SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report (Date of earliest event reported): August 20,1999
Allstate Financial Corporation
(Exact name of registrant as specified in its charter)
Virginia 0-17832 54-1208450
(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
2700 South Quincy Street, Arlington, Virginia 22206
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (703) 931-2274
Item 5. Other Events.
On August 20,1999, Allstate Financial Corporation (the "Company"), entered
into a loan agreement with Value Partners, Ltd. Value Partners, Ltd., a Texas
limited partnership, is the beneficial owner of 44.2% of the Company's common
shares. Under the agreement, Value Partners advanced Allstate $1,000,000 for
general corporate purposes, including working capital. The loan bears interest
at 10% per annum, is unsecured, and matures March 31, 2000. The Company is
required to prepay the loan with a portion of the proceeds of certain
collections.
On August 1, 1999, Allstate also entered into a forbearance agreement with
its lenders, IBJ Whitehall Business Credit Corporation and National Bank of
Canada. The agreement became effective upon the funding of the Value Partners'
loan on August 25,1999. Under the forbearance agreement, the Company may borrow
up to $10,000,000 or the amount calculated by the lenders based on pledged
collateral, whichever is less, subject to certain limitations and conditions.
The forbearance agreement covers the period to October 31, 1999. During the
forbearance period, the interest rate on advances is set at the Base Rate, as
defined, of IBJ Whitehall Business Credit Corporation, plus 2.25%. The Company
is required to maintain an excess of pledged collateral value, as calculated by
the lenders, of $200,000 plus a portion of certain collections.
Attached hereto and incorporated herein by reference in their entirety as
exhibits, are copies of (1) the loan agreement and (2) the forbearance
agreement.
Item 7(c). Exhibits
10.1 Loan Agreement dated as of August 20, 1999 between Value Partners,
Ltd. and Allstate Financial Corporation
10.2 Forbearance Agreement dated as of August 1, 1999 among Allstate
Financial Corporation, IBJ Whitehall
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
Allstate Financial Corporation
Date: September 7, 1999 /s/ C. Fred Jackson
-------------------------------
By: C. Fred Jackson
- --------------------------------------------------------------------------------
LOAN AGREEMENT
This LOAN AGREEMENT ("Agreement") is made and entered into as of this 20th
day of August, 1999, by and between Value Partners, Ltd., a Texas Limited
Partnership ("Lender") and Allstate Financial Corporation, a Virginia
corporation ("Borrower").
R E C I T A L S
Borrower has requested that Lender loan to Borrower and Lender is willing
to loan to Borrower the sum of $1,000,000.00 (the "Loan Amount") upon the terms
and subject to conditions hereinafter set forth. To evidence this loan, Borrower
shall execute that certain Promissory Note in the sum of $1,000,000.00 (the
"Note") in the form attached hereto as Exhibit "A". This Agreement, the Note and
the Notice, as that term is defined herein, and other documents required by the
terms hereof shall be referred to collectively as the "Loan Documents". All
exhibits attached hereto are by this reference incorporated herein. The term
"Holder" or "holder", as used herein or in any of the Loan Documents, refers to
the Lender and each successive owner and holder of the Note.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and legal sufficiency of which are hereby
acknowledged, Lender and Borrower agree:
1. Certain Terms Defined. The following terms (except as otherwise
expressly provided or unless the context otherwise clearly requires) for all
purposes of this Agreement and of any amendment hereto shall have the respective
meanings specified in this Section 1. All other terms used in this Agreement
which are defined in the Trust Indenture Act of 1939 ("TIA"), as amended, or the
definitions of which in the Securities Act of 1933, as amended, are referred to
in the TIA (except as herein otherwise expressly provided or unless the context
otherwise requires) have the meanings assigned to such terms in said TIA and in
said Securities Act as in force at the date of this Agreement. The words
"herein," "hereof" and "hereunder" and other words of similar import refer to
this Agreement as a whole and not to any particular Section or other
subdivision. The terms defined in this Section include the plural as well as the
singular.
"Affiliate" means any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Borrower,
except that Affiliate shall not include the Lender. For purposes of this
definition, "control" when used with respect to any specified Person means the
power to direct the management and policies of a Person, directly or indirectly,
whether through the ownership of voting securities, by contract, or otherwise,
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agent" means IBJ Whitehall Business Credit Corporation, as agent for the
Senior Lenders pursuant to the Senior Loan Agreement and any successor thereto
and, if the Senior Loan Agreement does not provide for an agent or
representative of the Senior Lenders, the term "Agent" shall refer to the Senior
Lenders (or any agent, trustee or other representative acting on their behalf).
"Applicable Law" shall mean (i) the laws of the United States of America
applicable to contracts made or performed in the State of Virginia, now or at
any time hereafter prescribing maximum rates of interest or eliminating maximum
rates of interest on loans and extensions of credit; (ii) laws of the state of
Virginia, including, without limitation those applicable to transactions in the
State of Virginia, and any items prescribing or eliminating maximum rate of
interest on loans and extensions of credit; and (iii) any other laws at any time
applicable to contracts made or performed in the State of Virginia, including
those which permit a higher interest rate ceiling hereunder.
"Capital Stock" means any and all shares, interests, participations, rights
or other equivalents (however designated) or corporate stock, whether common or
preferred, including, without limitation, partnership interests, membership
interests in limited liability companies and an ownership interest in joint
stock companies.
"GAAP" means United States of America Generally Accepted Accounting
Principles set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as may be approved by a significant
segment of the accounting profession, as the same are in effect on the date
hereof.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness, and "Guaranteed" has a correlative meaning.
"Indebtedness" means, with respect to any Person, without duplication, any
indebtedness of such Person, whether or not contingent, in respect of borrowed
money or evidenced by bonds, notes, debentures or similar instruments or letters
of credit (or reimbursement agreements in respect thereof) or representing the
balance deferred and unpaid of the purchase price of any property (including
pursuant to capital leases), except any such balance that constitutes an accrued
expense or less than sixty (60) days past due trade payable if and to the extent
any of the foregoing would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, and also includes, to the extent not
otherwise included, the Guarantee of items that would be included within this
definition and all Indebtedness of others secured by (or for which the holder of
such Indebtedness has an existing right, contingent or otherwise, to be secured
by) any Lien on any asset or property (including, without limitation, leasehold
interests and any other tangible or intangible property) of such Person, whether
or not such Indebtedness is assumed by such Person or is not otherwise such
Person's legal liability, PROVIDED that if the obligations so secured have not
been assumed in full by such Person or are otherwise not such Person's legal
liability in full, the amount of such Indebtedness for the purposes of this
definition shall be limited to the lesser of the amount of such Indebtedness
secured by such Lien or the fair market value of the assets or property securing
such Lien. Notwithstanding the foregoing, the term "Indebtedness" shall not
include deferred compensation arrangements that are not evidenced by bonds,
notes, debentures or similar instruments, nor shall Indebtedness include
reserves (cash or otherwise) or credit balances held by the Borrower or its
Subsidiaries as security to be returned upon timely fulfillment of a client's
contractual obligations.
"Lien" means, with respect to any asset, any mortgage, including without
limitation any multiple indebtedness mortgage, lien, pledge, charge, security
interest or encumbrance of any kind in respect of such asset, whether or not
filed, recorded or otherwise perfected under applicable law (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
and any filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
"Non Borrowing Base Assets" means those assets of Borrower and Affiliates
against which no Revolving Advances, Equipment Value Advances, or Inventory
Advances (as those terms are defined in the Senior Loan Agreement) have been
made or are outstanding under the Senior Loan Agreement.
"Obligations" of a Person mean all loans, debts, liabilities and
obligations, of every kind, nature and description, direct or indirect, secured
or unsecured, joint, several, joint and several, absolute or contingent, due or
to become due, now existing or hereinafter arising, contractual or tortious,
liquidated or unliquidated, owing by such Person at any time, whether or not
evidenced by any note, agreement or other instrument. This term includes,
without limitation, all principal, interest, fees, charges, reimbursement
obligations in respect of letters of credit, expenses, attorneys' fees and any
other sum chargeable to such Person.
"Person" means an individual, a corporation, a partnership, an association,
a trust or any other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Senior Indebtedness" means all Obligations of any kind of the Borrower to
the Senior Lenders and/or the Agent from time to time under or pursuant to the
Senior Loan Agreement including, without limitation, all principal and interest
(including all interest accruing after commencement of any case, proceeding or
other action relating to the bankruptcy, insolvency or reorganization of the
Borrower) accruing thereon, charges, expenses, fees and other sums chargeable to
the Borrower by the Senior Lenders and/or by the Agent under or pursuant to the
Senior Loan Agreement, and reimbursement, indemnity or other Obligations due and
payable to the Senior Lenders and/or the Agent under or pursuant to the Senior
Loan Agreement. Senior Indebtedness shall also include any Obligation of the
Borrower incurred to refinance the Senior Indebtedness. Senior Indebtedness
shall continue to constitute Senior Indebtedness, notwithstanding the fact that
such Senior Indebtedness or any claim for such Senior Indebtedness is
subordinated, avoided or disallowed under the Federal Bankruptcy Code or other
applicable law.
"Senior Lenders" means collectivelyany holder from time to time of all or
any portion of the Senior Indebtedness.
"Senior Loan Agreement" means (a) that certain Amended and Restated
Revolving Credit and Security Agreement dated as of May 17, 1997, among the
Borrower, the Senior Lenders and the Agent, as amended, together with all
documents related thereto, including without limitation, all promissory notes
and security documents, in each case, as supplemented, amended, restated or
otherwise modified from time to time; and (b) any and all agreements, documents
and instruments related to or incurred in connection with, or extending the
maturity of, refinancing, replacing or restructuring all or any portion of, the
foregoing or the Obligations thereunder.
"Stated Maturity" means the date which all remaining unpaid principal and
interest of Indebtedness is due and payable pursuant to the terms of document(s)
evidencing such Indebtedness.
"Subsidiary" means any corporation, association or other business entity of
which more than 50% of the total voting power of shares of Capital Stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by any Person or one or more of the other
Subsidiaries of that Person or a combination thereof.
2. References in Loan Documents. All references in the Loan Documents to
the Note shall henceforth include references to the Note, as such Note may, from
time to time, be reaffirmed, amended, modified, reinstated, restated, extended,
renewed, decreased, and/or increased.
3. Execution of Documents. Subject to the terms and conditions set forth
herein, Borrower will execute in favor of Lender the Note in the form attached
hereto as Exhibit "A" and Borrower and Lender shall execute that certain Notice
and Certification of No Oral Agreements in the form attached hereto as Exhibit
"B" (the "Notice") together with such other documents as are necessary and
related to this transaction.
4. Agreement to Advance; Purpose. Upon Borrower's compliance with the
requirements of Lender as set forth in this Agreement and subject to the terms
and conditions hereof, Lender shall advance a total amount not to exceed
$1,000,000.00, as evidenced by the Note, and Borrower shall repay such sums
pursuant to the terms of the Loan Documents. The proceeds of this loan are to be
used by Borrower in conformance with that certain Forbearance Agreement entered
into as of August 1, 1999 between Borrower and the Senior Lenders. The Lender's
obligation to fund this loan is conditioned upon the delivery to the Lender of
an executed copy of the Forbearance Agreement, the terms and conditions of which
are acceptable to Lender in its sole and absolute discretion.
5. Confirmation of Rights. Lender shall have the right to exercise all
rights and remedies of Lender under the Loan Documents and under applicable law
upon the occurrence of any default or event of default under any of the Loan
Documents and under any and all amendments or modifications to any of the Loan
Documents or to the terms thereof.
6. Representations and Warranties of Borrowers. Borrower represents and
warrants to the Lender as follows:
(a) Organization, Standing, etc. Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the
state of Virginia and has all requisite corporate power and authority to
own its assets and carry on its business as presently conducted. Borrower
has all requisite corporate power and authority to (i) execute, deliver and
perform its obligations under the Loan Documents, and (ii) execute, deliver
and perform its obligations under all other agreements and instruments
executed and delivered by it pursuant to or in connection with the Loan
Documents.
(b) Authorization and Execution. The execution, delivery and
performance by Borrower of the Loan Documents has been duly and validly
authorized and Borrower has the corporate power and authority to execute,
deliver and perform this Agreement and execute, deliver and perform the
Loan Documents. The Loan Documents have been duly executed and delivered by
Borrower and constitute a valid and binding agreement of Borrower.
(c) Contravention. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby do
not contravene or constitute a default under or violate (i) any provision
of applicable law or regulation the violation of which would have a
material adverse effect on Borrower or on the Loan Documents, (ii) the
Articles of Incorporation or Bylaws of Borrower, or (iii) any agreement,
judgment, injunction, order, decree or other instrument binding upon
Borrower or any of its assets or properties, the violation of which would
have a material adverse effect on Borrower or result in the creation or
imposition of any lien on any asset of Borrower or on the Loan Documents.
(d) Litigation, Proceedings, Defaults. Other than the litigation as
described in Borrower's Form 10-Q for the period ended June 30, 1999 as
filed with the Securities and Exchange Commission on August 16,1999, there
is no action, suit, investigation or proceeding pending against, or to the
knowledge of the Borrower threatened against or affecting, Borrower or its
assets before or by any court or arbitrator or any governmental body,
agency, department, instrumentality or official which could have a material
adverse effect on the Borrower's consolidated financial condition or
results of operation. Borrower is not in violation of its Articles of
Incorporation or Bylaws, and Borrower is not in violation of, or in default
under any provision of any applicable law or regulation or of any
agreement, judgment, injunction, order, decree or other instrument binding
upon Borrower which violation or default (i) would affect the validity of
this Agreement, the Note, or any other document or agreement executed or to
be executed by Borrower pursuant hereto or in connection herewith, or (ii)
would impair the ability of Borrower to perform in any material respect the
obligations which it has under the Loan Documents, or any such other
document or agreement.
(e) Governmental Regulation. Borrower is not subject to any Federal or
State law or regulation limiting its ability to execute or issue the Loan
Documents.
(f) Ownership of Property. Borrower has good record title in fee
simple to, or valid and subsisting leasehold interests in, all of its real
property, and good title to all other property, in each case which is
necessary or useful in the conduct of its business.
(g) Documentation; No Material Misstatements. All of the necessary
documents related to the consummation of this transaction requested by
Lender have been provided by Borrower to the Lender and are true, correct
and complete in all material respects, and no written representation,
warranty or statement made by the Borrower in or pursuant to this Agreement
contains or will contain, when made, any untrue statement of a material
fact or omits or will omit to state any material fact necessary to make
such representation, warranty or statement not misleading to a prospective
purchaser of securities from Borrower, who is seeking full information with
respect to Borrower.
(h) Third Party Consent. The Borrower has obtained all consents
necessary to enter into this Agreement and to perform its obligations under
the Loan Documents.
(i) Additional Representations, Covenants, and Agreements
Borrower further covenants and agrees:
(i) To perform all obligations under the Loan Documents and
other documents related to the Loan Documents and any
instrument, document, or writing referenced herein, and to
promptly pay when due, all other costs, charges, and
expenses incurred in connection with the operations of
Borrower.
(ii) To indemnify and hold harmless from any and all actions,
claims, demands, damages, costs, expenses, and other
liabilities, including without limitation attorney's fees,
that Lender may incur that in any way relate to or arise out
of this Agreement or the Loan Documents, but not the gross
negligence, willful misconduct, fraud or violation of law by
Lender.
(iii)That this Agreement or any right or obligation that Borrower
has under this Agreement shall not be assigned or
transferred by Borrower without the express written consent
of Lender, and that Borrower and Borrower's successors and
assigns shall be bound by this Agreement.
7. Representations and Warranties of Lender. The Lender represents and
warrants to Borrower as follows:
The Lender has full legal right, power, and authority (including the due
authorization by all necessary partnership action) to enter into this Agreement
and to perform the Lender's obligations hereunder without the need for the
consent of any other person; and this Agreement has been duly authorized,
executed and delivered and constitutes a legal, valid and binding obligation of
the Lender enforceable against the Lender in accordance with the terms hereof.
8. Covenants of Borrower. Borrower covenants and agrees that so long as its
obligation under the Note shall be outstanding:
a. Principal and Interest. Borrower will pay or cause to be paid
punctually the principal of and interest on the Note at the times
and places and in the manner specified in the Note.
b. Maintenance and Existence. Borrower shall, and shall cause each
of its Subsidiaries to, at all times do or cause to be done all
things necessary to maintain, preserve and renew its existence
and its rights, patents and franchises.
c. Compliance with Laws. Borrower shall, and shall cause each of its
Subsidiaries to, comply in all material respects with all
applicable laws, rules, regulations, and orders of the United
States of America and of all foreign countries and of any state
or municipality, and of any instrumentality or agency of any
thereof (including applicable statutes, regulations, orders and
restrictions relating to equal employment opportunities and
environmental standards or controls) in respect of the conduct of
business and the ownership of property by Borrower.
d. Taxes, Assessments and Other Charges. Borrower will pay
punctually and discharge when due and payable: (i) all taxes,
assessments and other governmental charges levied or imposed upon
it or upon its income, profits, or properties and (ii) all claims
(including, without limitation, claims for labor, materials,
supplies, or services) which might, if unpaid, become a lien upon
any property of Borrower, except those which the Borrower is
disputing in good faith and which dispute is being prosecuted in
good faith, so long as such process does not endanger the ability
of Borrower to perform its obligations herein.
e. Indebtedness. Borrower will pay punctually and discharge when due
and payable any Indebtedness heretofore or hereafter incurred or
assumed by it and discharge, perform and observe the covenants,
provisions and conditions to be discharged, performed and
observed on the part of Borrower in connection therewith, or in
connection with any agreement or other instrument relating
thereto, except to the extent waived by the holder of such
Indebtedness.
f. Books. Borrower will keep at all times proper books of record and
account in which full, true and correct entries will be made of
its transactions in accordance with applicable generally accepted
accounting principles.
g. Statements, Reports and Certificates to be Delivered by the
Borrower. From the date hereof and so long as the Lender shall
hold the Note, Borrower will deliver to Lender at the address
shown in the register maintained by Borrower the following:
(i) Quarterly Financial Statements. As soon as reasonably
possible, and in any event within 45 days after the close of
each of the first three fiscal quarters of Borrower in each
fiscal year, (1) the unaudited balance sheet of the Borrower
as of the end of such period, setting forth in comparative
form the corresponding figures for the end of the preceding
fiscal year, and (2) the unaudited statements of income and
retained earnings and cash flows of the Borrower for each
quarter and for the portion of the fiscal year ended with
such quarter and setting forth in comparative form the
corresponding figures for the corresponding periods of the
preceding fiscal year, all in reasonable detail and
certified by a principal financial officer of Borrower
subject to year-end audit adjustments.
(ii) Other Reports and Statements. Promptly upon the mailing to
its equity holders of each annual report or other report or
communication, a copy of each such report or communication;
and promptly upon any filing by Borrower with the Securities
and Exchange Commission, or any governmental agency or
agencies substituted therefor, or with any national
securities exchange, of any annual or periodic or special
report or registration statement, a copy of the
nonconfidential portions of such report or statement.
(iii)Certificate of Default. Deliver to the Lender, forthwith
upon becoming aware of any default or defaults in the
performance of any covenant, agreement or condition
contained in the Loan Documents (including notice of any
event which with the giving of notice, lapse of time or both
would become an Event of Default as defined in the Note), an
Officer's Certificate specifying such default or Event of
Default.
(iv) Additional Information. Such other data and information as
from time to time may be reasonably and timely requested by
the Lender.
h. Other Documents. Borrower will comply will all other covenants,
representations, warranties, terms and obligations of the Loan
Documents and all other documents executed pursuant to the terms
hereof or to the other Loan Documents.
i. Until the Indebtedness of Borrower to the Senior Lenders is paid
in full, twenty-five percent (25%) of all collections, payments,
receipts, disbursements or proceeds of any kind or nature
("Receipts") from Non Borrowing Base Assets shall be applied to
repayment of the Note. Borrower shall provide a certificate on
the fifth day of each month setting forth the Receipts and the
methodology employed in calculating such Receipts for the prior
month in a form acceptable to the Lender. However, the obligation
of Borrower to repay the Note is an absolute, general obligation
of the Borrower, not limited to the Receipts.
j. Limitation On Dividends. The Borrower shall not, and shall not
permit any of its Subsidiaries, directly or indirectly, until the
Note is repaid in full, to declare or pay any dividend on, or
make any distribution on or in respect of, or purchase, redeem of
otherwise acquire or retire for value any of the Borrower's
Capital Stock.
k. Limitations On Liens. The Borrower shall not, and shall not
permit any of its Subsidiaries, directly or indirectly, to
create, incur, assume or suffer to exist any Lien on any of their
respective assets now owned or hereafter acquired, or any income
or profits therefrom or assign or convey any right to receive
income therefrom, except as required or permitted in the Senior
Loan Agreement.
l. Line Of Business.Neither the Borrower nor its Subsidiaries shall
substantially change the nature of the business in which each is
presently engaged as disclosed in the Borrower's annual report on
Form 10-KSB for the fiscal year ended December 31, 1998, nor
except as specifically permitted hereby or in the Senior Loan
Agreement, purchase or invest, directly or indirectly, in any
assets or property other than in the ordinary course of business
for assets or properties which were useful in, necessary for and
are to be used in its business as presently conducted. Neither
the Borrower nor its Subsidiaries shall permit any future
Subsidiary or Affiliate to engage in any business other than the
marketing and development of the business of the Borrower and its
Subsidiaries outside the State of Virginia or the marketing and
development of the business or programs offered by banks and
other financial institutions. Notwithstanding the above, the
Borrower and its Subsidiaries shall be permitted to expand its
business into that of commercial finance in the continental
United States.
m. Limitations On Sale And Leaseback Transactions. The Borrower
shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, enter into any sale and leaseback
transaction, provided that the Borrower or any Subsidiaries may
enter into a sale and leaseback transaction if the net proceeds
of such sale and leaseback transaction are at least equal to the
fair market value of such property (such determination of fair
market value in the case of a sale and leaseback transaction,
being evidenced by a resolution of the Board of Directors of the
Borrower set forth in an Officers' Certificate delivered to the
Lender).
n. Limitation On Dividends And Other Payment Restrictions Affecting
Subsidiaries. Except as set forth herein, the Borrower shall not
permit any Subsidiary thereof to, directly or indirectly, create
or otherwise cause or suffer to exist or become effective any
consensual encumbrance or restriction of any kind on the ability
of any such Subsidiary to (a) pay dividends or make any other
distributions to Borrower or any Subsidiary thereof on its
Capital Stock, (b) pay any Indebtedness owed to the Borrower or
any Subsidiary thereof, (c) make loans or advances to the
Borrower or any Subsidiary thereof, or (d) transfer any of its
properties or assets to the Borrower or any Subsidiary thereof.
o. Fundamental Modification. The Borrower shall not, and shall not
permit any of its Subsidiaries to, make any modification in its,
or their, as the case may be, articles of incorporation, by-laws
or any other such documents or agreements which would have a
material adverse effect on the ability of the Borrower to perform
its obligations under the terms of the Loan Documents.
p. Maintenance Of Properties, Etc. The Borrower shall, and shall
cause each of its Subsidiaries to, maintain its material
properties and assets in working order and condition and make all
necessary repairs, renewals, replacements, additions, betterments
and improvements thereto, all as may be necessary so that the
business carried on in connection therewith may be conducted in
the usual and customary manner.
q. Insurance. The Borrower shall, and shall cause each of its
Subsidiaries to, maintain with insurers that are financially
sound and reputable such insurance as may be required by law and
such other insurance, to such extent and against such hazards and
liabilities, as is customarily maintained by companies similarly
situated with like properties.
The Borrower shall, and shall cause each of its Subsidiaries to,
pay prior to delinquency all taxes, assessments and governmental
levies except as contested in good faith and by appropriate
proceedings.
r. Comply With Material Agreements. The Borrower shall, and shall
cause each of its Subsidiaries to, comply in all material respect
with all material agreements, indentures, mortgages or documents
binding on it or affecting its properties or business.
9. Events of Default. The Events of Default provision of the Note are
incorporated herein by reference and made a part hereof for all purposes.
10. Waiver of Claims. Borrower warrants and represents to Lender that as of
the date hereof the Note is subject to no credits, charges, claims, or rights of
offset or deduction of any kind or character whatsoever; and the Borrower
releases and discharges Lender from any and all claims and causes of action,
whether known or unknown and whether now existing or hereafter arising,
including, without limitation, any usury claims, that have at any time been
owned, or that are hereafter owned by Borrower and that arise out of or are
related to the execution, delivery and performance of the Loan Documents.
11. Special Notices to Borrower and All Other Obligors. THIS LOAN IS
PAYABLE IN FULL NO LATER THAN MARCH 31, 2000. AT MATURITY, YOU MUST PAY THE
ENTIRE UNPAID PRINCIPAL BALANCE OF THE LOAN AND ACCRUED UNPAID INTEREST THEN
DUE. THE LENDER IS UNDER NO OBLIGATION TO REFINANCE THE LOAN AT THAT TIME. YOU
WILL THEREFORE BE REQUIRED TO MAKE PAYMENT OUT OF OTHER ASSETS YOU MAY OWN, OR
YOU WILL HAVE TO FIND A LENDER WILLING TO LEND THE MONEY AT PREVAILING MARKET
RATES, WHICH MAY BE CONSIDERABLY HIGHER THAN THE INTEREST RATE ON THIS LOAN. IF
YOU REFINANCE THIS LOAN AT MATURITY, YOU MAY HAVE TO PAY SOME OR ALL OF THE
CLOSING COSTS NORMALLY ASSOCIATED WITH A NEW LOAN EVEN IF YOU OBTAIN REFINANCING
FROM THE SAME LENDER.
12. Costs and Expenses. Borrower agrees to pay, within three (3) business
days of execution of this Agreement, all costs and expenses incurred by Lender
in connection with the execution and consummation of this Agreement, including,
without limitation, the reasonable fees and expenses of Lender's counsel
Bergman, Stein & Bird, L.L.P. on behalf of the Lender(s).
13. Governing Law. The terms and provisions hereof shall be governed by and
construed in accordance with the Applicable Law.
14. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the respective successors and assigns of the parties hereto, and each
of the parties hereto hereby represent, warrant, and covenant to the other that
the persons executing this Agreement on behalf of each such party have full
authority, power, and authorization to execute such document and to bind its
principal.
15. Entire Agreement. This Agreement supersedes all prior oral and written
agreements and understandings of the parties hereto with respect to the subject
matter hereof.
16. Headings. The headings of the sections and subsections hereof are
inserted as a matter of convenience and for reference only and in no way define,
limit or describe the scope of this Agreement or the meaning of any provision
hereof.
17. Waivers. The failure of any party to act to enforce rights under any of
the Loan Documents shall not be deemed a waiver and shall not preclude
enforcement of any rights in the Loan Documents. No waiver of any term or
provision of any of the Loan Documents on the part of a party shall be effective
for any purpose whatsoever unless such waiver is in writing and signed by such
party.
18. Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws effective during
the term hereof, such provision shall be fully severable. This Agreement shall
be construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part hereof, and the remaining provisions hereof shall
remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom. Furthermore, in
lieu of such illegal, invalid or unenforceable provision there shall be added
automatically as a part of this Agreement a provision as similar in terms to
such illegal, invalid or unenforceable provision as may be possible and be
legal, valid and enforceable.
19. Notices. Any request, demand, authorization, direction, notice,
consent, waiver, instruction, document or other communication provided or
permitted by this Agreement to be made upon, given or furnished to, or filed
shall be sufficient for every purpose hereunder if in writing and mailed,
registered or certified mail, postage prepaid or delivered by facsimile or
telecopier (if confirmed), as follows:
If to Borrower, to:
Allstate Financial Corporation
2700 South Quincy Street, Suite 540
Arlington, Virginia 22206
Attn: President
With copies to:
Elias, Matz, Tiernan & Herrick, L. L. P.
734 15th Street, N.W., 12th Floor
Washington, D.C. 20005
Attn: Gerald F. Heupel, Jr., Esq.
If to Lender, to:
Value Partners, Ltd.
4514 Cole Avenue
Suite 808
Dallas, Texas 75205
Attn: Timothy G. Ewing
With copies to:
Bergman, Stein & Bird L.L.P.
4514 Travis Street
Travis Walk, Suite 300
Dallas, Texas 75205
Attn: Jack R. Bird, Esquire
20. Attorneys' Fees. In the event attorneys' fees or other costs are
incurred to secure performance of any of the obligations herein provided for, or
to establish damages for the breach thereof, or to obtain any other appropriate
relief, whether by way of prosecution or defense, the prevailing party shall be
entitled to recover reasonable attorneys' fees and costs incurred therein.
21. Further Assurances. Each party hereto agrees to execute any and all
documents, and to perform such other acts, whether before or after closing, that
may be reasonably necessary or expedient to further the purposes of this
Agreement or to further assure the benefits intended to be conferred hereby.
22. NOTICE OF INVALIDITY OF ORAL AGREEMENTS. THIS WRITTEN AGREEMENT, THE
LOAN DOCUMENTS, AND ALL EXHIBITS HERETO REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
23. Usury. All agreements between Borrower and Lender, whether now existing
or hereafter arising and whether written or oral, are hereby limited so that in
no contingency, whether by reason of demand or acceleration of the Final
Maturity Date, as that term is defined in the Note, or otherwise, shall the
interest contracted for, charged, received, paid or agreed to be paid to Lender
exceed the maximum amount permissible under the Applicable Law. If, from any
circumstance whatsoever, interest would otherwise be payable to Lender in excess
of the maximum amount permissible under the Applicable Law, the interest payable
to Lender shall be reduced to the maximum amount permissible under the
Applicable Law, and if from any circumstance Lender shall ever receive anything
of value deemed interest by the Applicable Law in excess of the maximum amount
permissible under the Applicable Law, an amount equal to the excessive interest
shall be applied to the reduction of the principal hereof and not to the payment
of interest, or if such excessive amount of interest exceeds the unpaid balance
of principal hereof, such excess shall be refunded to Borrower. All interest
paid or agreed to be paid to Lender shall, to the extent permitted by the
Applicable Law, be amortized, prorated, allocated and spread throughout the full
period (including any renewal or extension) until payment in full of the
principal so that the interest hereon for such full period shall not exceed the
maximum amount
<PAGE>
permissible under the Applicable Law. Lender expressly disavows any intent to
contract for, charge or receive interest in an amount which exceeds the maximum
amount permissible under the Applicable Law. This paragraph as well as similar
paragraphs as set forth in the Note shall control all agreements between
Borrower and Lender.
24. Counterparts. This Agreement may be executed in separate or multiple
counterparts by the parties, and all of such counterparts shall be considered as
one and the same instrument notwithstanding the fact that various counterparts
are signed by only one or more of the parties, and all of such Agreements shall
be deemed but one and the same Agreement.
EXECUTED as of the date first above written.
LENDER:
VALUE PARTNERS, LTD.
By:/S/ Timothy G. Ewing
-------------------------------------------
Timothy G. Ewing
Managing Partner of Ewing & Partners
general partner of Value Partners, Ltd.
Its: General Partner
BORROWER:
ALLSTATE FINANCIAL CORPORATION
By:/S/ Charles Johnson
-------------------------------------------
Its: Chief Executive Officer
PROMISSORY NOTE
$1,000,000.00 August 20, 1999
FOR VALUE RECEIVED, Allstate Financial Corporation, a Virginia corporation
("Maker"), does hereby promise to pay to the order of Value Partners, Ltd.
("Payee"), at its office at 4514 Cole Avenue, Suite 808, Dallas, Texas 75205, or
at such other place as the holder hereof may from time to time designate in
writing, in lawful money of the United States of America, the principal sum of
ONE MILLION DOLLARS and NO/100 ($1,000,000.00), or so much thereof as may be
advanced, with interest thereon as follows:
1. Certain Definitions. For the purposes hereof, the terms set forth below
shall have the following meanings:
(a) "Applicable Law" shall mean (i) the laws of the United States of
America applicable to contracts made or performed in the State of Virginia,
now or at any time hereafter prescribing maximum rates of interest or
eliminating maximum rates of interest on loans and extensions of credit;
(ii) laws of the state of Virginia, including, without limitation, those
applicable to transactions in the State of Virginia and any items
prescribing or eliminating maximum rate of interest on loans and extensions
of credit; and (iii) any other laws at any time applicable to contracts
made or performed in the State of Virginia, including those which permit a
higher interest rate ceiling hereunder.
(b) "Base Rate" shall mean ten percent (10%) per annum.
(c) "Final Maturity Date" shall mean March 31, 2000 or such earlier
date as a result of acceleration as permitted by the terms hereof or in any
of the Loan Documents.
(d) "Highest Lawful Rate" shall mean at the particular time in
question the lesser of eighteen percent (18%) or the maximum non-usurious
rate of interest which, under Applicable Law, Payee is then permitted to
charge Maker on this note. If the maximum rate of interest which, under
Applicable Law, Payee is permitted to charge Maker on this note shall
change after the date hereof, the Highest Lawful Rate shall be
automatically increased or decreased, as the case may be, from time to time
as of the effective date of each change in the Highest Lawful Rate without
notice to Maker.
(e) "Loan Agreement" shall mean that certain Loan Agreement dated of
even date herewith, executed by and between Maker and Payee, the terms of
which are incorporated herein by reference and which shall govern this
note.
(f) "Loan Documents" shall mean the Loan Agreement, this note, that
certain Notice and Certification of No Oral Agreements of even date hereof
and all documents related or arising out of the Loan Agreement.
(g) "Non Borrowing Base Assets" shall mean those assets of Borrower
and Affiliates (as defined in the Loan Agreement) against which no
Revolving Advances, Equipment Value Advances, or Inventory Advances (as
those terms are defined in the Senior Loan Agreement, as that term is
defined in the Loan Agreement) have been made or are outstanding under the
Senior Loan Agreement.
(h) "Receipts" shall mean twenty-five percent (25%) of all
collections, payments, receipts, disbursements or proceeds of any kind or
nature from Non Borrowing Base Assets.
2. Calculation and Payment of Principal and Interest.
(a) Simple interest on the unpaid principal balance hereof from time
to time outstanding shall be computed at a rate equal to the lesser of (i)
the Base Rate and (ii) the Highest Lawful Rate.
(b) Accrued and unpaid interest, computed as set forth above, shall be
due and payable on September 30, 1999 and December 31, 1999.
(c) Receipts for each month, commencing with the month of August 1999,
shall be due and payable on the fifth day of the following month to be
applied to unpaid principal.
(d) Unpaid principal and accrued and unpaid interest, computed as set
forth above, shall be due and payable in one installment on the Final
Maturity Date, together with all other sums payable under the Loan
Documents.
(e) Interest on this note shall be calculated as if each year
consisted of three hundred sixty (360) days, but to the extent such
computation of interest might cause the rate of interest which this note
bears to exceed the Highest Lawful Rate, such interest shall be computed on
the basis of three hundred sixty-five (365) day or three hundred sixty-six
(366) day years, as the case may be.
(f) Following the maturity of this note, whether by acceleration or
otherwise, the unpaid principal balance of this note shall bear interest at
a rate of interest equal to the Highest Lawful Rate.
(g) If the date for any payment or prepayment hereunder falls on a day
which is a Saturday, Sunday or other legal holiday in the state of
Virginia, then for all purposes of this note, the same shall be deemed to
have fallen on the next following day, and such extension of time shall in
such case be included in the calculation of interest.
(h) Provided no Event of Default has occurred and is continuing, all
payments received by Payee (other than Receipts) shall be applied, to the
extent thereof, first, to accrued, unpaid interest upon this note, second,
to principal, and third, to any other outstanding portion of the
indebtedness. Upon and during the continuation of an Event of Default, all
payments (including Receipts) received by Payee shall be applied, to the
extent thereof, to the indebtedness in the order and manner which Payee
shall deem appropriate, any instructions from Maker to the contrary
notwithstanding.
3. Negotiability; Offsets, Defenses or Counterclaims. This note is freely
negotiable. The Maker knows of no defenses, setoffs or counterclaims existing as
of the date hereof which could be asserted or brought by the Maker or any other
party in any suit or action for the collection of any sum due hereunder.
4. Prepayment. Maker shall have the right to prepay the unpaid principal
balance of, and accrued interest upon, this note in whole at any time, or in
part from time to time, without permission or penalty.
5. Waiver. Maker and all sureties, endorsers, accommodation parties,
guarantors and other parties now or hereafter liable for the payment of this
note, in whole or in part, hereby severally (i) waive demand, notice of demand,
presentment for payment, notice of nonpayment, notice of default, protest,
notice of protest, notice of intent to accelerate, notice of acceleration,
notice of dishonor and all other notices, and further waive diligence in
collecting this note, in taking action to collect this note, in bringing suit to
collect this note, or in enforcing this note or any of the security for this
note; (ii) agree to any substitution, subordination, exchange or release of any
security for this note or the release of any party primarily or secondarily
liable for the payment of this note; (iii) agree that Payee shall not be
required to first institute suit or exhaust its remedies hereon against Maker or
others liable or to become liable for the payment of this note or to enforce its
rights against any security for the payment of this note; and (iv) consent to
any extension of time for the payment of this note, or any installment hereof,
made by agreement by Payee with any person now or hereafter liable for the
payment of this note, even if Maker is not a party to such agreement.
6. Events of Default
(a) An "Event of Default" shall mean the occurrence or existence of
any of one or more of the following events (unless waived by the Payee),
whether such occurrence is voluntary or involuntary or comes about or is
effected by operation of law or pursuant to or in compliance with any
judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental authority:
(i) If Maker shall fail to pay any installment of principal
and/or interest under this note as and when same becomes due and
payable in accordance with the terms hereof or any other obligation of
Maker to Payee involving the payment of money, or if Maker shall
default in any other obligation under this note, and/or the Loan
Agreement which can be cured by the payment of money;
(ii) If Maker shall default in the observance or performance of
any of the terms, covenants, agreements, or conditions, not involving
the payment of money, set forth herein or in any other of the Loan
Documents;
(iii) The occurrence of a default under any document or
instrument evidencing, securing or pertaining to the indebtedness
evidenced hereby including, without limitation, the Loan Agreement;
(iv) If any representation, warranty or other statement of fact,
in the Loan Documents or in any writing, certificate, report or
statement at any time furnished by Maker or any other party obligated
in relation hereto to the Payee pursuant to or in connection thereto
shall be false or misleading in any material respect;
(v) The liquidation, termination or dissolution of the Maker or
any other parties obligated hereunder;
(vi) The bankruptcy or insolvency of, the assignment for the
benefit of creditors by, or the appointment of a receiver for any
property of Maker or any other parties obligated hereunder;
(vii) Default in the payment of any other indebtedness due to the
holder hereof or default in the performance of any other obligation to
the holder hereof by Maker of this note;
(ix) If any creditor of the Maker for any reason whatsoever
hereafter shall accelerate payment in whole or in part of any
outstanding material obligation owed to it by the Maker under any
agreement or arrangement due to a default or an event of default by
the Maker, or if any judgment against the Maker or any execution
against any property of the Maker or any amount remains unpaid,
unstayed or undismissed for a period in excess of ten (10) days; or
(x) If the Maker shall cease to exist.
(b) It is understood and agreed that time is of the essence of the
note. If an Event of Default exists, then all principal amounts under the
note at the time outstanding shall immediately become due and payable,
together with interest accrued thereon, without presentment, demand, grace,
protest or notice of any kind, including notice of intent to accelerate the
payment of the unpaid balance of the note or in any other Loan Documents,
of notice of acceleration, all of which are hereby waived by the Maker. Any
holder of the note and of rights under the Loan Documents may also proceed
to protect and enforce its rights either by suit in equity and/or by action
at law, or by other appropriate proceedings, whether for the specific
performance (to the extent permitted by law) of any covenant or agreement
contained in such Loan Documents, or in aid of the exercise of any power
granted in such Loan Documents, or may proceed to enforce the payment of
such Loan Documents or to enforce any other legal or equitable right of the
holder of such Loan Documents. The failure to exercise the foregoing option
upon the happening of one or more Events of Default shall not constitute a
waiver of the right to exercise the same or any other option at any
subsequent time, and no such failure shall nullify any prior exercise of
any such option without the express written consent of Payee.
7. Loan Agreement. This note is governed by the terms of that certain Loan
Agreement executed on even date hereof, the terms of which are by this reference
incorporated herein.
8. Default Interest; Late Charge. If the entire unpaid principal balance
and accrued but unpaid interest is not paid on or before the earlier to occur of
the Final Maturity Date or any acceleration of payment permitted hereby, all
unpaid amounts of this note, including principal and interest, shall thereafter
bear interest at the Highest Lawful Rate.
9. Compliance with Law. All agreements between Maker and Payee, whether now
existing or hereafter arising and whether written or oral, are hereby limited so
that in no contingency, whether by reason of demand or acceleration of the Final
Maturity Date or otherwise, shall the interest contracted for, charged,
received, paid or agreed to be paid to Payee exceed the maximum amount
permissible under Applicable Law. If, from any circumstance whatsoever, interest
would otherwise be payable to Payee in excess of the maximum amount permissible
under Applicable Law, the interest payable to Payee shall be reduced to the
maximum amount permissible under Applicable Law; and if from any circumstance
Payee shall ever receive anything of value deemed interest by Applicable Law in
excess of the maximum amount permissible under Applicable Law, an amount equal
to the excessive interest shall be applied to the reduction of the principal
hereof and not to the payment of interest, or if such excessive amount of
interest exceeds the unpaid balance of principal hereof, such excess shall be
refunded to Maker. All interest paid or agreed to be paid to Payee shall, to the
extent permitted by Applicable Law, be amortized, prorated, allocated, and
spread throughout the full period (including any renewal or extension) until
payment in full of the principal so that the interest hereon for such full
period shall not exceed the maximum amount permissible under Applicable Law.
Payee expressly disavows any intent to contract for, charge or receive interest
in an amount which exceeds the maximum amount permissible under Applicable Law.
This paragraph shall control all agreements between Maker and Payee.
10. Attorneys' Fees and Costs. If an event of default shall occur, and in
the event that thereafter this note is placed in the hands of an attorney for
collection, or in the event this note is collected in whole or in part through
legal proceedings of any nature, then and in any such case Maker promises to
pay, and there shall be added to the unpaid principal balance hereof, all
reasonable costs of collection, including but not limited to reasonable
attorneys' fees incurred by the holder hereof, on account of such collection,
whether or not suit is filed.
11. Consents, Waivers and Modifications. No term, covenant, agreement or
condition of the note may be amended, supplemented or modified, or compliance
therewith waived (either generally or in a particular instance and either
retroactively or prospectively), except pursuant to a written instrument signed
by the Maker and the holder. No course of dealing between the Maker and the
holder of the note or any delay or failure on the part of the holder of the note
in exercising any rights hereunder shall operate as a waiver of any rights of
such holder.
12. Cumulative Rights. No delay on the part of the holder of this note in
the exercise of any power or right under this note or under any other instrument
executed pursuant hereto shall operate as a waiver thereof, nor shall a single
or partial exercise of any power or right preclude other or further exercise
thereof or the exercise of any other power or right. Enforcement by the holder
of this note of any security for the payment hereof shall not constitute any
election by it of remedies so as to preclude the exercise of any other remedy
available to it.
13. Headings. The paragraph headings used in this note are for convenience
of reference only, and shall not affect the meaning or interpretation of this
note.
14. Notices and Demands. Any notice or demand to be given or to be served
upon Maker in connection with this note must be in writing and shall be given by
certified or registered mail, properly addressed, with postage prepaid,
addressed to Maker as follows:
Allstate Financial Corporation
2700 South Quincy Street, Suite 540
Arlington, Virginia 22206
Attn: President
or at such other address as Maker may designate from time to time by written
notice given to the holder hereof. Any notice or demand will be deemed given
when notice or demand is deposited in an authorized depository under the care
and custody of the United States Postal Service.
15. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE APPLICABLE LAW. COURTS WITHIN THE STATE OF VIRGINIA SHALL
HAVE JURISDICTION OVER ANY AND ALL DISPUTES BETWEEN MAKER AND PAYEE, WHETHER AT
LAW OR IN EQUITY.
16. ENTIRE AGREEMENT. THE TERMS OF THIS NOTE, TOGETHER WITH THE OTHER LOAN
DOCUMENTS, ARE INTENDED BY THE PARTIES HERETO AS A FINAL EXPRESSION OF THEIR
AGREEMENT WITH RESPECT TO THE SUBJECT MATTER HEREOF, AND MAY NOT BE CONSTRUED BY
EVIDENCE OF ANY PRIOR OR CONTEMPORANEOUS INSTRUMENT. THIS NOTE, TOGETHER WITH
THE OTHER LOAN DOCUMENTS, CONSTITUTES THE COMPLETE AND EXCLUSIVE STATEMENT OF
ITS TERMS, AND NO EXTRINSIC EVIDENCE WHATSOEVER MAY BE INTRODUCED IN ANY
PROCEEDINGS, IF ANY (JUDICIAL OR OTHERWISE), INVOLVING THIS NOTE, EXCEPT FOR
EVIDENCE OF A WRITTEN MODIFICATION ENTERED INTO SUBSEQUENT TO THE DATE OF THIS
NOTE.
<PAGE>
17. Successors and Assigns. The term "Payee" shall include all of Payee's
successors and assigns to whom the benefits of this Note shall inure.
18. SECURITIES LAWS. THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE. THIS NOTE
THEREFORE MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR OTHERWISE
DISTRIBUTED FOR VALUE IN THE ABSENCE OF (i) AN OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO THE MAKER THAT SUCH SALE, TRANSFER, ASSIGNMENT, PLEDGE OR OTHER
DISTRIBUTION IS EXEMPT FROM (OR NOT OTHERWISE SUBJECT TO) THE REGISTRATION (OR
QUALIFICATION) AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT OR LAWS, OR (ii)
SUCH REGISTRATION OR QUALIFICATION.
MAKER:
ALLSTATE FINANCIAL CORPORATION,
A VIRGINIA CORPORATION
By:/S/ Charles Johnson
----------------------------
Its: Chief Executive Officer
FORBEARANCE AGREEMENT
THIS FORBEARANCE AGREEMENT ("Agreement") is entered into as of August 1,
1999, by and among ALLSTATE FINANCIAL CORPORATION, a corporation organized under
the laws of the Commonwealth of Virginia ("Borrower"), IBJ WHITEHALL BUSINESS
CREDIT CORPORATION ("IBJWBCC") and NATIONAL BANK OF CANADA ("NBC") (IBJWBCC and
NBC each a "Lender" and collectively the "Lenders") and IBJWBCC as agent for the
Lenders (IBJWBCC, in such capacity, the "Agent").
BACKGROUND
Borrower, Lenders, and Agent are parties to an Amended and Restated
Revolving Credit and Security Agreement dated as of May 17, 1997, (as amended,
supplemented or otherwise modified from time to time, the "Loan Agreement")
pursuant to which Agent and Lenders provide Borrower with certain financial
accommodations.
An Event of Default now exists under the Loan Agreement arising from
Borrower's failure to maintain Undrawn Availability of not less than $2,000,000,
which failure is a violation of Section 7.20 of the Loan Agreement (such Event
of Default, the "Availability Default") by reason of which Agent and Lenders
have no obligation to make any additional Advances and Agent has the full legal
right to exercise its rights and remedies under the Loan Agreement. Borrower
also anticipates that as a result of its financial performance for the quarters
ended June 30, 1999 and September 30, 1999, a Default shall exist with respect
to one or all of the financial covenants set forth in Section 7.19 of the Loan
Agreement (the "Anticipated Defaults"). The Availability Default and the
Anticipated Defaults are hereinafter referred to as the "Designated Defaults."
Borrower has requested that Agent forbear for a period of time from
exercising its rights and remedies under the Loan Agreement and that Agent and
Lenders continue to make Advances available to Borrower.
NOW, THEREFORE, in consideration of any loan or advance or grant of credit
heretofore or hereafter made to or for the account of Borrower by Agent and
Lenders, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Definitions. All capitalized terms not otherwise defined herein shall
have the meanings given to them in the Loan Agreement.
2. Acknowledgement. Borrower acknowledges that the Availability Default has
occurred and exists as of the date hereof, and that, absent the implementation
of the Forbearance Period set forth in Section 4 hereof, Borrower is
unconditionally obligated to pay all of the Obligations, all without default,
setoff or counterclaim of any kind or nature whatsoever.
3. Outstanding Obligations. Borrower affirms and acknowledges that (i) as
of August 1, 1999 there is presently due and owing to Agent and Lenders, under
the Loan Agreement, approximately $8,002,320.91 in principal amount of Advances
(inclusive of the undrawn amount of outstanding Letters of Credit) together with
accrued interest thereon and costs and expenses; (ii) all such Obligations are
valid obligations of Borrower and there are no claims, setoffs or defenses to
the payment by Borrower of the Obligations; and (iii) the Loan Agreement and the
Other Documents are and shall continue to be legal, valid and binding
obligations and agreements of Borrower enforceable in accordance with their
respective terms.
4. Forbearance. During the period (the "Forbearance Period") commencing on
the Effective Date (as such term is defined in Section 7 hereof) and ending on
the earlier to occur of: (i) October 31, 1999 or (ii) the date of any
Forbearance Default (as defined in Section 6 hereof) Agent will forbear from
exercising its rights and remedies under the Loan Agreement with respect to the
Designated Defaults. All Obligations shall be due and payable in full at the end
of the Forbearance Period. In the event the Effective Date does not occur on or
prior to August 25, 1999, all Obligations shall be due and payable in full on
the following Business Day and Agent shall be entitled to exercise all rights
and remedies with respect to the Designated Defaults.
5. Additional Agreements.
(a) (i) Subject to the terms and conditions of this Agreement and provided
no Forbearance Default shall have occurred, Agent and Lenders shall make
Advances to Borrower in accordance with the provisions of Sections 2.1, 2.2 and
2.2A of the Loan Agreement; provided, however, (A) the term "Maximum Revolving
Advance Amount" is hereby amended to mean "$10,000,000" and (B) the outstanding
balance of Advances shall not exceed an amount equal to the lesser of (x) the
Maximum Revolving Advance Amount and (y) the Borrowing Base.
(ii) The Maximum Revolving Advance Amount shall be further reduced, at
Agent's discretion, on a dollar for dollar basis by the amount of gross proceeds
received by Borrower in connection with each Liquidity Event (as hereafter
defined); provided, however, in no event shall proceeds from a Liquidity Event
described in (A) Section 5(d)(ii) hereof reduce the Maximum Revolving Advance
Amount by more than the actual amounts due to Borrower from a Client and (B)
Section 5(d)(iii) hereof reduce the Maximum Revolving Advance Amount by more
than 50% of the amount collected in connection with such Liquidating Event (net
of associated reasonable out of pocket expenses) in excess of $100,000;
provided, that, an amount equal to 75% of the amount collected in connection
with such Liquidating Event (net of associated reasonable out of pocket
expenses), shall be remitted to Agent to reduce the outstanding obligations.
(b) Borrower shall not be entitled to obtain any additional Eurodollar Rate
Loans or convert any Domestic Rate Loans to a Eurodollar Rate Loan.
(c) Effective August 1, 1999, all Advances shall bear interest at the
Default Rate. Upon and after the occurrence of a Forbearance Default, and during
the continuation thereof, the Advances shall bear interest at the applicable
Revolving Interest Rate plus four (4%) percent.
(d) Upon the occurrence of a Liquidity Event, Borrowers shall remit the
gross proceeds therefrom to Agent, as provided in this Agreement, as a repayment
of the outstanding Obligations. For purposes hereof, "Liquidity Event" shall
mean each receipt of cash proceeds from the sale of assets or stock of Borrower
or any Subsidiary, each of which shall be in form and substance satisfactory to
Agent, including, without limitation, each receipt of cash proceeds from: (i)
the sale of all or substantially all of the factoring assets of Borrower, (ii)
the sale of certain asset based loans to Resource Capital Bidco, Inc. or another
third party and (iii) the collection by Borrower, in cash, of all or part of
that certain Receivable payable by Jarnow, or each receipt by Borrower of any
cash proceeds of Agent's Collateral to the extent such Collateral is not
included in the Borrowing Base, less associated reasonable out of pocket
expenses.
(e) (i) Borrower shall not be entitled to transfer funds from the Lockbox
Accounts to its Operating Account and all proceeds of Collateral, including all
proceeds received in connection with a Liquidity Event subject to Section 5(a)
above, shall be deposited to a deposit account which is subject to a blocked
account arrangement which is satisfactory to Agent and which shall provide,
among other things, for all such proceeds to be remitted to Agent's Depository
Account to be applied to the Obligations in such order as Agent may determine
and in accordance with the following wire instructions:
Bank: IBJ Whitehall Bank & Trust Company
One State Street
New York, NY 10004
ABA# 026007825
Account# 43589603
For Credit to: IBJ Whitehall Business Credit Corporation
Reference: Allstate Financial Corporation
(ii) The parties hereto acknowledge that the Borrower shall have the right
to pay to a participant in a Factoring Agreement or an Inventory Collateral
Funding Repayment Agreement such participant's share of any proceeds of
Collateral, whether or not an Event of Default or a Forbearance Default shall
have occurred and be continuing. The only Factoring Agreement and Inventory
Collateral Funding Repayment Agreement with respect to which there is a
participant are the agreements with MGV. The participant is Reservoir Capital
and its participation percentage in amounts outstanding under such Factoring
Agreement is 20%.
(f) The Undrawn Availability requirement set forth in Section 7.20 of the
Loan Agreement shall be amended from "$2,000,000" to "the sum of (x) $200,000
plus (y) the amount by which the Maximum Revolving Advance Amount has been
reduced pursuant to Section 5(ii)(B) of the Forbearance Agreement."
(g) Borrower shall deliver to Agent a Borrowing Base Certificate each day
as and for the prior day.
(h) Borrower shall furnish Agent within thirty (30) days after the end of
each month (45 days in the case of any month ending a calendar quarter), an
unaudited balance sheet of Borrower and its Subsidiaries on a consolidated and
consolidating basis and unaudited statements of income and stockholders' equity
and cash flow of Borrower and its Subsidiaries on a consolidated and
consolidating basis reflecting results of operations from the beginning of the
fiscal year to the end of such month and for such month, prepared on a basis
consistent with prior practices and complete and correct in all material
respects, subject to normal year end adjustments. The reports shall be
accompanied by a certificate of Borrower's President, Chief Financial Officer or
Chief Operating Officer which shall state that, based on an examination
sufficient to permit him to make an informed statement, no Default or Event of
Default exists, or, if such is not the case, specifying such Default or Event of
Default, its nature, when it occurred, whether it is continuing and the steps
being taken by Borrower with respect to such event and, such certificate shall
have appended thereto calculations which set forth Borrower's compliance with
the financial covenants contained in Sections 7.6, 7.11, 7.19 and 7.20.
(i) Borrower shall be permitted to incur subordinated debt not to exceed
$3,500,000 to consummate the acquisition of 100% of the outstanding capital
stock of Resource Capital BIDCO, Inc., a Tennessee corporation. The subordinated
debt may be secured by a pledge of 100% of the outstanding capital stock of
Business Funding of America, Inc., provided that such pledge shall be
subordinated in all respects to the prior pledge of such stock to Agent. The
subordinated debt holders shall execute a subordination agreement in form and
substance satisfactory to Agent, which subordination agreement shall provide,
among other things, that such subordinated debt holder shall not exercise any
rights or remedies prior to payment in full of all amounts owing to Agent and
Lenders.
(j) Borrower shall have received a $1,000,000 working capital loan from
Value Partners Ltd., a Texas limited partnership, which shall be unsecured and
which shall bear interest at a rate of 10% per annum. Unless the obligations
have been paid in full and the Lenders' obligations under the Loan Agreement
have been terminated, the working capital loan lender shall not be entitled to
receive any payments prior to March 31, 2000 except for an amount equal to 25%
of the amount collected (net of reasonable out of pocket expenses) by Borrower,
in cash, with respect to any Liquidity Event described in Section 5(d)(iii)
hereof.
6. Forbearance Defaults. Each of the following shall constitute a
Forbearance Default:
(a) The existence of an Event of Default under the Loan Agreement
(other than a Designated Default);
(b) Borrower shall fail to keep or perform any of the covenants or
agreements contained herein; or
(c) Any representation or warranty of Borrower contained herein shall
be false, misleading or incorrect in any material respect.
Upon the occurrence of a Forbearance Default, all Obligations shall, at
Agent's option, be immediately due and payable and Agent shall be entitled
immediately to exercise all of its rights and remedies under the Loan Agreement
and the Other Documents.
7. Conditions of Effectiveness. This Agreement shall become effective (the
"Effective Date") upon (a) receipt by Agent of a copy of this Agreement executed
by Lenders, Borrower and acknowledged by Guarantors, (b) receipt by Agent of
$1,000,000 representing the making of the $1,000,000 working capital loan
referred to in Section 5(j) hereof (which $1,000,000 shall be applied to the
outstanding Obligations with no reduction of the Maximum Revolving Advance
Amount) and (c) receipt by Agent for the ratable benefit of Lenders of a fee in
the amount of $10,000 which fee shall be charged to Borrower's account.
8. Representations and Warranties. Borrower hereby represents and warrants
as follows:
(a) This Agreement, the Loan Agreement as amended hereby and all Other
Documents (collectively, the "Documents"), constitute legal, valid and
binding obligations of Borrower and are enforceable against Borrower in
accordance with their respective terms.
(b) As to Borrower, other than the Designated Defaults, no material
Event of Default or Default has occurred and is continuing or would exist
after giving effect to this Agreement.
(c) Borrower has no defense, counterclaim or offset with respect to
the Documents.
(d) Borrower has the corporate power, and has been duly authorized by
all requisite corporate action, to execute and deliver this Agreement and
to perform its obligations hereunder. This Agreement has been duly executed
and delivered by Borrower.
(e) Borrower's execution, delivery and performance of this Agreement
does not and will not (i) violate any law, rule, regulation or court order
to which Borrower is subject, (ii) conflict with or result in a breach of
Borrower's Articles of Incorporation or By-laws or any agreement or
instrument to which Borrower is a party or by which it or its properties
are bound, or (iii) result in the creation or imposition of any lien,
security interest or encumbrance on any property of Borrower, whether now
owned or hereafter acquired, other than liens in favor of Agent.
(f) Intentionally omitted.
(g) The recitals set forth in the Background paragraph above are
truthful and accurate and are an operative part of this Agreement.
(h) Agent has and will continue to have a valid first priority lien
and security interest in all Collateral, and Borrower expressly reaffirms
all security interests and liens granted to Agent pursuant to the
Documents.
9. Waiver. Borrower waives and affirmatively agrees not to allege or
otherwise pursue any or all defenses, affirmative defenses, counterclaims,
claims, causes of action, setoffs or other rights that it may have to contest
(a) the Designated Defaults which could be declared by Agent; (b) any provision
of the Documents or this Agreement; (c) the security interest of Agent in any
property, whether real or personal, tangible or intangible, or any right or
other interest, now or hereafter arising in connection with the Collateral; or
(d) the conduct of Agent in administering the financing arrangements between
Borrower and Lenders on and prior to the date of execution of this Agreement by
Borrower.
10. Release. Borrower hereby releases, remises, acquits and forever
discharges Agent, Lenders and Agent's and each Lender's employees, agents,
representatives, consultants, attorneys, fiduciaries, officers, directors,
partners, predecessors, successors and assigns, subsidiary corporations, parent
corporations, and related corporate divisions (all of the foregoing hereinafter
called the "Released Parties"), from any and all actions and causes of action,
judgments, executions, suits, debts, claims, demands, liabilities, obligations,
damages and expenses of any and every character, known or unknown, direct and/or
indirect, at law or in equity, of whatsoever kind or nature, for or because of
any matter or things done, omitted or suffered to be done by any of the Released
Parties prior to and including the date of execution hereof, and in any way
directly or indirectly arising out of or in any way connected to this Agreement
or the Documents (all of the foregoing hereinafter called the "Released
Matters"). Borrower acknowledges that the agreements in this Section are
intended to be in full satisfaction of all or any alleged injuries or damages
arising in connection with the Released Matters.
11. Effect and Construction of Agreement. Except as expressly provided
herein, the Documents shall remain in full force and effect in accordance with
their respective terms, and this Agreement shall not be construed to:
(a) impair the validity, perfection or priority of any lien or
security interest securing the Obligations;
(b) waive or impair any rights, powers or remedies of Agent under, or
constitute a waiver of, any provision of the Documents upon termination of
the Forbearance Period; or
(c) constitute an agreement by Agent or Lenders or require Agent or
Lenders to extend the Forbearance Period, grant additional forbearance
periods, or extend the time for payment of any of the Obligations.
12. Conflicts. In the event of any express conflict between the terms of
this Agreement and any of the Documents, this Agreement shall govern.
13. Presumptions. Borrower acknowledges that it has consulted with and been
advised by its counsel and such other experts and advisors as it has deemed
necessary in connection with the negotiation, execution and delivery of this
Agreement and has participated in the drafting hereof. Therefore, this Agreement
shall be construed without regard to any presumption or rule requiring that it
be construed against any one party causing this Agreement or any part hereof to
be drafted.
14. Expenses. Borrower shall pay all reasonable costs, fees and expenses of
Agent (including the costs, fees and expenses of Agent's counsel) incurred by
Agent in connection with the negotiation, preparation, administration and
enforcement of this Agreement.
15. Entire Agreement. This Agreement sets forth the entire agreement among
the parties hereto with respect to the subject matter hereof. Borrower has not
relied on any agreements, representations, or warranties of Agent or any Lender,
except as specifically set forth herein. Any promises, representations,
warranties or guarantees not herein contained and hereinafter made shall have no
force and effect unless in writing, signed by each party hereto. Borrower
acknowledges that it is not relying upon oral representations or statements
inconsistent with the terms and provisions of this Agreement.
16. Further Assurance. Borrower shall execute such other and further
documents and instruments as Agent may reasonably request to implement the
provisions of this Agreement.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and
year first written above.
ALLSTATE FINANCIAL CORPORATION
By: /s/Charles Johnson
-----------------------------
Name: Charles Johnson
Title: Chief Executive Officer
IBJ WHITEHALL BUSINESS CREDIT CORPORATION,
as Agent and as Lender
By: /s/Adam Moskowitz
-----------------------------
Name: Adam Moskowitz
Title: Vice President
NATIONAL BANK OF CANADA
By: /s/R.A. Incorvatia
-----------------------------
Name: R.A. Incorvatia
Title: Vice President
By: /s/Karen A. Grexa
-----------------------------
Name: Karen A. Grexa
Title: Vice President
ACKNOWLEDGED AND AGREED TO:
LIFETIME OPTIONS, INC., A VIATICAL SETTLEMENT COMPANY
By: /s/Charles Johnson
-----------------------
Name: Charles Johnson
Title: Chief Executive Officer
SETTLEMENT SOLUTIONS, INC.
By: /s/Charles Johnson
-----------------------
Name: Charles Johnson
Title: Chief Executive Officer
AFC HOLDING CORPORATION
By: /s/Charles Johnson
-----------------------
Name: Charles Johnson
Title: Chief Executive Officer
PREMIUM SALES NORTHEAST, INC.
By: /s/Charles Johnson
-----------------------
Name: Charles Johnson
Title: Chief Executive Officer
BUSINESS FUNDING OF AMERICA, INC.
By: /s/Charles Johnson
-----------------------
Name: Charles Johnson
Title: Chief Executive Officer
RECEIVABLE FINANCING CORPORATION
By: /s/Charles Johnson
-----------------------
Name: Charles Johnson
Title: Chief Executive Officer
BUSINESS FUNDING OF FLORIDA, INC.
By: /s/Charles Johnson
-----------------------
Name: Charles Johnson
Title: Chief Executive Officer
