-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TU2SM05Os12FJAv4zY0ukdGf90mUEfbsMbEzoHGrDGf9YcXEWBtijf/KM6XDo9eb FRCwf4t09UYfx+qdlOLQ9Q== 0000891554-99-001766.txt : 19990908 0000891554-99-001766.hdr.sgml : 19990908 ACCESSION NUMBER: 0000891554-99-001766 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990907 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990907 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLSTATE FINANCIAL CORP /VA/ CENTRAL INDEX KEY: 0000852220 STANDARD INDUSTRIAL CLASSIFICATION: SHORT-TERM BUSINESS CREDIT INSTITUTIONS [6153] IRS NUMBER: 541208450 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-17832 FILM NUMBER: 99707200 BUSINESS ADDRESS: STREET 1: 2700 S QUINCY ST STE 540 CITY: ARLINGTON STATE: VA ZIP: 22206 BUSINESS PHONE: 7039312274 MAIL ADDRESS: STREET 1: 2700 S QUINCY STREET STREET 2: STE 540 CITY: ARLINGTON STATE: VA ZIP: 22206 8-K 1 FORM 8-K 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 EX-10.1 2 LOAN AGREEMENT - -------------------------------------------------------------------------------- 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 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 EX-10.1(A) 3 PROMISSORY NOTE 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. 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 EX-10.2 4 FORBEARANCE AGREEMENT 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. 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 -----END PRIVACY-ENHANCED MESSAGE-----