual Excess Basic Costs
exceeded Landlord's estimate thereof. If actual Excess Basic Costs are
less than Landlord's estimate thereof, Landlord shall promptly after
delivery of such statement (but in no event within less than thirty (30)
days) make a lump sum payment to Tenant (or at Landlord's option,
Landlord may credit such lump sum amount against the rent installment
due in the immediately succeeding month) equal to Tenant's Proportionate
Share of the amount by which estimated Excess Basic Costs exceeded the
actual amount thereof. The effect of this reconciliation payment or
credit, as applicable, is that Tenant will pay during the Lease Term
Tenant's Proportionate Share of Excess Basic Costs, and no more.
(c) All rent attributable to Excess Basic Costs shall be
paid by Tenant in the proportion that the Net Rentable Area of the
Premises bears to ninety-five percent (95%) of the Net Rentable Area of
the Building ("Tenant's Proportionate Share").
7. Basic Costs Defined. "Basic Costs" consist of all
-------------------
operating expenses of the Building, the land on which the Building is
located, and parking areas, facilities, structures and drives thereon,
and any future additions or improvements thereto (collectively, the
"Complex"). All operating expenses shall be computed on the accrual
basis in accordance with generally accepted accounting principles
consistently applied. Operating expenses consist of all expenses,
costs, and disbursements (but not specific costs billed to and paid by
specific tenants) of every kind and nature that Landlord shall pay or
become obligated to pay in connection with the ownership and operation
of the Complex, including, but not limited to the following: See
Section 8 of the Addendum.
(a) Wages, salaries, and fees of all employees of Landlord
and/or Landlord's agents (whether paid directly by Landlord itself or
reimbursed by Landlord to such other party) engaged in the operation,
maintenance, leasing, or security of the Complex and personnel who may
provide traffic control relating to ingress and egress from the parking
areas of the Complex to the surrounding public streets. All taxes,
insurance, and benefits for employees providing these services are also
included. See Section 9 of the Addendum.
- 4 -
<PAGE>
<PAGE>
(b) Cost of all supplies, materials and equipment rented
or used in the operation or maintenance of the Complex.
(c) Cost of all utilities for the Complex including, but
not limited to, the cost of water and power, gas, heating, lighting, air
conditioning and ventilating for the Complex.
(d) Management costs and the cost of all maintenance,
janitorial, and service agreements for the Complex and the equipment
therein including, but not limited to, alarm service, window cleaning,
elevator maintenance, security service, traffic control, and janitorial
service.
(e) Cost of all insurance relating to the Complex,
including, but not limited to, the cost of fire and extended coverage
insurance, rental loss or abatement insurance, casualty and liability
insurance applicable to the Complex and Landlord's personal property
used in connection therewith. See Section 10 of the Addendum.
(f) All taxes, assessments, and other governmental
charges, whether federal, state, county or municipal (other than federal
taxes on Landlord's net income and Landlord's franchise taxes), and
whether they be by taxing districts or authorities presently taxing the
Complex or by others, subsequently created or otherwise, and any other
taxes and assessments attributable to the Complex or its operation. It
is agreed that Tenant will be responsible for ad valorem taxes on its
personal property and on the value of leasehold improvements to the
extent that the same exceed standard Building allowances.
(g) Costs of repairs and general maintenance (excluding
repairs and general maintenance paid by proceeds of insurance or by
Tenant or other third parties, and alterations attributable solely to
tenants of the Building other than Tenant).
(h) Amortization of the cost of capital investment items
which are primarily for the purpose of reducing operating costs or which
may be required by governmental authority. All such costs shall be
amortized over the reasonable life of the capital investment items by
including in Basic Costs the annual amortized amount thereof, with the
reasonable life and amortization schedule being determined by Landlord
in accordance with generally accepted accounting principles, but in no
event to extend beyond the reasonable life of the Building. See Section
11 of the Addendum.
(i) Landlord's central accounting costs applicable to the
Complex. See Section 12 of the Addendum.
(j) Cost of an office in the Building maintained for
management of the Complex. See Section 12 of the Addendum.
Landlord and Tenant agree that the foregoing enumeration of specific
types of costs and expenses is intended as illustrative only and shall
not be construed so as to limit the inclusion of any types of costs or
expenses otherwise intended to be included within the term Basic Costs
but not set forth above or to obligate Landlord to provide any services
contemplated thereby. In addition to the direct costs described above,
Landlord shall have the right to establish reserves for capital
improvements, repairs and maintenance as Landlord may from time to time
deem necessary or appropriate. The amount of such reserves shall be an
additional component of Basic Costs. Should such capital improvements
be necessary due to casualty damage, ordinary wear and tear, compliance
with any governmental law, ordinance or requirement or for any other
reason, the cost of such capital improvements in excess of the currently
available reserves shall be amortized over a period of time designated
by Landlord in its reasonable discretion as a component of Basic Costs.
- 5 -
<PAGE>
<PAGE>
Notwithstanding any other provision herein to the contrary,
if the Building is not fully occupied during any year of the Lease Term,
an adjustment shall be made in computing the Basic Costs for such year
so that the Basic Costs shall be computed for such year as though the
Building had been fully occupied during such year. Tenant at its
expense shall have the right at any reasonable time within twelve (12)
months after the end of an applicable year for which additional rent is
due, upon prior written notice to Landlord, to audit Landlord's books
and records relating to this Lease for the immediately preceding
calendar year in which Base Rental was adjusted pursuant to Paragraph 6
hereof; or at Landlord's sole discretion, Landlord will provide at
Tenant's expense such audit prepared by a certified public accountant.
See Section 13 of the Addendum.
8. Completion of Leasehold Improvements. Tenant shall submit
------------------------------------
to Landlord for approval full definitive plans and specifications for
all leasehold improvements (the "Leasehold Improvements") to be
constructed or installed or other work to be performed by Tenant in the
Premises, including but not limited to, all architectural, electrical
and mechanical plans, room finish schedules, millwork detail, and air
conditioning layout drawings, all in accordance with the terms and
provisions of the Work Letter attached hereto as Exhibit D. The Work
---------
Letter sets forth certain dates by which plans and specifications for
the Leasehold Improvements must be prepared, reviewed and approved, and
further describes the circumstances, if applicable, under which the
Commencement Date hereof may be delayed.
9. Acceptance of Premises and Building By Tenant. The taking
---------------------------------------------
of possession of the Premises by Tenant shall be conclusive evidence (a)
that Tenant accepts the Premises as suitable for the purposes for which
the same are leased, (b) that Tenant accepts the Building and each and
every part and appurtenance thereof as being in a good and satisfactory
condition, and (c) that Landlord has fully complied with Landlord's
obligations contained in this Lease with respect to the construction of
the Building and the Leasehold Improvements.
10. Services to Be Furnished By Landlord. During Tenant's
------------------------------------
occupancy of the Premises, Landlord shall furnish (as a part of the
Basic Costs of the Complex) the following services:
(a) Hot and cold water at those points of supply provided
for general use of other tenants in the Building and central heat and
air conditioning in season, at such temperatures and in such amounts as
are considered by Landlord to be standard; provided, however, such
service at times other than normal business hours (as set forth in
Exhibit C Building Rules and Regulations) for the Building shall be
- ---------
furnished only upon the prior request of Tenant, who shall bear the
entire cost thereof.
(b) Routine maintenance and electric lighting service for
all public areas and special service areas of the Building in the manner
and to the extent deemed by Landlord to be standard.
(c) Janitorial service, Mondays through Fridays, exclusive
of holidays.
(d) Electrical facilities to furnish sufficient power for
typewriters, word processors, photocopying machines, personal computers,
and other machines of similarly low electrical consumption (total
consumption not to exceed one (1) watt per square foot of Net Rentable
Area per month) but not for electronic data processing equipment,
special lighting in excess of Building standard, or any other item of
electrical equipment which (singly) consumes more than 0.5 kilowatts at
rated capacity or requires a voltage other than 120 volts single phase.
If Tenant's electrical equipment requires additional air conditioning
capacity above that provided by the Building standard system, then the
additional air conditioning installation and operating costs will be
payable by Tenant on demand therefor by Landlord.
- 6 -
<PAGE>
<PAGE>
(e) All Building standard fluorescent bulb replacement in
all areas of the Building and all incandescent bulb replacement in
public areas, toilet and restroom areas, and stairwells.
(f) Security to the Complex. Landlord shall be the sole
determinant of the type and amount of security services to be provided,
if any. Landlord shall not be liable to Tenant, and Tenant hereby
waives any claim against Landlord for (i) any unauthorized or criminal
entry of third parties into the Premises or Complex, (ii) any damage to
persons or property, or (iii) any loss of property in and about the
Premises or Complex from an unauthorized or criminal acts of third
parties, regardless of any action, inaction, failure, breakdown or
insufficiency of security.
(g) Passenger elevator(s) for ingress to and from the
Premises (if applicable). See Section 14 of the Addendum.
At Landlord's election Landlord may cause to be installed
and maintained at Tenant's expense, metering devices for any utility
service provided to the Premises and Tenant will reimburse Landlord
within ten (10) days after invoicing by Landlord for the cost of such
utility service. Landlord shall be deemed to have observed and
performed the terms and conditions to be performed by Landlord under
this Lease, including those relating to the provisions of utilities and
services, if Landlord acts in accordance with a directive, policy or
request of a governmental or quasi-governmental authority servicing the
public interest in the fields of energy, conservation or security.
Tenant shall pay to Landlord on demand, and as additional
rental, the costs incurred by Landlord for (a) extra cleaning work in
the Premises required because of (i) misuse or neglect on the part of
Tenant or Tenant's permitted subtenants or the employees or visitors of
Tenant or Tenant's permitted subtenants, (ii) the use of portions of the
Premises for special purposes requiring greater or more difficult
cleaning work than office areas (including, without limitation,
kitchens, breakrooms, reproduction rooms, computer areas or similar
facilities in the Premises), (iii) interior glass partitions or unusual
quantity of interior glass surfaces, and (iv) non-building standard
materials or finishes installed by Tenant or at Tenant's request, and
(b) removal from the Premises and the Building of any refuse and rubbish
of Tenant that in Landlord's judgement exceeds that ordinarily
accumulated in business office occupancy or at times other than
Landlord's standard cleaning times.
Water, gas, electrical, and sewer services included in the
foregoing Building services will be provided through available public
utilities. The failure by Landlord to any extent to furnish these
services, any cessation, malfunction, fluctuation, variation, or
interruption thereof, or any breakdown or malfunction of equipment in
the Complex resulting from causes beyond the reasonable control of
Landlord shall not render Landlord liable in any respect for damages,
direct or consequential, to either persons or property, nor be construed
as an eviction of Tenant, nor work an abatement of rent, nor relieve
Tenant from the obligation to fulfill any covenant or agreement hereof.
Should any of Tenant's office equipment or machinery breakdown, be
damaged, or for any cause cease to function properly as a result of the
cessation, malfunction, fluctuation, variation, interruption, or
breakdown of services or equipment in the Complex, Tenant shall have no
claim for rebate, offset or reduction of rent or damages.
11. Keys and Locks. Landlord shall furnish Tenant a Building
--------------
standard number of keys for each corridor entering the Premises.
Additional keys will be furnished at a charge by Landlord on receipt of
an order signed by Tenant. All keys shall remain the property of
Landlord. No additional locks shall be allowed on any door of the
Premises without Landlord's written permission, and Tenant shall not
make or permit to be made any duplicate keys, except those furnished by
Landlord. Upon termination of this
- 7 -
<PAGE>
<PAGE>
Lease, Tenant shall surrender to Landlord all keys to the Premises, and
give to Landlord the explanation of the combination of all locks for
safes, safe cabinets, and vault doors, if any, in the Premises.
12. Graphics. Landlord shall provide and install, at Tenant's
--------
cost, chargeable against any available Tenant improvement allowance, all
letters or numerals on doors in the Premises. All such letters and
numerals shall be in the standard graphics for the Building, and no
others shall be used or permitted on the Premises. Landlord also agrees
to provide and install, at Tenant's cost, a listing on the Building
directory board.
13. Maintenance and Repairs by Landlord. Unless otherwise
-----------------------------------
stipulated herein, Landlord shall not be required to make any
improvements or repairs of any kind or character on the Premises during
the Lease Term, except such repairs as may be deemed necessary by
Landlord for normal maintenance operations. The obligation of Landlord
to maintain and repair the Premises shall be limited to the repair of
Building standard items. Any Leasehold Improvements will, at Tenant's
written request, be maintained by Landlord at Tenant's expense, at a
cost or charge equal to all costs incurred in such maintenance plus an
additional charge to cover overhead, which costs and charges shall be
payable by Tenant on demand therefor by Landlord. See Section 15 of the
Addendum.
14. Repairs by Tenant. Tenant shall repair or replace, at
-----------------
Tenant's cost and expense, any damage done to the Complex, or any part
thereof, caused by Tenant or Tenant's agents, employees, invitees, or
visitors, and shall restore the Complex to the same or as good a
condition as it was prior to such damage. All repairs and replacements
shall be effected in compliance with all building and fire codes and
other applicable laws and regulations. If Tenant fails to make such
repairs or replacements promptly, Landlord may, at its option, make the
repairs or replacements, and Tenant shall pay the cost thereof to
Landlord on demand. Any repairs required to be made by Tenant to the
mechanical, electrical, sanitary, heating, ventilating, air conditioning
or other system of the Building shall be performed only by contractor(s)
designated by Landlord and only upon the prior written approval of
Landlord as to the work to be performed and materials to be furnished in
connection therewith. Any other repairs in or to the Building, the
Complex, and the facilities and systems thereof for which Tenant is
responsible shall be performed by Landlord at Tenant's expense; but
Landlord may, at Landlord's option, before commencing any such work or
at any time thereafter, require Tenant to furnish to Landlord such
security, in form (including, without limitation, a bond issued by a
corporate surety licensed to do business in the state in which the
Building is situated) and in such amount as Landlord shall deem
necessary to assure the payment for such work by Tenant.
15. Care of Premises. Tenant shall not commit or allow any
----------------
waste or damage to be committed on any portion of the Premises, and at
the termination of this Lease, by lapse of time or otherwise, to deliver
possession of the Premises to Landlord in as good a condition as at the
Commencement Date, ordinary wear and tear excepted. Upon any
termination of this Lease, Landlord shall have the right to reenter and
resume possession of the Premises.
16. Peaceful Enjoyment. Tenant shall be entitled to hold and
------------------
enjoy the Premises subject to the terms hereof, provided that Tenant
timely pays the rent and other sums herein required to be paid by Tenant
and timely performs all of Tenant's covenants and agreements herein
contained. This covenant and any and all other covenants and agreements
of Landlord contained in the Lease shall be binding upon Landlord and
its successors only with respect to breaches occurring during its or
their respective periods of ownership of Landlord's interest hereunder.
17. Holding Over. If after expiration or other termination of
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this Lease Tenant holds over without the prior written consent of
Landlord, Tenant shall, throughout the entire holdover period, pay
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rent equal to the greater of twice the Base Rental (with such
adjustments to Base Rental as would otherwise have been in effect if the
Lease Term had continued during such period of holding over) or the
prevailing market rent determined by Landlord, plus all other amounts
that would otherwise have been payable hereunder as rent had the Lease
Term continued through the period of such holding over by Tenant;
provided, however, that Landlord's acceptance of any such payment shall
not constitute nor imply any consent by Landlord to any such holding
over by Tenant. No holding over by Tenant after the expiration of the
Lease Term shall be construed to extend the Lease Term; and in the event
of any unauthorized holding over, Tenant shall indemnify, defend and
hold Landlord harmless from and against all claims for damages (and
reimburse Landlord upon demand for any sums paid in settlement of any
such claims) by any other Tenant or prospective Tenant to whom Landlord
may have leased all or any part of the Premises effective before or
after the expiration of the Lease Term and by any broker claiming any
commission or fee in respect of any such lease or offer to lease. Any
holding over with the written consent of Landlord shall thereafter
constitute this Lease a lease from month to month under the terms and
provisions of this Lease, to the extent applicable to a tenancy from
month to month, with a Base Rental of one and one-half (1 1/2) times
that payable at the end of the Lease Term. See Section 16 of the
Addendum.
18. Alterations, Additions, and Improvements. Tenant shall
----------------------------------------
not permit the Premises to be used for any purpose other than that
stated in Paragraph 4 hereof or make or allow to be made any alterations
or physical additions in or to the Premises, or place signs on the
Premises which are visible from outside the Premises, without first
obtaining the written consent of Landlord in each such instance. Tenant
agrees to indemnify Landlord and hold Landlord harmless against any
loss, liability, claim, or damage resulting from any work done by Tenant
in or to the Premises. Any and all alterations, physical additions, or
improvements, including Leasehold Improvements, when made to the
Premises by Tenant, shall be done in a good and workmanlike manner,
lien-free and in accordance with all applicable laws, codes,
regulations, and requirements and shall at once become the property of
Landlord and shall be surrendered to Landlord upon termination of this
Lease by lapse of time or otherwise; provided, however, this clause
shall not apply to trade fixtures, movable equipment, or furniture owned
by Tenant, which, if Tenant is not in default, may be (or if requested
by Landlord, shall be) removed by Tenant upon termination of this Lease.
Tenant agrees specifically that no food, soft drink, or other vending
machine will be installed within the Premises. See Section 17 of the
Addendum.
19. Legal Use and Violations of Insurance. Tenant shall not
-------------------------------------
occupy or use, or permit any portion of the Premises to be occupied or
used, for any business or purpose that is unlawful, disreputable or
extra-hazardous in any manner, or permit anything to be done that could
in any way increase the rate or result in the denial or reduction of
fire, liability or any other insurance coverage on the Complex and/or
its contents. If, by reason of Tenant's acts or conduct of business,
there shall be an increase in the rate of insurance on the Building or
the Building's contents, then Tenant shall pay such increase to Landlord
immediately upon demand as additional rental.
20. Laws and Regulations; Building Rules.
------------------------------------
(a) Tenant shall comply at its sole cost and expense with
all laws, ordinances, statutes, rules and regulations of any state,
federal, municipal, or other government or governmental agency or
quasi-governmental agency having jurisdiction of the Premises that
relate to the use, condition or occupancy of the Premises and the
conduct of Tenant's business thereon, including, without limitation,
compliance with the Americans with Disabilities Act of 1990, as amended
and any regulations promulgated thereunder. Tenant will comply with the
rules of the Complex adopted and altered by Landlord from time to time
for the safety, care, and cleanliness of the Premises and Complex and
for the
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preservation of good order therein, all changes to which will be sent by
Landlord to Tenant in writing and shall be thereafter carried out and
observed by Tenant.
(b) Tenant acknowledges that it will be wholly responsible
for any accommodations or alterations which need to be made to the
Premises to accommodate disabled employees and customers of Tenant,
including requirements under the Americans with Disabilities Act and the
Texas Architectural Barriers Act. Any alterations made to the Premises
in order to comply with either statute must be made solely at Tenant's
expense and in compliance with all terms and requirements of the Lease.
Landlord agrees to make reasonable efforts to ensure that the Complex is
in compliance with the applicable disability access laws as of the date
hereof. If a complaint is received by Landlord from either a private or
government complaint regarding disability access to the common areas of
the Complex, Landlord reserves the right to mediate, contest, comply
with or otherwise respond to such complaint as Landlord deems to be
reasonably prudent under the circumstances. If Landlord decides to make
alterations to the common areas of the Complex in response to any such
complaints or in response to legal requirements Landlord considers to be
applicable to the common areas of the Complex, the cost of such
alterations shall be included in the Basic Costs under the Lease.
Landlord and Tenant agree that so long as the governmental entity or
entities charged with enforcing such statutes have not expressly
required Landlord to take specific action to effectuate compliance with
such statutes, Landlord shall be conclusively deemed to be in compliance
with such statutes. In the event Landlord is required to take action to
effectuate compliance with such statutes, Landlord shall have a
reasonable period of time to make the improvements and alterations
necessary to effectuate such compliance, which period of time shall be
extended by any time necessary to cause any necessary improvements and
alterations to be made. See Section 18 of the Addendum.
21. Nuisance. Tenant shall conduct its business and control
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its agents, employees, invitees, and visitors in such manner as not to
create any nuisance, or interfere with, annoy, or disturb any other
tenant or Landlord in its operation of the Complex.
22. Entry by Landlord. Tenant shall permit Landlord and its
-----------------
agents and representatives to enter any part of the Premises at all
reasonable hours (and in emergencies at all times) to inspect the same,
or to show the Premises to prospective tenants, purchasers, mortgagees,
or insurers, to clean or make repairs, alterations, or additions
thereto, as Landlord may deem necessary or desirable. Tenant shall not
be entitled to any abatement or reduction of rent by reason of such
entry.
23. Assignment and Subletting. See Section 19 of the Addendum.
-------------------------
(a) Tenant shall not, without the prior written consent of
Landlord, (i) assign or in any manner transfer this Lease or any estate
or interest therein, or (ii) permit any assignment of this Lease or any
estate or interest therein by operation of law, or (iii) sublease the
Premises or any part thereof, or (iv) grant any license, concession, or
other right of occupancy of any portion of the Premises, or (v) permit
the use of the Premises by any parties other than Tenant, its agents and
employees. For purposes hereof, the merger or consolidation of Tenant
with or into any other corporation or other entity, a sale or other
transfer of fifty percent (50%) or more of Tenant's capital stock or
other analogous ownership interest, or a sale or other transfer of fifty
percent (50%) or more of Tenant's assets shall be deemed an assignment
of this Lease. Consent by Landlord to one or more assignments or
sublettings shall not operate as a waiver of Landlord's rights as to any
subsequent assignments and subletting. All such money or other
consideration not paid or delivered to Landlord shall be held in trust
for the benefit of Landlord and shall be promptly paid or delivered to
Landlord. Notwithstanding any assignment or subletting consented to by
Landlord, Tenant and any guarantor of Tenant's obligations under this
Lease shall at all times remain fully responsible and liable for the
payment of the rent herein specified and for
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compliance with all of Tenant's other obligations under this Lease. If
any event of default should occur while the Premises or any part thereof
are then assigned or sublet, Landlord, in addition to any other remedies
herein provided or provided by law, may at its option collect directly
from such assignee or subtenant all rents becoming due to Tenant under
such assignment or sublease, and apply such rent against any sums due to
Landlord by Tenant hereunder, and Tenant hereby directs any such
assignee or subtenant to make such payments of rent directly to Landlord
upon receipt of notice from Landlord. No direct collection by Landlord
from any such assignee or subtenant shall be construed to constitute a
novation or a release of Tenant or any guarantor of Tenant from the
further performance of its obligations hereunder. Receipt by Landlord
of rent from any assignee, subtenant or occupant of the Premises shall
not be deemed a waiver of the covenant contained in this Lease against
assignment and subletting or a release of Tenant from any obligation
under this Lease. The receipt by Landlord to any such assignee or
subtenant obligated to make payments of rent shall be a full and
complete release, discharge, and acquittance to such assignee or
subtenant to the extent of any such amount of rent so paid to Landlord.
Landlord is authorized and empowered, on behalf of Tenant, to endorse
the name of Tenant upon any check, draft, or other instrument payable to
Tenant evidencing payment of rent, or any part thereof, and to apply the
proceeds therefrom in accordance with the terms hereof. Tenant shall
not mortgage, pledge, or otherwise encumber its interest in this Lease
or in the Premises. Any attempted assignment or sublease or encumbrance
by Tenant in violation of the terms and covenants of this paragraph
shall be void and constitute an event of default under this Lease.
(b) Notwithstanding anything to the contrary contained
herein, and without prejudice to Landlord's right to require a written
assumption from each assignee, any person or entity to whom this Lease
is assigned including, without limitation, assignees pursuant to the
provisions of the Bankruptcy Code, 11 U.S.C. Paragraph 101 et seq. (the
"Bankruptcy Code") shall automatically be deemed, by acceptance of such
assignment or sublease or by taking actual or constructive possession of
the Demised Premises, to have assumed all obligations of Tenant arising
under this Lease effective as of the earlier of the date of such
assignment or sublease or the date on which the assignee or sublessee
obtains possession of the Demised Premises. In the event this Lease is
assigned to any person or entity pursuant to the provisions of the
Bankruptcy Code, any and all monies or other consideration payable or
otherwise to be delivered in connection with such assignment shall be
paid or delivered to Landlord and shall remain the exclusive property of
Landlord and not constitute the property of Tenant or Tenant's estate
within the meaning of the Bankruptcy Code. In the event of any default
described in subsection 28(a)(iv) below, in order to provide Landlord
with the assurances contemplated by the Bankruptcy Code, in connection
with any assignment and assumption of this Lease Tenant must fulfill the
following obligations, in addition to any other reasonable obligations
that Landlord may require, before any assumption of this Lease is
effective: (i) all defaults under subsection (a) of Section 28 of this
Lease must be cured within ten (10) days after the date of assumption,
(ii) all other defaults under Section 28 of this Lease other than under
subsection (a)(iv) of Section 28 must be cured within fifteen (15) days
after the date of assumption; (iii) all actual monetary losses incurred
by Landlord (including, but not limited to, reasonable attorneys' fees)
must be paid to Landlord within ten (10) days after the date of
assumption; and (iv) Landlord must receive within ten (10) days after
the date of assumption a security deposit in the amount of six (6)
months Base Rental (using the Base Rental in effect for the first full
month immediately following the assumption) and an advance prepayment of
Base Rental in the amount of three (3) months Base Rental (using the
Base Rental in effect for the first full month immediately following the
assumption), both sums to be held by Landlord in accordance with Section
5(b) above and deemed to be rent under this Lease for the purposes of
the Bankruptcy Code as amended and from time to time in effect. In the
event this Lease is assumed in accordance with the requirements of the
Bankruptcy Code and this Lease, and is subsequently assigned, then, in
addition to any other reasonable obligations that Landlord may require
and in order to provide Landlord with the assurances contemplated by the
Bankruptcy Code, Landlord shall be provided with (i) a financial
statement of the proposed assignee prepared in accordance with
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generally accepted accounting principles consistently applied, though on
a cash basis, which reveals a net worth in an amount sufficient, in
Landlord's reasonable judgment, to assure the future performance by the
proposed assignee of Tenant's obligations under this Lease; or (ii) a
written guaranty by one or more guarantors with financial ability
sufficient to assure the future performance of Tenant's obligations
under this Lease, such guaranty to be in form and content satisfactory
to Landlord and to cover the performance of all of Tenant's obligations
under this Lease.
(c) If Tenant requests Landlord's consent to an assignment
of the Lease or subletting of all or a part of the Premises, Tenant
shall submit to Landlord in writing, at least sixty (60) days in advance
of the date on which Tenant desires to make such an assignment or
sublease, notice of the name of the proposed assignee or subtenant and
the proposed commencement date of such assignment or subletting,
together with copies of all agreements entered into or contemplated to
be entered into regarding such subletting or assignment, and such
information as Landlord may request regarding the nature and character
of the business of the proposed assignee or subtenant. Landlord shall
have the option (to be exercised within thirty (30) days after
Landlord's receipt of Tenant's submission of written request and all
information requested by Landlord in connection therewith), (i) to
permit Tenant to assign or sublet such space to the proposed assignee or
subtenant (in which event Tenant shall deliver to Landlord
fully-executed legible, correct and complete copies of all agreements
relating to such assignment or subletting); if, however, the rental or
other consideration payable in respect of such subletting or assignment
exceeds the rent payable hereunder by Tenant, then all such excess rent
and other consideration shall be deemed additional rent owed by Tenant
to Landlord, and shall be payable to Landlord by Tenant in the same
manner and on the same terms as installments of Base Rental are payable
by Tenant hereunder (or upon Tenant's receipt thereof, whichever is
earlier); or (ii) to refuse to consent to Tenant's assignment or
subleasing of such space and to continue this Lease in full force and
effect as to the entire Premises; or (iii) to cancel this Lease (or the
applicable portion thereof as to a partial subletting) as of the
commencement date stated in the above-mentioned notice from Tenant of
its desire to enter into such subletting or assignment, in which event
the term of this Lease, and the tenancy and occupancy of the Premises
(or the applicable portion thereof as to a partial subletting) by Tenant
thereunder, shall terminate as if the cancellation date was the original
termination date of this Lease. If Landlord should fail to notify
Tenant in writing of such election within such thirty (30) day period,
Landlord shall be deemed to have elected option (ii) above. If Landlord
elects to exercise option (i) above, Tenant agrees to provide, at its
expense and at a location approved by Landlord, direct access from such
sublet space to a public corridor of the Building. Notwithstanding
Landlord's consent to any assignment or subletting, no further or
subsequent assignment or subletting shall be permitted unless Landlord
consents in writing thereto.
24. Transfers by Landlord. Landlord shall have the right to
---------------------
transfer and assign, in whole or in part, all its rights and obligations
hereunder and in the Complex and other property referred to herein, and
in such event and upon such transfer (any such transferee to have the
benefit of, and be subject to, the rights and obligations of Landlord
hereunder), Landlord shall be released from any further obligations
hereunder, and Tenant agrees to look solely to such successor in
interest of Landlord for the performance of such obligations.
25. Subordination to Mortgage. This Lease is subject and
-------------------------
subordinate to any mortgage or deed of trust that may now or hereafter
encumber the Complex, and to all renewals, modifications, consolidations,
replacements, and extensions thereof. This clause shall be self-operative
and no further instrument of subordination need be required by any mortgagee
or beneficiary; provided that any such mortgagee or beneficiary may elect
to make this Lease superior to such mortgage or deed of trust by written
instrument delivered to Tenant. In confirmation of such subordination,
however, Tenant shall, within five (5) days after Landlord's request, execute
any certificate or instrument evidencing such
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subordination that Landlord or its lender may request. Tenant hereby
constitutes and appoints Landlord as Tenant's attorney-in-fact to
execute any such certificate or instrument for and on behalf of Tenant.
In the event of the enforcement by the mortgagee or beneficiary under
any such mortgage or deed of trust of the remedies provided for by law
or by such mortgage or deed of trust, Tenant will, at the option of any
person or party succeeding to the interest of Landlord as a result of
such enforcement, attorn to and automatically become the Tenant of such
successor in interest without change in the terms or other provisions of
this Lease; provided, however, that such successor in interest shall not
be bound by (a) any payment of rent or additional rent for more than one
(1) month in advance, except advance rental payments expressly provided
for in this Lease; (b) any modification of this Lease made without the
written consent of such mortgagee or beneficiary or such successor in
interest; (c) liable for any act or omission of Landlord; or (d) subject
to any offset or defense arising prior to the date such successor in
interest acquired title to the Building. Upon request by any mortgagee
or beneficiary, Tenant shall execute and deliver an instrument or
instruments confirming the attornment provided for herein.
26. Mechanic's Lien. Tenant shall not permit any mechanic's
---------------
lien or liens to be placed upon the Premises, the Leasehold Improvements
thereon or the Complex during the term hereof caused by or resulting
from any work performed, materials furnished, or obligation incurred by
or at the request of Tenant, and nothing contained in this Lease shall
be deemed as constituting the consent or request of Landlord, express or
implied, to any contractor, subcontractor, laborer, or materialman for
the performance of any labor or the furnishing of any material for any
specific improvement, alteration, or repair to the Premises, or any part
thereof, nor as giving Tenant any authority to contract for or permit
the rendering of any services or the furnishing of any materials that
would give rise to the filing of any mechanic's or other liens against
the interest of Landlord in the Premises. If a lien is filed upon the
interest of Landlord or Tenant in the Premises, the Leasehold
Improvements or the Complex, Tenant shall cause the same to be
discharged of record within ten (10) days after the filing of same. If
Tenant shall fail to discharge such mechanic's lien within such period,
then, in addition to any other right or remedy of Landlord, Landlord may
discharge the same, either by paying the amount claimed to be due, or by
procuring the discharge of such lien by deposit in court or bonding.
Any amount paid by Landlord for any of the aforesaid purposes, or for
the satisfaction of any other lien not caused by Landlord, with interest
thereon at the rate hereinafter provided from the date of payment, shall
be paid by Tenant to Landlord immediately on demand as rent.
27. Estoppel Certificate. Tenant will, at any time and from
--------------------
time to time, within three (3) days from any written request by
Landlord, execute, acknowledge, and deliver to Landlord a statement in
writing executed by Tenant certifying to Landlord and/or any party
designated by Landlord that Tenant is in possession of the Premises
under the terms of this Lease, that this Lease is unmodified and in full
effect (or, if there have been modifications, that this Lease is in full
effect as modified, and setting forth such modifications), the dates to
which the rent has been paid, that to the knowledge of Tenant no default
exists hereunder or specifying each such default of which Tenant may
have knowledge, and such other matters as may be reasonably requested by
Landlord. Any such statement by Tenant may be relied upon by any
prospective purchaser or mortgagee of the Complex.
28. Events of Default. (a) The following events shall be
-----------------
events of default by Tenant under this Lease:
(i) Tenant shall fail or refuse to pay any installment
of the rent hereby reserved or other sum of money payable hereunder
or under any other agreement between Landlord and Tenant when due
and such failure or refusal shall continue for ten (10) days after
such payment shall become due and payable.
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(ii) Tenant shall fail or refuse to comply with any
term, provision, or covenant of this Lease, other than the payment
of rent, or any term, provision, or covenant of any other agreement
between Landlord and Tenant, and shall not cure such failure or
refusal within fifteen (15) days after written notice thereof from
Landlord to Tenant.
(iii) Tenant or any guarantor of Tenant's obligations
hereunder (hereinafter called "Guarantor") shall become insolvent,
make a transfer in fraud of creditors, make a general assignment
for the benefit of creditors, or admit in writing its inability to
pay its debts as they become due.
(iv) Tenant or any Guarantor shall file a petition
under any section or chapter of the Federal Bankruptcy Code, as
amended from time to time, or under any similar law or statute of the
United States or any State thereof, or an order for relief shall
be entered against Tenant or any Guarantor in any bankruptcy or
insolvency proceedings, or a petition or answer proposing the
entry of an order for relief against Tenant or any Guarantor in a
bankruptcy or its reorganization proceedings under any present or
future federal or state bankruptcy or similar law shall be filed
in any court and not discharged or denied within thirty (30) days
after its filing.
(v) A receiver, trustee or custodian shall be
appointed for all or substantially all of the assets of Tenant or
any Guarantor or of the Premises or any of Tenant's property located
therein in any proceeding brought by Tenant or any Guarantor, or
any such receiver, trustee or custodian shall be appointed in any
proceeding brought against Tenant or any Guarantor and shall not
be discharged within thirty (30) days after such appointment, or
Tenant or such Guarantor shall consent to or acquiesce in such
appointment.
(vi) Tenant's leasehold interest hereunder shall be taken
in execution or other process of law in any action against Tenant.
(vii) Tenant shall cease to conduct its business in the
Premises or shall vacate any substantial portion of the Premises,
whether or not rent continues to be paid.
(viii) Tenant shall fail or refuse to move into or take
possession of the Premises within fifteen (15) days after the
Commencement Date.
(b) If an event of default occurs, Landlord shall have the
right to pursue any one or more of the following remedies in addition to
all other rights or remedies provided herein or at law or in equity:
(i) Landlord may terminate this Lease or, without
terminating this Lease, terminate Tenant's right of possession and
forthwith repossess the Premises by forcible entry and detainer
suit or otherwise without liability for trespass or conversion and
be entitled to recover as damages a sum of money equal to the
total of (A) the cost of recovering the Premises, (B) the unpaid
rent due and payable at the time of termination, plus interest
thereon at the rate hereinafter specified from the due date, (C)
the balance of the rent for the remainder of the term less the
fair market value of the Premises for such period, and (D) any
other sum of money and damages owed by Tenant to Landlord.
(ii) Landlord may terminate Tenant's right of
possession and may repossess the premises by forcible entry or
detainer suit or otherwise without liability for trespass or
conversion, without demand or notice of any kind to Tenant and
without terminating this Lease,
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in which event Landlord may, but shall be under no obligation to,
relet the same for the account of Tenant for such rent and upon
such terms as shall be satisfactory to Landlord. For the purpose
of such reletting, Landlord is authorized to decorate or to make
any repairs, changes, alterations, or additions in or to the
Premises that may be necessary or convenient. If Landlord
exercises the remedies provided in this subparagraph, Tenant shall
pay to Landlord, and Landlord shall be entitled to recover from
Tenant, an amount equal to the total of the following: (A) unpaid
rent, plus interest at the rate hereinafter provided, owing under
this Lease the for all periods of time that the Premises are not
relet; plus (B) the cost of recovering possession, and all of the
costs and expenses of such decorations, repairs, changes,
alterations, and additions, and the expense of such reletting and
of the collection of the rent accruing therefrom to satisfy the
rent provided for in this Lease to be paid; plus (C) any
deficiency in the rentals and other sums actually received by
Landlord from any such reletting from the rent and additional rent
required to be paid under this Lease with respect to the periods
the Premises are so relet, and Tenant shall satisfy and pay any
such deficiency upon demand therefor from time to time. Tenant
agrees that Landlord may file suit to recover any sums falling due
under the terms of this subparagraph from time to time; and that
no delivery or recovery of any portion due Landlord hereunder
shall be a defense in any action to recover any amount not
theretofore reduced to judgment in favor of Landlord, nor shall
such reletting be construed as an election on the part of Landlord
to terminate this Lease unless a written notice of such intention
be given to Tenant by Landlord. Notwithstanding any such
reletting without termination, Landlord may at any time thereafter
elect to terminate this Lease for such previous default.
(iii) Offset against any rents, damages, or other sums of
money owed by Tenant any security deposit and/or any advance rent
applicable to any time period after the occurrence of the default
and any sums which would then or thereafter otherwise be due from
Landlord to Tenant.
(iv) Landlord may alter locks and other security devices
at the Premises.
29. Lien for Rent. Tenant hereby grants to Landlord a lien
-------------
and security interest on all property of Tenant now and hereafter placed
in or upon the Premises, and such property shall be and remain subject
to such lien and security interest of Landlord for payment of all rent
hereunder. The provisions of this paragraph relating to such lien and
security interest shall constitute a security agreement under the
Uniform Commercial Code so that Landlord shall have and may enforce a
security interest on all property of Tenant now or hereafter placed in
or on the Premises by Tenant, including, but not limited to, all
fixtures, machinery, equipment, furnishings, and other articles of
personal property. Tenant shall execute from time to time as debtor
such financing statements or continuation statements as Landlord may
hereafter reasonably request in order to perfect such security
interests. Landlord may at its election at any time file a copy of this
Lease as a financing statement. Landlord, as secured party, shall be
entitled to all of the rights and remedies afforded a secured party
under the Uniform Commercial Code in addition to the landlord's liens
and rights provided by law or by the other terms and provisions of this
Lease. See Section 20 of the Addendum.
30. Attorneys' Fees. If Tenant defaults in the performance of
---------------
any terms, covenants, agreements, or conditions contained in this Lease
and Landlord places the enforcement of this Lease or the collection of
any rent due or to become due hereunder, or recovery of the possession
of the Premises in the hands of an attorney, or files suit upon the
same, Tenant agrees to pay Landlord's reasonable attorneys' fees and
expenses. In addition, if Tenant requests any consent or other action
on the part of Landlord, in connection with which Landlord deems it
necessary for any documents to be prepared or
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reviewed by its counsel, Tenant shall pay all reasonable attorneys' fees
and expenses incurred by Landlord in such connection. See Section 21 of
the Addendum.
31. No Implied Waiver. The failure of Landlord to insist at
-----------------
any time upon the strict performance of any covenant or agreement or to
exercise any option, right, power, or remedy contained in this Lease
shall not be construed as a waiver or a relinquishment thereof for the
future. The waiver of or redress for any violation of any term,
covenant, agreement, or condition contained in this Lease shall not
prevent a subsequent act, which would have originally constituted a
violation, from having all the force and effect of an original
violation. No express waiver shall affect any condition other than the
one specified in such waiver and that one only for the time and in the
manner specifically stated. A receipt by Landlord of any rent with
knowledge of the breach of any covenant or agreement contained in this
Lease shall not be deemed a waiver of such breach, and no waiver by
Landlord of any provision of this Lease shall be deemed to have been
made unless expressed in writing and signed by Landlord. No payment by
Tenant or receipt by Landlord of a lesser amount than the monthly
installment of rent due under this Lease shall be deemed to be other
than on account of the earliest rent due hereunder, nor shall any
endorsement or statement on any check or any letter accompanying any
check or payment as rent be deemed an accord and satisfaction, and
Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such rent or pursue any other
remedy in this Lease provided.
32. Casualty Insurance. Landlord shall maintain fire and
------------------
extended coverage insurance on the portion of the Complex constructed by
Landlord. Such insurance shall be maintained with an insurance company
authorized to do business in the State in which the Building is located,
in amounts and with deductibles desired by Landlord at the expense of
Landlord (as a part of the Basic Costs), and payments for losses
thereunder shall be made solely to Landlord. Tenant shall maintain at
its expense fire and extended coverage insurance on all of its personal
property, including removable trade fixtures, located in the Premises
and on all additions and improvements made by Tenant and not required to
be insured by Landlord above. Tenant shall also maintain business
interruption insurance covering the Premises. If the annual premiums to
be paid by Landlord shall exceed the standard rates because Tenant's
operations, contents of the Premises, or improvements with respect to
the Premises beyond Building standard result in extra-hazardous
exposure, Tenant shall pay the excess amount of the premium upon request
therefor by Landlord. See Section 22 of the Addendum.
33. Liability Insurance. Tenant shall, at its expense,
-------------------
maintain a policy or policies of comprehensive general liability
insurance, with coverages acceptable to Landlord, with the premiums
thereon fully paid on or before the due date, issued by and binding upon
an insurance company with an A.M. Best Rating of at least A-VII and
acceptable to Landlord, such insurance to afford minimum protection in
limits of not less than $1,000,000.00 Combined Single Limits of coverage
for Personal Injury and Property Damage and $1,000,000.00 Annual
Aggregate. At least fifteen (15) days prior to Tenant's occupancy of
the Leased Premises, Tenant shall deliver to Landlord a copy of all
policy provisions intended to be included in the coverage to be provided
by Tenant, and a valid certificate of insurance issued to Landlord,
effective as of the dates applicable under the terms of this Lease,
which certificate of insurance shall include, without limitation: (A)
provisions requiring notice by the insurer to Landlord at least thirty
(30) days in advance of any contemplated, intended or effective
cancellation, nonrenewal, or material change or modification of coverage
provisions or limits; and (B) a Waiver of Subrogation in favor of
Landlord and agents, employees, servants, officers, directors,
contractors, and subcontractors of Landlord, with respect to the
insurance coverage and claims of Tenant. See Section 23 of the
Addendum.
34. Indemnity. Landlord shall not be liable to Tenant, or to
---------
Tenant's agents, contractors, servants, employees, customers, or
invitees, and Tenant shall indemnify, defend and hold harmless
- 16 -
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<PAGE>
Landlord, Landlord's asset manager, Landlord's subasset manager,
Landlord's partners, any subsidiary or affiliate of Landlord and the
officers, directors, shareholders, partners, employees, managers,
independent contractors, attorneys and agents of any of the foregoing
(collectively, the "Indemnitees") from and against any and all claims,
demands, causes of action, judgments, costs and expenses, and all losses
and damages (including consequential and punitive damages) arising from
the use by Tenant or its agents, independent contractors, servants,
employees, customers, or invitees of the Premises or the Complex or from
the conduct of its business or from any activity, work, or other acts or
things done, permitted or suffered by Tenant in or about the Premises or
the Complex, and shall further indemnify, defend and hold harmless the
Indemnitees from and against any and all claims arising from any breach
or default in the performance of any obligation on Tenant's part to be
performed under the terms of this Lease, or arising from any act,
omission or negligence or willful or criminal misconduct of Tenant, or
by Tenant or its agents, independent contractors, servants, employees,
customers, or invitees and from all reasonable costs, attorneys' fees
and disbursements, and liabilities incurred in the defense of any such
claim or any action or proceeding which may be brought against, out of
or in any way related to this Lease. Upon notice from Landlord, Tenant
shall defend any such claim, demand, cause of action or suit at Tenant's
expense by counsel satisfactory to Landlord in its sole discretion. As
a material part of the consideration to Landlord for this Lease, Tenant
hereby assumes all risk of damage to property or injury to persons in,
upon or about the Premises from any cause, and Tenant hereby waives all
claims with respect thereto against Landlord. The provisions of this
Section shall survive the expiration or sooner termination of this
Lease. See Section 24 of the Addendum.
35. Waiver of Subrogation Rights. Anything in this Lease to
----------------------------
the contrary notwithstanding, Landlord and Tenant each hereby waives all
rights of recovery, claim, action, or cause of action, against the
other, its agents, officers, or employees, for any loss or damage that
may occur to the Premises any Leasehold Improvements, or the Complex of
which the Premises are a part, by reason of fire, the elements, or any
other cause which is insured against under the terms of standard fire
and extended coverage insurance policies referred to in Paragraph 32
hereof or is otherwise insured against under an insurance policy
maintained by the party suffering such loss or damage, regardless of
cause or origin, including any negligence of the other party hereto
and/or its agents, officers, or employees, and each party covenants that
is no insurer shall hold any right of subrogation against such other
party. Each party hereto agrees to give immediately to any insurer that
has issued to it policies of fire and extended coverage insurance
written notice of the mutual waiver contained in this provision and to
have such policies endorsed, if necessary, to prevent the invalidation
of insurance coverage by reason of such mutual waiver.
36. Casualty Damage. If the Premises or any part thereof
---------------
shall be damaged by fire or other casualty, Tenant shall give prompt
written notice thereof to Landlord. If the Complex shall be so damaged
by fire or other casualty that substantial alteration or reconstruction
of the Complex shall, in Landlord's sole opinion, be required (whether
or not the Premises shall have been damaged by such fire or other
casualty), or if any mortgagee or beneficiary under a mortgage or deed
of trust covering the Complex should require that the insurance proceeds
payable as a result of said fire or other casualty be applied to the
balance of the mortgage debt, Landlord may, at its option, terminate
this Lease and the term and estate hereby granted by notifying Tenant in
writing of such termination within sixty (60) days after the date such
insurance proceeds are applied to such mortgage debt, in which event the
Base Rental hereunder shall be abated as of the date of such damage. If
Landlord does not thus elect to terminate this Lease, Landlord shall
within one hundred eighty (180) days after the date of such damage
commence to repair and restore the Complex and shall proceed with
reasonable diligence to restore the Complex (except that Landlord shall
not be responsible for delays outside its control) to substantially the
same condition in which it was immediately prior to the happening of the
casualty, except that Landlord shall not be required to rebuild, repair,
or replace any part of Tenant's furniture or furnishings or fixture and
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<PAGE>
equipment removable by Tenant under the provisions of this Lease, but
such work shall not exceed the scope of the work done by Landlord in
originally constructing the Complex and installing Building standard
items in the Premises, nor shall Landlord in any event be required to
spend for such work an amount in excess of the insurance proceeds
actually received by Landlord as a result of the fire or other casualty.
Tenant agrees that promptly after completion of such work by Landlord,
Tenant will proceed with reasonable diligence and at Tenant's sole cost
and expense to restore, repair and replace all alterations, additions,
improvements, fixtures and equipment installed by Tenant. Landlord
shall not be liable for any inconvenience or annoyance to Tenant or
injury to the business of Tenant resulting in any way from such damage
or the repair thereof, except that, subject to the provisions of the
next sentence, Landlord shall allow Tenant a fair diminution of rent
during the time and to the extent the Premises are unfit for occupancy.
If the Premises or any other portion of the Complex be damaged by fire
or other casualty resulting from the fault or negligence of Tenant or
any of Tenant's agents, employees, or invitees, the rent hereunder shall
not be diminished during the repair of such damage, and Tenant shall be
liable to Landlord for the cost and expense of the repair and
restoration of the Complex caused thereby to the extent such cost and
expense is not covered by insurance proceeds. Any insurance which may
be carried by Landlord or Tenant against loss or damage to the Complex
or to the Premises shall be for the sole benefit of the party carrying
such insurance and shall be under its sole control. Tenant shall use
proceeds from insurance carried by Tenant to repair and restore Tenant's
property. See Section 25 of the Addendum.
37. Condemnation. If the Premises shall be taken or condemned
------------
for public purpose to such extent as to render the Premises
untenantable, this Lease shall, at the option of either party, cease and
terminate as of the date of such taking or condemnation. Either party
may exercise such option to terminate by written notice to the other
party within fifteen (15) days after such taking or condemnation. All
proceeds from any taking or condemnation of the Premises shall belong to
and be paid to Landlord. Upon termination pursuant to this Section,
Tenant shall immediately vacate the Premises.
38. Damages from Certain Causes. Landlord shall not be liable
---------------------------
to Tenant for any delay or for any loss or damage to any property or
person occasioned by theft, fire, act of God, public enemy, injunction,
riot, strike, insurrection, war, court order, requisition, or order of
government body or authority, or for any damage or inconvenience which
may arise through repair or alteration of, or failure to repair, any
part of the Complex or Premises necessitated by such causes. Tenant, to
the fullest extent permitted under applicable law, hereby waives any
claim or cause of action which may now exist or hereafter arise under
any applicable deceptive trade practices law or consumer protection law
or any successor statute.
39. Notice and Cure. In the event of any act or omission by
---------------
Landlord that would give Tenant the right to damages from Landlord or
the right to termination this Lease by reason of a constructive or
actual eviction from all or part of the Premises or otherwise, Tenant
shall not sue for such damages or exercise any such right to terminate
until it shall have given written notice of such act or omission to
Landlord and to the holder(s) of the indebtedness or other obligations
secured by any mortgage or deed of trust affecting the Premises, and a
reasonable period of time for remedying such act or omission shall have
elapsed following the giving of such notice, during which time Landlord
and such holder(s), or either of them, their agents or employees, shall
be entitled to enter upon the Premises and do therein whatever may be
necessary to remedy such act or omission. During the period after the
giving of such notice and during the remedying of such act or omission,
the Base Rental payable by Tenant for such period as provided in this
Lease shall be abated and apportioned only to the extent that any part
of the Premises shall be untenantable.
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<PAGE>
40. Personal Liability. The liability of Landlord, any, agent
------------------
of Landlord, or any of their respective officers, directors,
shareholders, or employees to Tenant for or in respect of any default by
Landlord under the terms of this Lease or in respect of any other claim
or cause of action shall be limited to the interest of Landlord in the
Complex, and Tenant agrees to look solely to Landlord's interest in the
Complex for the recovery and satisfaction of any judgment against
Landlord, any agent of Landlord, or any of their respective officers,
directors, shareholders, and employees.
41. Notice. Any notice, communication, request, reply or
------
advice (hereinafter collectively called "notice") provided for in this
Lease must be in writing, and shall, unless otherwise expressly provided
in this Lease, be given or be served by depositing the same in the
United States mail, postpaid and certified and addressed to the party to
be notified, with return receipt requested, or by delivering the same in
person to an officer of such party, or by consigning the same to a
recognized overnight delivery service operating on a nationwide basis,
addressed to the party to be notified. Notice deposited in the mail in
the manner hereinabove described shall be effective, unless otherwise
stated in this Lease, three (3) days after it is so deposited. Notice
given in any other manner shall be effective upon delivery. The
addresses for the delivery of any notices hereunder shall, until changed
as herein provided, be those specified on the first page of this Lease.
A party hereto may change its address by at least fifteen (15) days
written notice to the other party delivered in compliance with this
paragraph; provided, however, that no such notice shall be effective
until actually received by the other party and provided further that
during the Lease Term any notice to Tenant shall be deemed duly given if
delivered to Tenant at the Premises.
42. Captions. The captions and headings appearing in this
--------
Lease are solely for convenience and shall not be given any effect in
construing this Lease.
43. Entirety and Amendments. This Lease embodies the entire
-----------------------
contract between the parties hereto, relative to the subject matter
hereof. Except as otherwise herein provided, no variations,
modifications, changes, or amendments hereof shall be binding upon any
party hereto unless in writing, executed by a duly authorized officer or
agent of the particular party. Landlord and Tenant have fully
negotiated the provisions of this Lease and, notwithstanding any rule or
principle of law or equity to the contrary, no provision of the Lease
shall be construed in favor of or against either party by virtue of the
authorship or purported authorship thereof.
44. Severability. If any term or provision of this Lease
------------
shall be invalid or unenforceable to any extent, the remainder of this
Lease shall be not be affected thereby, and each term and provision of
this Lease shall be valid and enforced to the fullest extent permitted
by law.
45. Binding Effect. All covenants and obligations contained
--------------
within this Lease shall bind and inure to the benefit of Landlord, its
successors and assigns, and shall be binding upon Tenant, its permitted
successors and assigns.
46. Number and Gender of Words. All personal pronouns used in
--------------------------
this Lease shall include the other gender, whether used in the
masculine, feminine, or neuter gender, and the singular shall include
the plural whenever and as often as may be appropriate.
47. Recordation. Tenant shall not record this Lease or any
-----------
memorandum thereof.
48. Governing Law. This Lease and the rights and obligations
-------------
of the parties hereto shall be interpreted, construed, and enforced in
accordance with the laws of the State of Kentucky.
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<PAGE>
<PAGE>
49. Interest Rate. All past due rents or other sums payable
-------------
by Tenant hereunder, and any sums advanced by Landlord for Tenant's
account pursuant to applicable provisions hereof, shall bear interest
from the date due or advanced until paid at the maximum lawful rate in
effect at the time such payment was due or sum was advanced, or if there
is no ascertainable maximum lawful rate then in effect, at a rate of
eighteen percent (18%). See Section 27 of the Addendum.
50. Force Majeure. Whenever a period of time is herein
-------------
prescribed for the taking of any action by Landlord, Landlord shall not
be liable or responsible for, and there shall be excluded from the
computation of such period of time, any delays due to strikes, riots,
acts of God, shortages of labor or materials, war governmental laws,
regulations or restrictions, or any act, omission, delay, or neglect of
Tenant or any of Tenant's employees or agents, or any other cause
whatsoever beyond the control of Landlord.
51. Rules and Regulations. Tenant shall comply with the Rules
---------------------
and Regulations of Landlord in the form of Exhibit C as well as all
---------
changes therein and additions thereto that may from time to time be
adopted by Landlord for the operation and protection of the Building and
the protection and welfare of its tenants and invitees. Landlord
expressly reserves the right at any time and from time to time to make
such reasonable changes in and additions to such Rules and Regulations,
provided, however, that such changes shall not become effective and a
part of this Lease until a copy thereof shall have been delivered to
Tenant.
52. Reserved Rights. Without limiting in any way Landlord's
---------------
right to promulgate rules and regulations, Landlord shall have the
following rights, exercisable without notice and without liability to
Tenant for damage or injury to property, persons or business and without
effecting an eviction, constructive or actual, or disturbance of
Tenant's use or possession or giving rise to any claim for set off or
abatement of rent:
(a) To change the Building's and/or the Complex's name,
design or street address
(b) To approve, restrict, install, affix, maintain, and
remove any and all signs on the exterior and interior of the Building.
See Section 28 of the Addendum.
(c) To designate and approve, prior to installation, all
types of window shades, blinds, drapes, awnings, window ventilators and
other similar equipment and to control all internal lighting that may be
visible from the exterior of the Building.
(d) To designate, restrict and control all sources from
which Tenant may obtain ice, drinking water, towels, toilet supplies,
shoe shining, catering, food and beverages, or like or other services on
the Premises and in general to reserve to Landlord the exclusive right
to designate, limit, restrict and control any business and any service
in or to the Building and its tenants. See Section 29 of the Addendum.
(e) To retain at all times, and to use in appropriate
instances, keys to all doors within and to the Premises.
(f) To decorate and to make repairs, alterations,
additions, changes or improvements, whether structural or otherwise, in
and about the Complex, or any part thereof, and for such purposes to
enter upon the Premises and, during the continuance of any such work, to
temporarily close doors, entryways, public space and corridors in the
Complex, to interrupt or temporarily suspend Complex services and
facilities and to change the arrangement and location of entrances or
passageways, doors and
- 20 -
<PAGE>
<PAGE>
doorways, corridors, elevators, stairs, toilets or other public parts of
the Complex, all without abatement of rent or affecting any of Tenant's
obligations hereunder, so long as the Premises are reasonably
accessible.
(g) To have and retain a paramount title to the Premises
free and clear of any act of Tenant purporting to burden or encumber
them.
(h) To grant to anyone the exclusive right to conduct
any business or render any service in or to the Complex, provided such
exclusive right shall not operate to exclude Tenant from the use
expressly permitted herein.
(i) To approve the weight, size and location of safes
and other heavy equipment and articles in and about the Premises and the
Complex, and to require all such items and furniture and similar items
to be moved into and out of the Complex and the Premises only at such
times and in such manner as Landlord shall direct in writing. Movements
of Tenant's property into or out of the Complex and within the Complex
are entirely at the risk and responsibility of Tenant, and Landlord
reserves the right to require permits before allowing any such property
to be moved into or out of the Complex. See Section 30 of the Addendum.
(j) To prohibit the placing of vending or dispensing
machines of any kind in or about the Premises without the prior written
permission of Landlord. See Section 31 of the Addendum.
(k) To have access for Landlord and other Tenants of the
Complex to any mail chutes located on the Premises according to the
rules of the United States Postal Service.
(l) To take all such reasonable measures as Landlord may
deem advisable for the security of the Complex and its occupants,
including without limitation, the closing of the Complex after normal
business hours and on Saturdays, Sundays and holidays; subject, however
to Tenant's right to admittance when the Complex is closed after normal
business hours under such reasonable regulations as Landlord may
prescribe from time to time which may include, by way of example but not
of limitation, that persons entering or leaving the Complex, whether or
not during normal business hours, identify themselves to a security
officer by registration or otherwise and that such persons establish
their right to enter or leave the Complex.
53. Approval by Landlord's Mortgagees. Landlord's execution
---------------------------------
and delivery of this Lease are expressly subject to and conditioned upon
approval of all of the provisions of this Lease by any lenders
furnishing financing in respect of the Building.
54. Brokers. Tenant represents and warrants that Tenant has
-------
had no dealing with any broker other than Faulkner, Hinton & Barnett
Real Estate Corporation, Inc. in connection with the negotiation or
execution of this Lease, and Tenant agrees to indemnify Landlord and
hold Landlord harmless from any and all costs, expenses or liability for
commissions or other compensation claimed by any broker or agent other
than the party named above with respect to this Lease.
55. Substitute Space. Landlord reserves the right at any time
----------------
prior to tender of possession of the Premises to Tenant or during the
term of this Lease after the Commencement Date and upon sixty (60) days'
prior notice ("Substitution Notice") to substitute comparable space
("Substitute Space") elsewhere within the Building for the Premises.
Landlord shall reimburse Tenant for all reasonable, out of pocket
expenses involved in Tenant's relocation to Substitute Space. See
Section 32 of the Addendum.
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<PAGE>
56. Time of Essence. Time is of the essence of this Lease and
---------------
each and every provision of this Lease.
57. Best Efforts. Whenever in this Lease there is imposed
------------
upon Landlord the obligation to use Landlord's best efforts or
reasonable efforts or diligence, Landlord will be required to exert such
efforts or diligence only to the extent the same are economically
feasible and will not impose upon Landlord extraordinary financial or
other burdens.
58. No Reservation. Submission by Landlord of this instrument
--------------
to Tenant for examination or signature does not constitute a reservation
of or option for lease. This Lease will be effective as a lease or
otherwise only upon execution and delivery by both Landlord and Tenant.
59. Consents. In all circumstances under this Lease where the
--------
prior consent of one party (the "consenting party"), whether it be
Landlord or Tenant, is required before the other party (the "requesting
party") is authorized to take any particular type of action, such
consent shall not be withheld in a wholly unreasonable and arbitrary
manner; however, the requesting party agrees that its exclusive remedy
if it believes that consent has been withheld improperly (including, but
not limited to, consent required from Landlord pursuant to Section 23)
shall be to institute litigation either for a declaratory judgment or
for a mandatory injunction requiring that such consent be given (with
the requesting party hereby waiving any claim for damages, attorneys'
fees or any other remedy unless the consenting party refuses to comply
with a court order or judgment requiring it to grant its consent).
60. Legal Authority. If Tenant is a corporation (including
---------------
any form of professional association), then each individual executing or
attesting this Lease on behalf of such corporation covenants, warrants
and represents that he is duly authorized to execute or attest and
deliver this Lease on behalf of such corporation. If Tenant is a
partnership (general or limited) or limited liability company, then each
individual executing this Lease on behalf of the partnership or company
hereby covenants, warrants and represents that he is duly authorized to
execute and deliver this Lease on behalf of the partnership or company
in accordance with the partnership agreement or membership agreement, as
the case may be, or an amendment thereto, now in effect. Lessee
represents and warrants to Lessor that neither Lessee nor any partner,
related entity or affiliate of Lessee is in any way affiliated with
MIF Gen-Par L.P., MIF Sponsor, Inc., JE Robert Company, Goldman Sachs &
Co., GE Capital Realty Group, Inc., General Electric Capital
Corporation, General Electric Company or any affiliate of General
Electric Company. The preceding representation and warranty shall
survive the execution and delivery of this Lease and Lessee agrees to
notify Lessor if at any time during the term of this Lease, including
any renewal or option period, the preceding representation and warranty
becomes untrue.
61. Hazardous Materials. (a) During the term of this Lease,
-------------------
Tenant shall comply with all Environmental Laws and Environmental
Permits (each as defined in Section 61(d) hereof) applicable to the
operation or use of the Premises, will cause all other persons occupying
or using the Premises to comply with all such Environmental Laws and
Environmental Permits, and will immediately pay or cause to be paid all
costs and expenses incurred by reason of such compliance.
(b) Tenant shall not generate, use, treat, store, handle,
release or dispose of, or permit the generation, use, treatment, storage,
handling, release or disposal of Hazardous Materials (as defined in Section
61(d) hereof) on the Premises, or the Complex, or transport or permit the
transportation of Hazardous Materials to or from the Premises or the Complex
except for limited quantities used or stored at the Premises and required in
connection with the routine operation and maintenance of the Premises, and
then only upon the written consent of Landlord and in compliance with all
applicable Environmental Laws and Environmental Permits.
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<PAGE>
(c) Tenant agrees to defend, indemnify and hold harmless
Landlord from and against all obligations (including removal and
remedial actions), losses, claims, suits, judgments, liabilities,
penalties, damages (including consequential and punitive damages), costs
and expenses (including attorneys' and consultants' fees and expenses)
of any kind or nature whatsoever that may at any time be incurred by,
imposed on or asserted against such Indemnitees directly or indirectly
based on, or arising or resulting from (a) the actual or alleged
presence of Hazardous Materials on the Complex which is caused or
permitted by Tenant and (b) any Environmental Claim relating in any way
to Tenant's operation or use of the Premises (the "Hazardous Materials
Indemnified Matters"). The provisions of this Section 61 shall survive
the expiration or sooner termination of this lease.
(d) As used herein, the following terms shall have the
following meanings: "Hazardous Materials" means (i) petroleum or
petroleum products, natural or synthetic gas, asbestos in any form that
is or could become friable, urea formaldehyde foam insulation, and radon
gas; (ii) any substances defined as or included in the, definition of
"hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic
substances," "toxic pollutants," "contaminants" or "pollutants," or
words of similar import, under any applicable Environmental Law; and
(iii) any other substance exposure which is regulated by any governmental
authority. "Environmental Law" means any federal, state or local statute,
law, rule, regulation, ordinance, code, policy or rule of common law now
or hereafter in effect and in each case as amended, and any judicial
or administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, relating to the
environment, health, safety or Hazardous Materials, including without
limitation, the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, 42 U.S.C. Sections 9601 et seq.; the Resource
-- ---
Conservation and Recovery Act, 42 U.S.C. Sections 6901 et seq.; the
-- ---
Hazardous Materials Transportation Act, 49 U.S.C. Sections 1801 et seq.;
-- ---
the Clean Water Act, 33 U.S.C. Sections 1251 et seq.; the Toxic Substances
-- ---
Control Act, 15 U.S.C. Sections 2601 et seq.; the Clean Air Act, 42 U.S.C.
-- ---
Sections 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. Sections 300f
-- ---
et seq.; the Atomic Energy Act, 42 U.S.C. Sections 2011 et seq.; the
- -- --- -- ---
Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. Sections 136
et seq.; the Occupational Safety and Health Act, 29 U.S.C. Sections 651
- -- ---
et seq. "Environmental Claims" means any and all administrative, regulatory
- -- ---
or judicial actions, suits, demands, demand letters, claims, liens, notices
of non-compliance or violation, investigations, proceedings, consent orders
or consent agreements relating in any way to any Environmental Law or
any Environmental Permit, including without limitation (i) any and all
Environmental Claims by governmental or regulatory authorities for
enforcement, cleanup, removal, response, remedial or other actions or
damages pursuant to any applicable Environmental Law and (ii) any and all
Environmental Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief
resulting from Hazardous Materials or arising from alleged injury or
threat of injury to health, safety or the environment. "Environmental
Permits" means all permits, approvals, identification numbers, licenses
and other authorizations required under any applicable Environmental
Law.
62. Exhibits, Riders and Addenda. Exhibits A through E and
----------------------------
any other exhibits, riders and addenda attached hereto are incorporated
herein and made a part of this Lease for all purposes.
63. Waiver of Jury Trial. LANDLORD AND TENANT HEREBY
--------------------
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION BASED HEREON, ARISING OUT OF, UNDER OR
IN CONNECTION WITH THIS LEASE OR ANY DOCUMENTS CONTEMPLATED TO BE
EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF
DEALINGS, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF EITHER
PARTY ARISING OUT OF OR RELATED IN ANY MANNER WITH THE PREMISES
(INCLUDING
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<PAGE>
WITHOUT LIMITATION, ANY ACTION TO RESCIND OR CANCEL THIS LEASE OR ANY
CLAIMS OR DEFENSES ASSERTING THAT THIS LEASE WAS FRAUDULENTLY INDUCED OR
IS OTHERWISE VOID OR VOIDABLE). THIS WAIVER IS A MATERIAL INDUCEMENT
FOR LANDLORD TO ENTER AND ACCEPT THIS LEASE.
[REMAINDER OF PAGE IS LEFT INTENTIONALLY BLANK]
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<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease
in multiple original counterparts as of the date and year first above
written.
LANDLORD: MIF REALTY, L.P., a Delaware limited
partnership doing business in Kentucky
as MIF Realty Limited Partnership
Signed in the By: MIF GEN-PAR L.P., a Delaware
presence of: limited partnership, doing
business in Kentucky as
MIF Gen-Par Limited Partnership,
/s/ Athena Bayman its general partner
- --------------------------
Signature
By: MIF SPONSOR, INC.,
Athena Bayman a Delaware corporation,
- -------------------------- its general partner
Printed Name
By: /s/ Michael Hudspeth
-----------------------------
/s/ Chuck Hixson Name: Michael Hudspeth
- -------------------------- -----------------------
Signature Title: Vice President
----------------------
Chuck Hixson
- --------------------------
Printed Name
TENANT: EQUITY INSURANCE MANAGERS, INC.,
a Kentucky corporation
Signed in the
Presence of:
/s/ Catherine Gillispie By: /s/ John R. Owens
- -------------------------- ------------------------------
Signature Name: John R. Owens
------------------------
Title: President
-----------------------
Catherine Gillispie
- --------------------------
Print Name
/s/ Jean L. Watson
- --------------------------
Signature
Jean L. Watson
- --------------------------
Print Name
- 25 -
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<PAGE>
State of Texas )
)
County of Dallas )
Before me, a Notary Public, personally appeared Michael Hudspeth, known
to me to be the Vice President of MIF Realty L.P., a Delaware limited
partnership doing business in Kentucky as MIF Realty Limited
Partnership, who executed the foregoing and attached Lease pursuant to
authority granted by the said limited partnership.
/s/ Beth Jones
----------------------------
Notary Public
My commission expires:
2/18/97
- -----------------------
State of Kentucky )
)
County of Fayette )
Before me, a Notary Public, personally appeared John Robert Owens, known
to me to be the President of Equity Insurance Managers, Inc., who
executed the foregoing and attached Lease pursuant to authority granted
by the said corporation.
/s/ Judith W. Lis
----------------------------
Notary Public
My commission expires:
July 20, 2000
- -----------------------
- 26 -
<PAGE>
<PAGE>
EXHIBIT E
----------
RIGHT OF REFUSAL
----------------
Landlord hereby grants to Tenant a right of refusal to include
under this Lease all or any portion of the ROR Floor (defined below)
upon the terms and conditions set forth in this Exhibit E. As used
---------
herein, "ROR Floor" shall mean the 4th Floor, of the Building. It is
---------
understood and agreed that Tenant's right of refusal described in this
Exhibit E applies only to space which has been previously occupied by
- ---------
a tenant and is being vacated by such tenant, and that such right does
not extend to Landlord's initial leasing of the ROR Floor.
Tenant's right of refusal shall be continuous but shall be subject
and subordinate to any renewal options, expansion options, rights of
refusal or similar rights now held by any present tenants of the
Building or hereafter granted to any initial tenants of the Building
(the "Superior Tenants") as an inducement for the Superior Tenants to
----------------
enter into their leases with Landlord, all of which rights Landlord may
give the Superior Tenants in its sole discretion.
Whenever Landlord shall notify any Superior Tenant that any
portion of the ROR Floor is available for lease by it under its
expansion option, Landlord shall send a copy of said notice to Tenant
and from and after the date any such tenants involved give written
notice to Landlord that they elect not to lease any relevant space out
of the ROR Floor, or if no such rights then exist in favor of any
Superior Tenant, then from and after the date on which the tenant
occupying all or any portions of any ROR Floor gives written notice to
Landlord that it is vacating said floor or portion or fails to exercise
any right of renewal, and if this Lease is then in full force and effect
and Tenant is not then in default of any of its covenants contained in
this Lease, Landlord shall offer to Tenant in writing (the "Notice")
------
the right to include said space under this Lease, upon the following
terms and conditions:
(a) the Base Rental for any such space shall be the Base Rental
in effect for the Premises at the time said portion is made available to
Tenant;
(b) Tenant may not assign this right of refusal except to a
permitted assignee of all of Tenant's rights under this Lease;
(c) the leasehold improvements will be provided in their then
existing condition at the time said space is made available to Tenant;
(d) Notwithstanding anything herein to the contrary, the initial
term for any ROR Floor or part thereof added to this Lease pursuant to
this right of refusal shall terminate when the Term of this Lease for
the initial Leased Premises terminates or expires.
Tenant shall exercise its right of refusal, if at all, within
fifteen (15) days after the Notice is received by Tenant; provided,
--------
however, Tenant agrees to use its reasonable efforts to respond in as
- -------
short a time period as the circumstances dictate (e.g., a tenant
abandons its premises without notice to Landlord). Tenant's obligation
to pay rent for such space shall commence on the later of (i) the date
the prior tenant vacates such space and said space is made available to
Tenant in the condition described in (c) above or (ii) the date when
Tenant exercises its right of refusal.
<PAGE>
EXHIBIT 10.40
ADDENDUM
--------
This Addendum made and entered into this 4th day of November, 1996
by and between MIF Realty L.P., a Delaware limited partnership doing
business in Kentucky as MIF Realty Limited Partnership ("Landlord") and
Equity Insurance Manager's Inc. ("Tenant").
WHEREAS Landlord and Tenant have entered into an Office Lease
Agreement and wish to amend, alter and delete certain provisions
therein;
Now, for valuable considerations including the recitations set out
hereinabove the terms and conditions set out hereinbelow and Tenant
signing the aforementioned Lease Agreement, it is agreed as follows:
1. Section 1(d) is amended as follows:
"Commencement date" the lease shall commence on February 1,
1997.
2. Section 1(e) is amended as follows:
"Lease Term": Commencing on the Commencement Date and
continuing for five (5) years and three (3) months after the
Commencement Date.
3. Section 1(h) is amended as follows:
"Net Rentable Area": It is agreed between the Landlord and
the Tenant that the net rentable area shall be: 18,370
square feet.
4. Section 3(b) is amended to provide that if the Premises are
not ready for occupancy 180 days after the Commencement Date, Tenant may
cancel this Lease by written notice to Landlord delivered within thirty
(30) days after the expiration of such 180 day period.
5. Section 5(b) is deleted.
6. Section 5(c) is amended such that the interest rate is 2%.
7. Section 5(d) is amended such that the amount of the rental
abatement is $64,295.01 which sum shall apply to the first
three months rent under the Lease.
<PAGE>
<PAGE>
8. "Basic Costs" shall not include costs incurred by Landlord
for alterations or improvements which are considered to be capital
improvements or replacements under generally accepted accounting
principles except as provided in Section 7(h) of the Lease.
9. Section 7(a) is amended to delete the word "leasing."
10. Section 7(e) is amended to delete the words "rental loss or
abatement insurance."
11. Section 7(h) is amended to the extent that it shall not
apply to the cost of any capital investment items which are primarily
for the purpose of satisfying governmental requirements when such
condition existed on the Commencement Date.
12. Section 7(i) and (j) are deleted in their entirety.
13. The last literary paragraph of Section 7 is amended to
delete the words "or at Landlord's sole discretion, Landlord will
provide at Tenant's expense such audit prepared by a Certified Public
Accountant."
14. Section 10(g) is amended such as to delete the last sentence
of the last literary paragraph.
15. Paragraph 13 is amended to read as follows:
Unless otherwise stipulated herein, Landlord
shall not be required to make any
improvements or repairs of any kind or
character on the Premises during the Lease
Term, except such repairs as may be deemed
necessary by Landlord for normal maintenance
operations. The obligations of Landlord to
maintain and repair the Premises shall be
limited to the repair of Building standard
items. Any Leasehold Improvements will, at
Tenant's written request, be maintained by
Landlord at Tenant's expense, at a cost or
charge equal to all costs incurred in such
maintenance.
16. The last sentence of Section 17 is redrafted to read
as follows:
Any holding over with the written consent of
Landlord shall thereafter constitute this
Lease a lease from month to month under the
terms and provisions of this lease, to the
extent applicable to a tenancy from month to
month, with a Base Rental of one times that
payable at the end of the Lease Term.
17. Section 18 is amended such that the consent of the
Landlord shall not be unreasonably withheld with respect to non-
structural alterations that do not affect the HVAC,
- 2 -
<PAGE>
<PAGE>
plumbing, electrical or mechanical systems. The last sentence in
Section 18 is deleted in its entirety.
18. Section 20(b) is amended to delete the words "Texas
Architectural Barrier's Act" and to add in their place "or any
similar state statute."
19. Section 23 is amended to provide that Landlord's
consent will not be unreasonably withheld or delayed.
20. Section 29 is deleted in its entirety.
21. Section 30 is amended to read as follows:
Attorney's Fees
---------------
If a party defaults in the performance of any
terms, covenants, agreements, or conditions
contained in this Lease which requires a
party to place a dispute in the hands of an
attorney, or to file suit on same, the
unsuccessful party in such litigation shall
pay the other party all reasonable attorney's
fees and expenses incurred by the successful
party.
22. Section 32 is amended to delete the sentence "Tenant shall
also maintain business interruption insurance covering the premises."
23. Section 33 is amended to require the insurance policy
subject to the provisions of this Section to be issued by the binding on
an insurance company with an A.M. Best rating of at least A.
24. ADD: Landlord shall require the property manager to carry
third party liability insurance with limits of at least $2,000,000 with
an insurance company with an A.M. Best rating of at least A.
25. Section 36 shall be amended to add the following sentence:
If Landlord is unable to repair the Premises and put them in
a tenantable position within six (6) months, the Tenant may
terminate this Lease at the expiration of such six (6) month
period.
26. Section 48 shall be amended to delete the word "Texas" and
insert in its place the word "Kentucky."
- 3 -
<PAGE>
<PAGE>
27. Section 49 is amended such that the interest rate to be
charged is the prime rate charged by Bank One Lexington N.A. adjusted
monthly.
28. No change.
29. Section 52(d) is deleted.
30. Section 52(i) is deleted.
31. Section 52 (j) is amended to add the following sentence:
It is understood and agreed that the Tenant
may place in the break room on the demised
premises vending and dispensing machines for
coffee, tea, soft drinks and water.
32. Section 55 is deleted in its entirety.
33. No insurance related entity or an entity occupying less than
one-half of the net rentable space in the building shall be
allowed to place exterior signage on the building without
Tenant's approval.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
- 4 -
<PAGE>
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this
Addendum in multiple original counter parts as of the day and year
first above written.
LANDLORD MIF REALTY, L.P., A Delaware limited
partnership doing business in
Kentucky as MIF
Realty Limited Partnership
Signed in the
presence of: By: MIF GEN-PAR L.P., a Delaware
limited partnership doing
business in Kentucky as MIF
Gen-Par Limited Partnership,
its general partner
/s/ Athena Bayman
- -----------------------
Signature By: MIF SPONSOR, INC., a Delaware
corporation, its general
partner
Athena Bayman
- -----------------------
Printed Name
By: /s/ Michael Hudspeth
--------------------------
Name: Michael Hudspeth
------------------------
Title: Vice President
-----------------------
TENANT:
EQUITY INSURANCE MANAGERS, INC., a
Kentucky corporation
Signed in the
presence of:
/s/ Richard E. Vimont
- -----------------------
Signature
By: /s/ John R. Owens
------------------------------
Name: John R. Owens
----------------------------
Title: President
---------------------------
Richard E. Vimont
- -----------------------
Printed Name
/s/ Judith W. Lopez
- -----------------------
Signature
Judith W. Lopez
- -----------------------
Printed Name
- 5 -
<PAGE>
EXHIBIT 10.41
Mr. Bobby Owens
220 Lexington Green Circle
Suite 600
Lexington, Kentucky 40503
RE: Amendment and Extension of lease dated November 4, 1996 by
and between MIF Realty L.P., a Delaware Limited Partnership
doing business in Kentucky as MIF Realty Group, Inc., and
Equity Insurance Managers which was subsequently assigned to
Nashville Mini Storage, L.P.
Dear Mr. Owens:
On behalf of Nashville Mini Storage, L.P. ("Lessor"), LaSalle Partners,
Inc., as Lessor's exclusive agent, is pleased to submit this Amendment
to Lessor's existing lease with Equity Insurance Managers ("Lessee").
This Amendment sets forth the terms and condition under which Lessor are
extending the existing lease with Equity Insurance Managers.
1. BUILDING
1.1 NAME
Lexington Green II
1.2 ADDRESS
200 Lexington Green Road, Suite 600
Lexington, Kentucky 40503
2. PREMISES
2.1 LOCATION AND SIZE
The Premises consist of the 1,710 square feet located on the
fourth floor.
3. LEASE EXTENSION
TERM
3.1 The term of the lease shall run concurrent with your existing
lease.
Start Date: January 1, 1999
Expiration Date: December 31, 2001
<PAGE>
<PAGE>
3.2 COMMENCEMENT DATE
The Commencement date shall be January 1, 1999.
4. BASE RENT
RATES
4.1 The lease rate shall be $16.00 per square foot for the remainder
of the term.
5. CONSTRUCTION
5.1 TENANT ALLOWANCE
All leasehold improvements will be constructed by a contractor and
subcontractors selected by Lessor. There will be an allowance
provided by Lessor not to exceed $630.00. Any cost over and above
will be paid by Lessee.
6. ACCEPTANCE
Should this amendment meet with the approval of Lessee, please
execute all three originals of this Amendment and return them to
LaSalle's Lexington office. After execution by the Lessor, we
will return one original to you. All other terms and conditions
of the current and existing lease shall remain the same.
AGREED, APPROVED AND ACCEPTED
LESSEE:
EQUITY INSURANCE MANAGER
BY: /s/ John R. Owens
-----------------------------
NAME: John R. Owens
---------------------------
TITLE: President
--------------------------
DATE: 2/23/99
---------------------------
LESSOR:
NASHVILLE MINI STORAGE, L.P. BY: /s/ Terri Patton - President
--------------------------------
BY: STORAGE CONCEPTS, INC. NAME: Terri Patton
------------------------------
TITLE: GENERAL PARTNER DATE: 3/1/99
------------------------------
<PAGE>
Exhibit 21.1
LIST OF SUBSIDIARIES
(as of March 31, 1999)
Corporation State
----------- -----
Unified Management Corporation Indiana
Unified Fund Services, Inc. Indiana
First Lexington Trust Company Kentucky
Health Financial, Inc. Kentucky
Resource Benefit Planners, Inc. Kentucky
Unified Internet Services, Inc. Indiana
Unified Investment Advisers, Inc. Delaware
Fiduciary Counsel, Inc. Delaware
EMCO Estate Management Company, Inc. Delaware
AmeriPrime Financial Services, Inc. Texas
AmeriPrime Financial Securities, Inc. Texas
Equity Underwriting Group, Inc. Kentucky
Equity Insurance Managers, Inc. Kentucky
21st Century Claims Service, Inc. Kentucky
Equity Insurance Administrators, Inc. Kentucky
Equity Insurance Managers of Illinois, L.L.C.
(d/b/a Irland & Rogers) (55% owned) Illinois
M. Wilson & Associates, Inc. Kentucky
Commonwealth Premium Finance Corporation Kentucky
Strategic Fund Services, Inc. Delaware
Smart Associates, Inc. Delaware
Unified University, Inc. Delaware
Archer Trading, Inc. Delaware
Unified Aviation, Inc. Delaware
HFI Acquisition Corporation Kentucky
FAP Acquisition Corporation Kentucky
VSX Technologies, Inc. New York
Unified Capital Resources, Inc. New York
<PAGE>
EXHIBIT 23.1
CONSENT OF LARRY E. NUNN & ASSOCIATES, LLC
We consent to the incorporation by reference in the Registration Statement on
Form S-8 (registration number 333-53863), and in the related Prospectus, of
Unified Financial Services, Inc. of our report dated February 12, 1999, with
respect to the consolidated financial statements of the Company as of and for
the years ended December 31, 1998 and 1997, appearing in the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1998.
/s/ Larry E. Nunn & Associates, LLC
Columbus, Indiana
April 8, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated statements of financial condition and the consolidated
statements of operation of Unified Financial Services, Inc. filed as a part of
the Company's annual report on Form 10-KSB and is qualified in its entirety
by reference to such report.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 10,342,501
<SECURITIES> 726,131
<RECEIVABLES> 8,912,229
<ALLOWANCES> (38,326)
<INVENTORY> 0
<CURRENT-ASSETS> 20,172,541
<PP&E> 4,455,749
<DEPRECIATION> (2,913,498)
<TOTAL-ASSETS> 26,695,936
<CURRENT-LIABILITIES> 14,502,720
<BONDS> 0
<COMMON> 27,174
0
1,672
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 26,695,936
<SALES> 0
<TOTAL-REVENUES> 22,971,836
<CGS> 0
<TOTAL-COSTS> 8,488,788
<OTHER-EXPENSES> 13,287,695
<LOSS-PROVISION> 36,875
<INTEREST-EXPENSE> 356,453
<INCOME-PRETAX> 1,283,239
<INCOME-TAX> 150,458
<INCOME-CONTINUING> 1,132,781
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,132,781
<EPS-PRIMARY> 0.47
<EPS-DILUTED> 0.42
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated statements of financial condition and the consolidated
statements of operation of Unified Financial Services, Inc. filed as a part of
the Company's annual report on Form 10-KSB and is qualified in its
entirety by reference to such report.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 2,566,394
<SECURITIES> 858,154
<RECEIVABLES> 6,439,985
<ALLOWANCES> (2,041)
<INVENTORY> 0
<CURRENT-ASSETS> 9,994,617
<PP&E> 3,937,382
<DEPRECIATION> (2,472,022)
<TOTAL-ASSETS> 14,200,342
<CURRENT-LIABILITIES> 9,264,444
<BONDS> 0
<COMMON> 21,728
0
8,486
<OTHER-SE> 8,583
<TOTAL-LIABILITY-AND-EQUITY> 14,200,342
<SALES> 0
<TOTAL-REVENUES> 19,249,217
<CGS> 0
<TOTAL-COSTS> 7,370,121
<OTHER-EXPENSES> 12,896,629
<LOSS-PROVISION> 16,135
<INTEREST-EXPENSE> 87,258
<INCOME-PRETAX> (654,786)
<INCOME-TAX> (376,853)
<INCOME-CONTINUING> (277,933)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (277,933)
<EPS-PRIMARY> (0.24)
<EPS-DILUTED> (0.23)
</TABLE>
