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Unassociated Document

EXHIBIT 10.18

 

THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF EFFECTIVE REGISTRATION STATEMENTS COVERING SUCH SECURITIES UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, UNLESS THE HOLDER SHALL HAVE OBTAINED AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED.

 

RENAISSANCE ALLIANCE INSURANCE SERVICES, LLC 

 

Convertible Note

 

	
$2,000,000

	
January 1, 2012

 

FOR VALUE RECEIVED, the undersigned, Renaissance Alliance Insurance Services, LLC, a Massachusetts limited liability company (the "Company"), hereby promises to pay to the order of Meadowbrook Insurance Group, Inc. (the "Payee") the principal sum of Two Million Dollars ($2,000,000), together with interest thereon, payable quarterly in arrears on the last day of each quarter beginning March 31, 2012. All computations of interest under this Note shall be made on the basis of a 365 day year and the actual days elapsed (including the first but excluding the last day) occurring in the period.

 

1.          Convertible Notes. This Note is one of the Convertible Notes (the "Notes") issued by the Company pursuant to, and entitled to the benefits of and obligations under, a Convertible Note Purchase Agreement dated the date hereof between the Company and the Payee and certain other investors (as amended from time to time, the "Purchase Agreement"). All capitalized and undefined terms herein shall have the meaning given them in the Purchase Agreement. Reference is also made to the Company's Amended and Restated Operating Agreement dated as of the date hereof among the Company's members (as amended from time to time, the "Operating Agreement").

 

2.           Interest. The outstanding principal amount hereunder shall bear interest at the rate of three percent (3%) per annum beginning on March 20, 2012 and continuing through the fifth anniversary of the date hereof; beginning on the first day following the fifth anniversary of the date hereof and continuing through the date of the occurrence of a Maturity/Conversion Event, the outstanding principal amount hereunder shall bear interest at the Federal Home Loan Bank of Boston 5-Year Classic Advance Rate in effect on such fifth anniversary plus two percent (2%).

 

3.           Maturity. Any portion of the outstanding principal balance of this Note with respect to which Payee has or does not exercise its Conversion Option (as hereinafter defined) in accordance with Section 4 hereunder, together with all accrued and unpaid interest thereon, shall be due and payable in full by the Company upon the first to occur of (i) the liquidation, dissolution or winding up of the Company, (ii) the merger, consolidation or reorganization of the Company (in one transaction or a series of related transactions) as a result of which the holders of a majority of the issued and outstanding Common Shares of the Company (or the majority of the issued and outstanding voting equity interests of the surviving entity in any merger or consolidation) were not the holders of a majority of the issued and outstanding Common Shares of the Company, in substantially the same proportion, immediately prior thereto, (iii) the sale or other similar disposition of all or substantially all of the assets of the Company or, (iv) December 31, 2021 (subparts (i) - (iv) being herein individually referred to as a "Maturity/Conversion Event" and collectively the "Maturity/Conversion Events").

 

  

  

  

 

4.           Conversion.

 

  (a)           Upon the occurrence of a Maturity/Conversion Event, the Payee shall have the option (i) to receive payment in full of the principal of this Note in accordance with Section 3 hereinabove, or, (ii) exercisable as set forth herein below, to convert the outstanding principal of this Note into Class A Common Shares of the Company, in the amount of one Class A Common Share per the Applicable Dollar Amount (determined in accordance with Exhibit A attached hereto) as of the date of exercise of the Conversion Option (as hereinafter defined) of outstanding principal (rounded to the nearest whole Class A Common Share, in the aggregate), as adjusted to reflect any partial prepayment permitted hereunder or any share split, reverse share split or share dividend affecting the Class A Common Shares (the "Conversion Option"). The Company shall notify the Payee in writing at least thirty (30) days in advance of the closing of a Maturity/Conversion Event of the type described in subparts (i) — (iv) of Section 3 hereinabove and upon the occurrence of a Maturity/Conversion Event and shall provide the Payee with all reasonably available material financial and other information about the applicable Maturity/Conversion Event and the Company at such time. The Payee shall then have the right to exercise the Conversion Option by notifying the Company in writing within fifteen (15) days of receipt of such notice and surrendering this Note to the Company, together with a joinder agreement to the Operating Agreement in form and substance reasonably acceptable to the Company, in exchange for the applicable number of Class A Common Shares, which shall be evidenced in the appropriate exhibit to the Operating Agreement and which shall be duly authorized and issued, and the Company shall deliver a certificate evidencing such Class A Common Shares (if other Class A Common Shares are certificated), together with the payment by the Company of any accrued, unpaid interest on the Note as of the effective date of conversion. In such event, the Payee's opening capital account will be equal to, or the Payee's capital account will be increased by, the converted outstanding principal balance of the Note.

 

  (b)           In addition to the rights set forth in Section 4(a) above, the Payee shall have the right to exercise the Conversion Option (but not to receive payment of all or any portion of the principal of this Note in accordance with Section 3 hereinabove) with respect to all or any portion of the outstanding principal of this Note, upon notice to the Company (i) upon the sale of Common Shares of the Company (in one transaction or a series of related transactions) as a result of which the holders of a majority of the issued and outstanding Common Shares of the Company were not the holders of a majority of the issued and outstanding Common Shares of the Company, in substantially the same proportion, immediately prior thereto, including without limitation the sale by J. Bruce Cochrane ("Mr. Cochrane") of the issued and outstanding Class A Common Shares of the Company resulting in Mr. Cochrane owning less than a majority of the issued and outstanding Class A Common Shares of the Company, (ii) the death, disability (as defined in the Operating Agreement) or termination of employment by the Company of Mr. Cochrane or (iii) immediately prior to the consummation of a Transaction pursuant to Section 5 of Article IV of the Operating Agreement with respect to which the Payee is a Co-Sale Participant (as defined in the Operating Agreement). Such conversion shall be effective (i) upon five (5) days written notice by the Payee to the Company and delivery to the Company of a joinder agreement to the Operating Agreement in form and substance reasonably acceptable to the Company (if the Payee has not previously delivered such a joinder agreement). In either such event, (A) the Company shall issue the applicable number of Class A Common Shares, which shall be evidenced in the appropriate exhibit to the Operating Agreement and which shall be duly authorized and issued, and the Company shall deliver a certificate evidencing such Class A Common Shares (if other Class A Common Shares are certificated) and (B) the Payee's opening capital account will be equal to, or the Payee's capital account shall be increased by, the outstanding principal balance of the Note with respect to which the Conversion Option was exercised, and the outstanding principal amount of the Note shall be reduced by such amount.

 

  

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5.           Subordination. Pursuant to the terms of the Subordination Agreement, all payments under this Note are subordinate to the payment obligations of the Company to the holders of the Term Note (as defined in the Subordination Agreement).

 

6.          Prepayment. The outstanding principal balance of this Note may not be prepaid, in whole or in part, at any time without the prior written consent of the Payee and the entire Board of Managers of the Company.

 

7.           Payments. All payments made by the Company in respect of this Note shall be made in immediately available funds to the Payee at such address or commercial bank within the United States as the Payee may designate by notice to the Company prior to the date when payment under this Note is due.

 

8.           Overdue Payments; Unlawful Interest Payment. Any amount overdue under this Note shall bear interest at a rate of two and one half percent (2.5%) per annum in excess of the rate then in effect under this Note, computed in the same manner as the base rate set forth hereinabove. In the event that any interest rate provided for herein shall be determined to be unlawful, such interest rate shall be computed at the highest rate permitted by applicable law.

 

9.           Costs of Collection. The Company hereby promises to pay all of the Payee's reasonable costs and expenses of collection, including without limitation reasonable attorneys' fees (to the extent permitted by applicable law).

 

10.         Waiver of Presentment. Every maker, endorser and guarantor hereof, or of the indebtedness evidenced hereby, expressly waives presentment, demand, protest, notice of dishonor, notice of non-payment, notice of maturity, notice of protest, presentment for the purpose of accelerating maturity, diligence in collection, and the benefit of any exemption under the homestead exemption law, if any, or any other exemption or insolvency laws.

 

11.         Events of Default. If any of the following events shall occur with respect to the Company, then the Payee may by written notice to the Company declare the entire outstanding principal balance of this Note, together with all accrued and unpaid interest thereon, to be immediately due and payable without presentation, presentment, protest or demand or notice of any kind, all of which are hereby expressly waived by the Company, and the Payee may proceed to enforce payment in such a manner as it may elect:

 

  

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  (a)           the failure of the Company to make any payment of principal of or interest on this Note within twenty (20) days of the date when due;

 

  (b)           the commencement of a voluntary case under Title 11 of the United States Code, as from time to time in effect, or the authorization, by appropriate proceedings of the Company's Board of Managers, of commencement of such a voluntary case;

 

  (c)           the filing against the Company of a petition commencing an involuntary case under said Title 11 and such petition shall remain undismissed and unstayed for a period of sixty (60) days;

 

  (d)           relief is sought by the Company as a debtor under any applicable law, other than said Title 11, of any jurisdiction relating to the liquidation or reorganization of debtors or to the modification or alteration of the rights of creditors, or the Company consents to or acquiesces in such relief; or

 

  (e)           the making of an assignment for the benefit of, or entering into a composition with, the Company's creditors, or the appointing or consent to the appointment of a receiver or other custodian for all or a substantial part of its property.

 

12.         Waivers. No delay or omission of the Payee in exercising any right or remedy hereunder shall constitute a waiver of any such right or remedy. A waiver on one occasion shall not operate as a bar to or waiver of any such right or remedy on any future occasion.

 

13.         Amendment. This Note may not be waived, modified, amended or terminated except by a written agreement signed by the Payee and the Company.

 

14.         Transfer. This Note may not be transferred except in accordance with the Purchase Agreement. Until this Note is transferred on the books of the Company, the Company may treat the registered holder hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary.

 

15.         Choice of Law. This Note shall be governed by, and construed and enforced in accordance with, the laws of The Commonwealth of Massachusetts.

 

[Remainder of this page is intentionally blank.]

 

  

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IN WITNESS WHEREOF, the Company has earned this Note to be executed on the day and year first above written.

 

	 	
RENAISSANCE ALLIANCE INSURANCE 

SERVICES, LLC

	 
	 	 	 	 
	 	
By: 

	 /s/ J. Bruce Cochrane	 
	 	 	Name:	J. Bruce Cochrane 	 
	 	 	Title:	President	 

 

[Signature Page to Meadowbrook Insurance Group, Inc. Convertible Note]

 

  

  

  

 

EXHIBIT A

 

Applicable Dollar Amount

Average

	
Annual

	 	$	1,099,999	 	 	$	1,100,000	 	 	$	 1,200,000 -	 	 	$	1,300,000 -	 	 	$	1,400,000 -	 	 	$	1,500,000 -	 	 	$	1,600,000 -	 	 	$	1,700,000 -	 	 	$	1,800,000 -	 	 	$	1,900,000 -	 	 	$	2,000,000	 
	
EBITDA

	 	
or less

	 	 	$	1,999,999	 	 	$	1,299,999	 	 	$	1,399,999	 	 	$	1,499,999	 	 	$	1,599,999	 	 	$	1,699,999	 	 	$	1,799,999	 	 	$	1,899,999	 	 	$	1,999,999	 	 	
or greater

	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Applicable Dollar

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Amount

	 	$	3.51	 	 	$	3.84	 	 	$	4.17	 	 	$	4.49	 	 	$	4.82	 	 	$	5.15	 	 	$	5.58	 	 	$	6.01	 	 	$	6.45	 	 	$	6.88	 	 	$	7.31	 

 

As used herein,

 

(i).     "EBITDA" means, with respect to any fiscal year, the Company's consolidated net income for such year, plus the total interest expense, plus state and federal income taxes, plus depreciation and amortization that were deducted in determining net income for such year, all determined on a consolidated basis in accordance with GAAP, but excluding extraordinary gains or losses (it being understood and agreed that in no event shall any increase or decrease in profit-sharing, override or other revenue- sharing amounts constitute an extraordinary gain or loss).

 

(ii).      "Average Annual EBITDA" means (a) if the date of exercise of the Conversion Option is in fiscal year 2015 or later, average annual EBITDA based on the Company's audited financial statements for the three consecutive fiscal years 2012-2014; (b) if the date of exercise of the Conversion Option is in fiscal year 2014, average annual EBITDA based on the Company's audited financial statements for the two consecutive fiscal years 2012 and 2013, (c) if the date of exercise of the Conversion Option is in fiscal year 2013, annual EBITDA based on the Company's audited financial statements for the fiscal year 2012; and (d) if the date of exercise of the Conversion Option is in fiscal year 2012, annual EBITDA based on a good faith estimate by the Company and trued up within 30 days after the Company's audited financial statements become available for the fiscal year 2012.ex10_19.htm

EXHIBIT 10.19

 

Business Purpose 

PROMISSORY NOTE -TERM LOAN

 

$4,228,473

 

Southfield, Michigan 

Dated: January 1, 2012

 

	 	TERMS
	 	 
	Principal Sum: 	$4,228,473
	 	 
	Effective Interest Rate:	Five and one-half percent (5.5%) per annum 
	 	 
	Commencement Date:	January 1, 2012 
	 	 
	Maturity Date:	April 30, 2016

 

FOR VALUE RECEIVED and as provided in this Promissory Note ("Note"), RENAISSANCE ALLIANCE SERVICES, LLC, a Massachusetts limited liability company ("Debtor"), promise(s) to pay to the order of MEADOWBROOK INSURANCE GROUP, INC., a Michigan corporation (or any holder of this Note, which collectively are referred to as "Lender") at its offices located at 26255 American Drive, Southfield, Michigan 48034 or such other place as Lender may designate in writing, the Principal Sum together with interest as provided in this Note.

 

The unpaid indebtedness under this Note shall be repayable to Lender in lawful money of the United States of America, and all principal indebtedness shall bear interest on the basis of a year of 360 days for the actual number of days elapsed at a rate of interest equal to the Effective Interest Rate and at the Effective Interest Rate plus three (3%) percent per annum ("Default Rate") after an Event of Default (as defined in that certain loan and security agreement dated January 1, 2012 between Debtor and Lender [the "Loan Agreement"]). Interest shall accrue from the Commencement Date.

 

On each of January 31, 2012 and February 29, 2012, interest only payments of $19,380.83 shall be paid by Debtor to Lender. On March 31, 2012, an interest only payment for the period from March 1 - 31, 2012 on the unpaid principal balance shall be made. Beginning on April 30, 2012 and on the last day of each calendar month thereafter until the Maturity Date, equal consecutive installments of principal and interest in the amount of $88,615.50 shall be paid by Debtor to Lender.

 

ALL OUTSTANDING PRINCIPAL, LATE PAYMENT CHARGES AND ACCRUED AND UNPAID INTEREST SHALL BE DUE AND PAYABLE ON THE MATURITY DATE.

 

This Note may be prepaid, in full or in part, at any time. In addition, the Debtor agrees to repay this Note with proceeds from the issuance of Convertible Notes in the manner set forth in Section 8, Use of Proceeds, of the Convertible Note Purchase Agreement (as defined in the Loan Agreement).

 

Except as otherwise provided in the Loan Agreement, all payments made under this Note shall be applied in the following order: First to late payment charges, then to interest, then to advances and last to principal. The Debtor acknowledges the payments required under this Note might not fully amortize the indebtedness evidenced by the Note and the final payment due at the Due Date accordingly might be a balloon payment comprising all the outstanding principal, late payment charges, advances and interest then due.

 

  

  

  

 

The Lender will credit any payment made by mail or night depository only upon the day of actual receipt by Lender, whether or not Lender has authorized payment by mail. Debtor expressly assumes all risks of loss or liability resulting from non-delivery or delay in delivery of any payment transmitted by mail, and no course of conduct or dealing shall affect Debtor's assumption of these risks.

 

If any payment due under this Note shall become overdue for a period in excess of five (5) days, the Debtor shall pay to the Lender a "late payment charge" equal to four (4%) percent of the delinquent payment to defray the expense incidental to handling such delinquent payment and not as a penalty. Acceptance of payment of a late payment charge shall not waive any default under this Note.

 

Upon the occurrence of an Event of Default, this Note and all other obligations and indebtedness of the Debtor to the Lender, whether absolute or contingent, direct, present or future, and however evidenced, shall become and shall be immediately due and payable.

 

If: (a) this Note or any loan document is referred to an attorney after demand for collection or enforcement or is collected or enforced through any legal proceeding; (b) an attorney is retained to represent the Lender in any bankruptcy, reorganization, receivership or other proceedings affecting creditors' rights and involving a claim under this Note or any loan document; (c) an attorney is retained to protect or enforce any mortgage or lien securing this Note; or (d) an attorney is retained to represent the Lender in any action arising out of any claim by Debtor or any other person against the Lender which would not have been asserted were it not for Lender's relationship with the Debtor, then the Debtor shall pay to the Lender all costs, expenses and actual attorney fees incurred by the Lender in addition to all other amounts due under this Note.

 

Acceptance by Lender of any payment in an amount less than the amount then due shall be deemed an acceptance on account only. No forbearance by Lender in enforcing any of its rights under this Note, nor any renewal, extension, or modification of any payment to be made under this Note, nor any acceptance by Lender of any payment in an amount less than the amount then due under this Note shall constitute a waiver of any of the terms of this Note or of any of Lender's rights under this Note. The Lender shall not by any act of omission or commission be deemed to waive any of its rights or remedies under this Note unless such waiver is in writing and signed and delivered by an authorized officer of the Lender and then only to the extent specifically set forth in the writing. No waiver shall operate as a waiver of the same right or remedy on a future occasion.

 

The rights, remedies, and benefits provided to the Lender in this Note and in documents given to secure the payment of this Note shall be cumulative, and shall not be exclusive of any other rights, remedies or benefits allowed by law or equity, and may be exercised either successively or concurrently.

 

It is the intention of Debtor and Lender to conform strictly to state and federal usury laws applicable to this loan transaction in permitting the highest rate of interest. Accordingly, the aggregate of all interest as determined under applicable law, chargeable or receivable under this Note or otherwise in connection with this loan transaction shall under no circumstances exceed the maximum amount of interest permitted by law. If any excess of interest in such respect is provided for, or shall be adjudicated to be so provided for in this Note, or in any of the documents securing payment of this Note or otherwise relating to this loan transaction then in such event (a) the provisions of this paragraph shall govern and control, (b) neither the Debtor nor the Debtor's successors and assigns or any other party liable for the payment of this Note shall be obligated to pay the amount of such interest to the extent that it is in excess of the maximum permitted by law and (c) the Effective Interest Rate shall be automatically subject to reduction to the maximum lawful contract rate allowed under such laws, as now or subsequently construed by courts of appropriate jurisdiction.

 

  

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The term "Lender" includes any holder of this Note. If more than one party signs, guarantees or acts as a surety for this Note, then the term "Debtor" shall mean all of them and any one of them and their obligations under this Note shall be joint and several.

 

The Debtor waives valuation and appraisement, demand, notice of protest or protest, presentment for payment, notice of nonpayment, dishonor and notice of dishonor and all other notices in connection with the exercise or enforcement of the Lender's rights or remedies, or any defense by reason of extension of time, renewals or other indulgences granted by Lender with respect to the Debtor or any of the collateral securing this Note. Debtor consents to any and all extensions of time, renewals, waivers, or modifications that may be granted by the Lender with respect to the payment or other provisions of this Note and consents to the release of any collateral given to secure the payment of this Note or of any part thereof, with or without substitution. Debtor agrees that additional makers, accommodation parties, or guarantors may become parties to this Note without notice to Debtor or affecting Debtor's liability under this Note. The liability to Lender of each person or entity signing this Note shall be absolute and unconditional, without regard to the liability of any other person or entity.

 

The invalidity of any of the provisions in this Note shall not affect any remaining provisions which can be given effect without the invalid provision. To this end, the provisions of this Note are declared to be severable.

 

This Note is secured by the Unlimited Personal Guaranty of J. Bruce Cochrane and Janet H. Cochrane, his wife, that certain Security Agreement delivered by Debtor to Lender, and the Unlimited Guaranty of each of Cochrane & Porter Insurance Agency, Inc., and RIG, LLC, all of which documents are dated January 1, 2012.

 

Reference is also made to the security documents for additional terms relating to the transaction giving rise to this Note, the security given for this Note, and additional terms, agreements, representations and conditions of the loan evidenced by this Note. If there is any express conflict between the terms and provisions of this Note and those contained in any security document, the terms and provisions of this Note shall govern and control.

 

[SPACE INTENTIONALLY LEFT BLANK]

 

  

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This Note has been delivered for value in Michigan, and shall be deemed executed in the State of Michigan. The liability of the Debtor shall be governed by, construed and enforced according to the laws of the State of Michigan.

 

	 	
"DEBTOR"

	 
	 	 	 
	 	
Renaissance Alliance Services, LLC, 

a Massachusetts limited liability company

	 
	 	 	 	 
	 	
By: 

	
J. Bruce Cochrane 

	 
	 	 	
J. Bruce Cochrane 

	 
	 	Its:	
President

	 
	 	 	 	 
	 	
Federal Tax I.D. No.: 043456048

	 

 

[SIGNATURE PAGE TO TERM NOTE]

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