Document:

pn-ex101_152.htm

Exhibit 10.1

 

SECOND AMENDMENT TO CREDIT AGREEMENT

 

This Second Amendment (this “Amendment”) to the Credit Agreement dated January 22, 2015 among Patriot National, Inc., a Delaware corporation (“Borrower”), the Lenders (as defined therein) and BMO Harris Bank N.A., as administrative agent (as previously amended, supplemented or otherwise modified, the “Credit Agreement”) is dated as of August 14, 2015.

1.Definitions.   Capitalized terms used and not defined in this Amendment have the respective meanings assigned to them in the Credit Agreement.

2.Amendments to the Credit Agreement.   As of the Second Amendment Effective Date (defined below), the Credit Agreement is hereby amended as follows:

(a)In Section 1.1, the following new defined terms shall be inserted in proper alphabetical order:

“Add-On Term Lender” means any Lender that is the holder of an Add-On Term Loan.

“Add-On Term Loan” – see Section 2.1.3.

“Initial Term Loan” – see Section 2.1.3.  

“Second Amendment” means the Second Amendment to Credit Agreement dated as of August 13, 2015 among the Borrower, the other Loan Parties, the Lenders party thereto and the Administrative Agent.

“Second Amendment Effective Date” means the date on which all of the conditions set forth in Section 4 of the Second Amendment have been satisfied.

(b)In Section 1.1, the following definitions are amended in their entirety to read as follows:

“Adjusted EBITDA” is defined as Consolidated Net Income plus, to the extent deducted in determining net income, tax expense (or less any tax benefits), Interest Expense, depreciation and amortization, net realized losses (or less any gains) on investments, loss on exchange of units and warrants, increase (or less any decrease) in the fair value of common stock and warrant redemption liability, non-cash stock compensation, and up to (x) $5,000,000 in any Fiscal Year beginning with Fiscal Year 2016 and (y) $5,000,000 for the period from the Second Amendment Effective Date through the end of Fiscal Year 2015 of non-capitalized fees and expenses related to Permitted Acquisitions that have been completed.  For any period in which a Permitted Acquisition of a line of business or entity occurs, Adjusted EBITDA shall be calculated on a pro forma basis as if the acquired line of business or entity had been acquired on the first day of such 

period.  Adjusted EBITDA for the Fiscal Quarter ending September 30, 2014 shall equal $9,737,868.

“Lender” means (a) each Person identified as a “Lender” on the signature pages hereof, (b) each Person that becomes a party hereto pursuant to an Assignment Agreement or a joinder agreement and (c) the respective successors and assigns of the foregoing.  References to the “Lenders” and to the “Revolving Lenders” shall include each Issuing Lender and the Swing Line Lender; for purposes of clarification only, to the extent that BMO Harris Bank N.A. (or any other Issuing Lender or successor Swing Line Lender) may have rights or obligations in addition to those of the other Lenders or the other Revolving Lenders, as applicable, due to its status as an Issuing Lender or the Swing Line Lender, its status as such will be specifically referenced.

“Term Percentage” means, as to any Term Lender, the percentage that (a) the outstanding principal amount of such Lender’s Term Loan is of (b) the aggregate outstanding principal amount of all Term Loans.  The Term Percentage of each Lender as of the Second Amendment Effective Date is set forth across from such Lender’s name on Schedule 2.1.

(c)Section 2.1.1 is amended in its entirety to read as follows:

2.1.1Revolving Loans.  Each Revolving Lender will make loans in Dollars to the Borrower on a revolving basis (“Revolving Loans”) during the period from the Effective Date to the Revolving Termination Date in an amount equal to such Revolving Lender’s Revolving Percentage of the aggregate amount of all Revolving Loans requested by the Borrower from time to time; provided that the Revolving Outstandings shall not at any time exceed the Revolving Commitment Amount; provided further that until such time as the Borrower delivers a Compliance Certificate demonstrating that the Total Leverage Ratio is equal to or less than 2.25 to 1.00 and the Borrower’s Adjusted EBITDA for the twelve-month period then ended is at least $70,000,000, the Revolving Outstandings shall not exceed $30,000,000 (for purposes of calculating Adjusted EBITDA in any Compliance Certificate delivered pursuant to this Section 2.1.1, the add-back in the definition of Adjusted EBITDA for non-capitalized fees and expenses related to Permitted Acquisitions shall be excluded).

(d)Section 2.1.2 is amended in its entirety to read as follows:

2.1.2Letters of Credit.  (a) Each Issuing Lender will issue standby letters of credit (each a “Letter of Credit”) in Dollars at the request of and for the account of the Borrower from time to time, subject to Section 2.3, before the date that is 30 days prior to the scheduled Revolving Termination Date, and (b) as more fully set forth in Section 2.3, each Revolving Lender agrees to purchase a participation in each Letter of Credit; provided that (x) the aggregate Stated Amount of all Letters of Credit shall not at any time exceed $10,000,000 and (y) the Revolving Outstandings shall not at any time exceed the Revolving Commitment Amount; 

 

provided further until such time as the Borrower delivers a Compliance Certificate demonstrating that the Total Leverage Ratio is equal to or less than 2.25 to 1.00 and the Borrower’s Adjusted EBITDA for the twelve-month period then ended is at least $70,000,000, the Revolving Outstandings shall not exceed $30,000,000 (for purposes of calculating Adjusted EBITDA in any Compliance Certificate delivered pursuant to this Section 2.1.2, the add-back in the definition of Adjusted EBITDA for non-capitalized fees and expenses related to Permitted Acquisitions shall be excluded). 

(e)Section 2.1.3 is amended in its entirety to read as follows:

2.1.3Term Loans.  

(a)On the Effective Date, each Term Lender made a term loan (each, an “Initial Term Loan”) in Dollars to the Borrower in the amount set forth on Part A of Schedule 2.1.3.  The aggregate amount of Initial Term Loans on the Effective Date was $40,000,000.  

(b)Prior to the Second Amendment Effective Date, certain Term Lenders made Incremental Term Loans to the Borrower in the amounts set forth on Part B of Schedule 2.1.3 and in an aggregate amount of $20,000,000 (the “Initial Incremental Term Loans” and together with the Initial Term Loans, the “Initial Loans”)

(c)On the Second Amendment Effective Date, each Add-On Term Lender will make a term loan (each, an “Add-On Term Loan”, and together with the Initial Loans and any Incremental Term Loans made pursuant to Section 2.5, the “Term Loans”) in Dollars in the amount set forth on Part C of Schedule 2.1.3.  The aggregate amount of all Add-On Term Loans on the Second Amendment Effective Date is $50,000,000. 

(c)Term Loans that are repaid may not be reborrowed.

(f)Section 2.4.1 

2.4.1.Swing Line Loans.  Subject to the terms and conditions of this Agreement, the Swing Line Lender may from time to time, in its discretion, make loans to the Borrower (collectively the “Swing Line Loans” and individually each a “Swing Line Loan”) in accordance with this Section 2.4 in an aggregate amount not at any time exceeding $10,000,000; provided that the Revolving Outstandings shall not at any time exceed the Revolving Commitment Amount; provided further that until such time as the Borrower delivers a Compliance Certificate demonstrating that the Total Leverage Ratio is equal to or less than 2.25 to 1.00 and the Borrower’s Adjusted EBITDA for the twelve-month period then ended is at least $70,000,000, the Revolving Outstandings shall not exceed $30,000,000 (for purposes of calculating Adjusted EBITDA in any Compliance Certificate delivered pursuant to this Section 2.4.1, the add-back in the definition of Adjusted EBITDA for non-capitalized fees and expenses related to Permitted Acquisitions 

 

shall be excluded).  Amounts borrowed under this Section 2.4 may be borrowed, repaid and (subject to the agreement of the Swing Line Lender) reborrowed until the Revolving Termination Date.  Swing Line Loans shall be Base Rate Loans. 

(g)Section 2.5(a) is amended in its entirety to read as follows:

(a)If no Unmatured Event of Default or Event of Default exists, the Borrower may, by written notice (substantially in the form of Exhibit I) to the Administrative Agent (which shall promptly advise each Lender) request the making of an additional tranche of term loans (each an “Incremental Term Loan”) by an amount for all such requests, plus the amount of any increases in the Revolving Commitments pursuant to Section 2.6, not to exceed $40,000,000 from and after the Second Amendment Effective Date; provided that any such request shall (x) be in a minimum amount of $5,000,000 or a higher integral multiple of $1,000,000 and (y) set forth the date that the Borrower proposes the Incremental Term Loans be made, the requested amount and the proposed terms of the Incremental Term Loans.  At the time of sending such notice, the Borrower (in consultation with the Administrative Agent) shall specify the time period within which each Lender is requested to respond (which shall in no event be less than ten Business Days from the date of delivery of such notice to the Lenders).

(h)Section 2.5(e) is amended in its entirety to read as follows:

(e)The Incremental Term Loans shall be on the same terms as the Term Loans made prior to such date with an amortization schedule in accordance with Schedule 6.1(b).  The supplement to this Agreement referenced in Section 2.5(f) may, without the consent of any Lender that is not an Incremental Lender, effect such amendments to this Agreement and the other Loan Documents as may be necessary or appropriate, in the opinion of the Administrative Agent to effect the provisions of this Section 2.5, including an amortization schedule that sets forth the amounts of each amortization payment in accordance with Schedule 6.1(b).

(i)Section 2.5(h) is amended in its entirety to read as follows:

(h)The Incremental Term Loans, shall constitute Term Loans under, and shall be entitled to all the benefits afforded by, this Agreement and the other Loan Documents and shall, without limiting the foregoing, benefit equally and ratably with respect to the security interests created by the Collateral Documents.  The Loan Parties shall take any actions reasonably required by the Administrative Agent to ensure and/or demonstrate that the Lien and security interests granted by the Collateral Documents continue to be perfected under the Uniform Commercial Code (as defined in the Security Agreement) or other Applicable Law relating to the perfection of security interests after giving effect to the establishment of the Incremental Term Loans.

 

(j)Section 2.6(a) is amended in its entirety to read as follows: 

(a)Request for Increase.  Provided there exists no Unmatured Event of Default or Event of Default, upon notice (substantially in the form of Exhibit I) to the Administrative Agent (which shall promptly notify the Lenders), the Borrower may from time to time request an increase in the Revolving Commitments by an amount for all such requests, plus the amount of any Incremental Term Loans, not to exceed $40,000,000 from and after the Second Amendment Effective Date; provided that (i) any such request for an increase shall be in a minimum amount of $5,000,000 or a higher integral multiple of $1,000,000 and (ii) the Borrower may make a maximum of three such requests.  At the time of sending such notice, the Borrower (in consultation with the Administrative Agent) shall specify the time period within which each Revolving Lender is requested to respond (which shall in no event be less than ten Business Days from the date of delivery of such notice to the Revolving Lenders).

(k)Section 6.1 is amended in its entirety to read as follows:

6.1Repayment of Loans.  (a)  The Initial Loans and the Add-On Term Loans shall be repaid in installments on the dates and in the amounts set forth on Schedule 6.1(a) and the Incremental Term Loans shall be repaid in installments on the dates and in the amounts set forth on Schedule 6.1(b), in each case, with a final installment on the Term Maturity Date in an amount equal to the then unpaid principal balance of such Term Loans.  Each such installment shall be applied to repay such Term Loans of the Term Lenders according to their respective Term Percentages.

(l)Section 12.1 is amended by replacing the term “Term Loans” with “Initial Term Loans” in each place where it appears therein.

(m)Schedule 2.1 of the Credit Agreement is replaced with Schedule 2.1 attached hereto.

(n)Schedule 2.1.3 attached hereto is added to the Credit Agreement.

(o)Schedule 6.1 of the Credit Agreement is replaced with Schedules 6.1(a) and 6.1(b) attached hereto.

(p)Schedule 9.14 of the Credit Agreement is replaced with Schedule 9.14 attached hereto.

3.Representations and Warranties. Each Loan Party represents and warrants to the Administrative Agent and the Lenders that:

(a)Authorization; No Conflict.  The execution, delivery and performance by such Loan Party of this Amendment, and the consummation of the transactions contemplated hereby, (i) are within such Loan Party’s limited liability company, limited partnership or corporate powers, as applicable, (ii) have been duly authorized by all 

 

necessary limited liability company, limited partnership or corporate action, as applicable, (iii) do not contravene (x) such Loan Party’s organizational documents or (y) any law, regulation or contractual restriction binding on or affecting such Loan Party and (iv) will not result in or require the creation or imposition of any Lien upon or with respect to any of the properties of such Loan Party or any of its Subsidiaries.  

(b)Governmental Approvals.  No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority or regulatory body or any other third party is required for the due execution, delivery and performance by such Loan Party of this Amendment.

(c)Enforceability.  This Amendment has been duly executed and delivered by such Loan Party and is the legal, valid and binding obligation of such Loan Party, enforceable against such Loan Party in accordance with its terms, except as affected by (i) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and other similar laws relating to or affecting the enforcement of creditors’ rights generally and/or (ii) general principles of equity (regardless of whether such enforcement is considered in a proceeding at law or in equity).

(d)Representations and Warranties.  On the date hereof, each representation and warranty set forth in Section 9 of the Credit Agreement, as amended by this Amendment, is true and correct in all material respects on and as of the date hereof with the same effect as if made on and as of the date hereof (except to the extent any such representation or warranty is expressly stated to have been made as of a specific date, in which case such representation or warranty was true and correct as of such date).

(e)No Default.  No Event of Default or Unmatured Event of Default exists or will exist after giving effect to this Amendment.

4.Effectiveness. This Amendment shall become effective on the date (the “Second Amendment Effective Date”) when the Administrative Agent has received each of the following, in form and substance satisfactory to the Administrative Agent:

(a)counterparts of this Amendment signed by each Loan Party, the Administrative Agent, each Add-On Term Lender and the Required Lenders; 

(b)a certificate signed by each Loan Party certifying that the representations and warranties set forth in Sections 3(a) through 3(e) are true and correct;

(c)favorable opinions of Baker & Hostetler LLP, counsel to the Loan Parties, addressed to the Lenders and the Administrative Agent;

(d)evidence that concurrently with the effectiveness of this Amendment, the Borrower will acquire Global HR Research, LLC; 

(e)certified copies of all documents evidencing any necessary corporate (or other similar) action, and any material third-party consents and governmental approvals 

 

(if any) required for the execution, delivery and performance (including the intended use of the Add-On Term Loans) by each Loan Party of this Amendment; 

(f)certified copies of resolutions of the Governing Body of each Loan Party authorizing or ratifying the execution, delivery and performance by such Person of this Amendment;

(g)certified copies of Uniform Commercial Code and other lien search reports dated a date reasonably near to the Second Amendment Effective Date, listing all effective financing statements that name any Loan Party (under its present name and any previous names) as debtor, together with copies of such financing statements;

(h)a pro forma Compliance Certificate giving effect to the Acquisition of Global HR Research, LLC and the Add-On Term Loans;

(i)all documentation and other information required by bank regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including the Patriot Act;

(j)certification that since December 31, 2014, there has been no event that constitutes or would reasonably be expected to have a Material Adverse Effect;

(k)evidence that all fees and other amounts that are then due and payable pursuant to the Fee Letter dated as of June 29, 2015 between the Borrower and BMO Capital Markets Corp. and pursuant to Section 15.6 of the Credit Agreement shall have been paid; 

(l)a joinder agreement with respect to any Add-On Lender that was not a party to the Credit Agreement; 

(m)evidence that on the Second Amendment Effective Date, after giving effect to the Add-On Term Loans and the Acquisition described in Section 4(h), the Borrower has a Total Leverage Ratio of less than 3.0 to 1.0; provided that solely for purposes of this Section 4(m), Total Leverage Ratio shall be calculated by including in Total Debt the unused portion of the Revolving Commitment Amount and excluding from Total Debt the amount of any Capitalized Lease Obligations; 

(n)the Revolving Oustandings shall not be greater than $30,000,000; and

(o)such other documents as the Administrative Agent or any Lender may reasonably request.

5.Continuing Effectiveness, etc. 

(a)Except to the extent expressly set forth herein, all of the terms and conditions of the Credit Agreement and the other Loan Documents remain unchanged and in full force and effect.  Each Loan Party affirms that after giving effect to this Amendment, the Credit Agreement, as modified hereby, and each other Loan Document 

 

to which any Loan Party is a party will remain in full force and effect and will continue to constitute a legal, valid and binding obligation of such Loan Party, enforceable against such Loan Party in accordance with its terms except insofar as such enforcement may be limited by Debtor Relief Laws. 

(b)Upon the effectiveness hereof, all references to the Credit Agreement set forth in any other agreement or instrument shall, unless otherwise specifically provided, be references to the Credit Agreement as amended hereby.   

6.Miscellaneous.  The provisions of Sections 1.2, 15.6(a), 15.7, 15.9, 15.10, 15.11, 15.12, 15.16 and 15.17 of the Credit Agreement are incorporated herein by reference, mutatis mutandis.  

[Signature Page Follows]

 

IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above.

 

		
	
PATRIOT NATIONAL, INC.

	
By:
	
/s/ Steven M. Mariano

	
Name: 
	
Steven M. Mariano

	
Title: 
	
CEO

	
 
	
 

	
PATRIOT SERVICES, INC.

	
 
	
 

	
By:
	
/s/ Steven M. Mariano

	
Name: 
	
Steven M. Mariano

	
Title: 
	
CEO

	
 
	
 

	
PATRIOT BENEFITS ADMINISTRATORS, INC.

	
 
	
 

	
By:
	
/s/ Steven M. Mariano

	
Name: 
	
Steven M. Mariano

	
Title: 
	
CEO

	
 
	
 

	
PATRIOT CAPTIVE MANAGEMENT, INC.

	
 
	
 

	
By:
	
/s/ Steven M. Mariano

	
Name: 
	
Steven M. Mariano

	
Title: 
	
CEO

	
 
	
 

	
PATRIOT CARE, INC.

	
 
	
 

	
By:
	
/s/ Steven M. Mariano

	
Name: 
	
Steven M. Mariano

	
Title: 
	
CEO

	
 
	
 

	
PATRIOT CARE HOLDINGS, INC. 

	
 
	
 

	
By:
	
/s/ Steven M. Mariano

	
Name: 
	
Steven M. Mariano

	
Title: 
	
CEO

	
 
	
 

	
PATRIOT CARE SERVICES, INC.

	
 
	
 

	
By:
	
/s/ Steven M. Mariano

	
Name: 
	
Steven M. Mariano

	
Title: 
	
CEO

 

 

		
	
PATRIOT CLAIM SERVICES, INC.

	
 
	
 

	
By:
	
/s/ Steven M. Mariano

	
Name: 
	
Steven M. Mariano

	
Title: 
	
CEO

	
 
	
 

	
PATRIOT LEGAL SERVICES, INC.

	
 
	
 

	
By:
	
/s/ Steven M. Mariano

	
Name: 
	
Steven M. Mariano

	
Title: 
	
CEO

	
 
	
 

	
PATRIOT RECOVERY SERVICES, INC.

	
 
	
 

	
By:
	
/s/ Steven M. Mariano

	
Name: 
	
Steven M. Mariano

	
Title: 
	
CEO

	
 
	
 

	
PATRIOT TECHNOLOGY SOLUTIONS, INC.

	
 
	
 

	
By:
	
/s/ Steven M. Mariano

	
Name: 
	
Steven M. Mariano

	
Title: 
	
CEO

	
 
	
 

	
VIKARAN TECHNOLOGY SOLUTIONS, INC.

	
 
	
 

	
By:
	
/s/ Steven M. Mariano

	
Name: 
	
Steven M. Mariano

	
Title: 
	
CEO

	
 
	
 

	
CORPORATE CLAIMS MANAGEMENT, INC.

	
 
	
 

	
By:
	
/s/ Steven M. Mariano

	
Name: 
	
Steven M. Mariano

	
Title: 
	
CEO

	
 
	
 

	
FORZA LIEN, INC.

	
 
	
 

	
By:
	
/s/ Steven M. Mariano

	
Name: 
	
Steven M. Mariano

	
Title: 
	
CEO

 

 

		
	
INSURELINX, INC.

	
 
	
 

	
By:
	
/s/ Steven M. Mariano

	
Name: 
	
Steven M. Mariano

	
Title: 
	
CEO

	
 

	
PATRIOT RISK SERVICES, INC.

	
 
	
 

	
By:
	
/s/ Christopher L. Pizzo

	
Name: 
	
Christopher L. Pizzo

	
Title: 
	
Secretary

	
 
	
 

	
PATRIOT CARE MANAGEMENT, INC.

	
 
	
 

	
By:
	
/s/ Christopher L. Pizzo

	
Name: 
	
Christopher L. Pizzo

	
Title: 
	
Vice-President, Secretary

	
 
	
 

	
PATRIOT UNDERWRITERS, INC.

	
 
	
 

	
By:
	
/s/ Christopher L. Pizzo

	
Name: 
	
Christopher L. Pizzo

	
Title: 
	
Secretary

	
 
	
 

	
CONTEGO INVESTIGATIVE SERVICES, INC.

	
 
	
 

	
By:
	
/s/ Christopher L. Pizzo

	
Name: 
	
Christopher L. Pizzo

	
Title: 
	
Vice-President

	
 
	
 

	
TRIGEN INSURANCE SOLUTIONS, INC.

	
 
	
 

	
By:
	
/s/ Christopher L. Pizzo

	
Name: 
	
Christopher L. Pizzo

	
Title: 
	
Vice-President, Secretary

	
 
	
 

	
TRIGEN HOSPITALITY GROUP, INC.

	
 
	
 

	
By:
	
/s/ Elizabeth M. Hensen

	
Name: 
	
Elizabeth M. Hensen

	
Title: 
	
Assistant Secretary

 

 

		
	
CWIBENEFITS, INC.

	
 
	
 

	
By:
	
/s/ Elizabeth M. Hensen

	
Name: 
	
Elizabeth M. Hensen

	
Title: 
	
Assistant Secretary

 

			
	
CONTEGO SERVICES GROUP, LLC

	
 

	
By:
	
Patriot Services, Inc., its Manager

	
 
	
 

	
 
	
By:
	
/s/ Steven M. Mariano

	
 
	
Name: 
	
Steven M. Mariano

	
 
	
Title: 
	
CEO

 

				
	
CONTEGO RECOVERY, LLC

	
 
	
 

	
By:
	
Contego Services Group, LLC, its Manager

	
 
	
 

	
 
	
By:
	
Patriot Services, Inc., its Manager

	
 
	
 
	
 
	
 

	
 
	
 
	
By:
	
/s/ Steven M. Mariano

	
 
	
 
	
Name:
	
Steven M. Mariano

	
 
	
 
	
Title:
	
CEO

 

			
	
DECISION UR, LLC

	
 

	
By:
	
Patriot Technology Solutions, Inc., its Manager

	
 
	
 

	
 
	
By:
	
/s/ Steven M. Mariano

	
 
	
Name:
	
Steven M. Mariano

	
 
	
Title:
	
CEO

 

 

		
	
BMO HARRIS BANK N.A., as Administrative Agent and a Lender

	
 

	
By:
	
/s/ Joan Spiotto Murphy

	
Name: 
	
Joan Spiotto Murphy

	
Title: 
	
Director

	
 
	
 

	
FIFTH THIRD BANK

	
 

	
By:
	
/s/ Gary Ladolcetta

	
Name: 
	
Gary Ladolcetta

	
Title: 
	
SVP

	
 
	
 

	
SUNTRUST

	
 

	
By:
	
/s/ Paula Mueller

	
Name: 
	
Paula Mueller

	
Title: 
	
Director

	
 
	
 

	
CITY NATIONAL BANK OF FLORIDA

	
 

	
By:
	
/s/ Gabriella Cioli

	
Name: 
	
Gabriella Cioli

	
Title: 
	
SVP – Corporate Banking

	
 
	
 

	
THE PRIVATEBANK AND TRUST COMPANY

	
 

	
By:
	
/s/ Andrew C. Haak

	
Name: 
	
Andrew C. Haak

	
Title: 
	
Managing Director

 

* All schedules and exhibits to this Exhibit 2.11 have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The schedules include a list of assumed customer contracts, assumed liabilities, wiring instructions, and licenses. The exhibits include the assignment and assumption agreement and the intellectual property assignment agreement. A copy of any omitted schedule and/or exhibit will be furnished to the Securities and Exchange Commission upon request.pn-ex102_153.htm

 

Exhibit 10.2

PATRIOT NATIONAL, INC.

ACQUISITION INCENTIVE PLAN
UNDER THE
PATRIOT NATIONAL, INC. 2014 OMNIBUS INCENTIVE PLAN

1.Purpose.  The purpose of this Patriot National, Inc. Acquisition Incentive Plan (the “Plan”) is to promote the interests of the Company and its shareholders by (i) retaining officers and other key employees of the Company and its subsidiaries and (ii) motivating such individuals to grow the business of the Company through one or more Acquisitions.  This Plan is established pursuant to Sections 4 and 10 of the Patriot National, Inc. 2014 Omnibus Incentive Plan (the “Omnibus Plan”) for the purpose of granting Other Cash-Based Awards.

2.Definitions.  All capitalized terms used in the Plan shall have the meanings set forth in Schedule A attached hereto.

3.Operation of the Plan.  Subject to applicable law, and in addition to other express powers and authorizations conferred on the Administrator by the Plan, the Administrator shall have full power and authority to: (i) designate Participants; (ii) determine the terms and conditions of the payment of any Incentive consistent with the provisions of the Plan; (iii) establish, amend, suspend, terminate or waive any terms or conditions of the Plan (subject to Section 5(g)); (iv) determine whether, to what extent, and under what circumstances and method(s) Incentives may be settled, canceled, forfeited, or suspended; (v) appoint such agents as it shall deem appropriate for the proper administration of the Plan; and (vi) make any other determination and take any other action that the Administrator deems necessary or desirable for the administration of the Plan.  All determinations and other decisions under or with respect to the Plan shall be final, conclusive, and binding upon all Persons, including the Company, any Participant, any beneficiary of any Participant and any employee of the Company charged with implementing any such determinations or decisions. Neither of the Administrator or any of its designees shall be personally liable for any action or determination made in good faith with respect to the Plan hereunder.

4.Incentive Pool and Payments.

a)Establishment and Allocation of Incentive Pool.  On or prior to any Closing Date of an Acquisition, the Company shall establish an Incentive Pool in respect of such Acquisition in an amount based upon the Acquisition Incentive Plan Matrix, as determined by the Administrator in its sole discretion, with such Incentive Pool to be allocated to all or a portion of the Participants as the Administrator may determine in its sole discretion (and with the advice of and in consultation with the Executive Vice President of Mergers and Acquisitions, or any successor position); provided, however, that, in all events such portion of the Incentive Pool shall be fully allocated. 

b)Payment of Incentives; Clawback.  Subject to the terms and conditions of the Plan and subject to the Participant’s continued employment with the Company or one of its subsidiaries through and including the applicable payment date, a Participant’s Incentive in respect of each Acquisition (if any) shall be paid in cash in a lump sum (unless otherwise determined by the Administrator) on the first payroll date following the Closing Date of such Acquisition (but in no event more than sixty (60) days following such Closing Date); provided that in the event the acquired entity, assets or business relating to an Acquisition does not meet or exceed certain target performance measures, objectives or metrics (set by the Administrator, in its discretion, in connection with the entry into or consummation of such Acquisition), then the Administrator may, in its sole discretion, (i) unilaterally require repayment of up to 50% (the “Clawback Amount”) of the proceeds of any Incentive paid to the Participant in respect of 

 

 

such Acquisition or (ii) to the extent the Participant remains employed with the Company or its subsidiaries and is eligible to participate in the Plan, reduce (including down to zero) such Participant’s allocation of any future Incentive in connection with any future Acquisition by the Clawback Amount.   

5.General Provisions.

a)Nontransferability.  Any rights of a Participant to any Incentive under the Plan shall not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant otherwise than by will or by the laws of descent and distribution, and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company.

b)No Inclusion in Calculation of Benefits. Any payment hereunder represents a unique payment to a Participant, and any such amounts shall not be considered in calculating, or determining the level of entitlement to, any Participant’s salary or other compensation-related benefits (including, without limitation, bonus, pension and 401(k)).

c)Withholding.  The Company and its subsidiaries shall have the right and are hereby authorized to withhold from any payment due hereunder or from any compensation or other amount owing to a Participant by the Company or its subsidiaries, the amount of any applicable withholding taxes in respect of any payment hereunder, and the Company and its subsidiaries are further authorized to take such other action as may be necessary in the opinion of the Company or its subsidiaries to satisfy all obligations for the payment of such taxes.

d)No Right to Employment.  The participation of any Participant in the Plan shall not be construed as giving a Participant the right to be retained in the employ of, or in any consulting relationship to, the Company.  

e)Governing Law.  The validity, construction, and effect of the Plan shall be determined in accordance with the laws of the State of Delaware, without regard to conflict of laws provisions thereof.

f)No Trust or Fund Created.  The Plan is intended to constitute an “unfunded” bonus plan.  The Plan shall not create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company and a Participant or any other Person.  To the extent that any Person acquires a right to receive payments from the Company pursuant to this Plan, such right shall be no greater than the right of any unsecured general creditor of the Company.

g)Amendment and Termination.  

i)The Committee may amend, alter, suspend, waive, discontinue or terminate the Plan or any portion thereof, at any time and from time to time; provided, however, that no such amendment, alteration, suspension, discontinuance or termination occurring after the Closing Date of any Acquisition shall adversely affect the rights of any Participant or any holder or beneficiary with respect to any unpaid Incentive amount in respect of such Acquisition, unless consented to, in writing, by the affected Participant or beneficiary thereof.  Notwithstanding the foregoing, nothing in this Section 5(g) shall impair the ability of the Administrator under clause 4(b)(ii) hereof to require repayment of any previously paid Incentive or unilaterally reduce the amount of future Incentives as provided therein. 

ii)Without limiting the foregoing, the Plan shall remain in full force and effect until the earlier of (y) the date the Plan is terminated by the Committee (in its sole discretion) or (y) the date the Omnibus Plan is amended, restated or terminated.  Participants shall not be entitled to receive any 

 

 

payments under the Plan with respect to any Acquisition whose Closing Date occurs after the termination of the Plan. 

h)Section 409A of the Code.  It is intended that the payments under the Plan will be exempt from the provisions of Section 409A of the Code (or comply with Section 409A of the Code, to the extent subject thereto). Notwithstanding other provisions of the Plan, no payment shall be granted, deferred, accelerated, extended, paid out or modified under this Plan in a manner that would result in the imposition of an additional tax under Section 409A of the Code upon a Participant.  In the event that it is reasonably determined by the Administrator that, as a result of Section 409A of the Code, payments under the Plan may not be made at the time contemplated by the terms of the Plan without causing the Participant receiving such payment to be subject to taxation under Section 409A of the Code, the Company will make such payment on the first day that would not result in the Participant incurring any tax liability under Section 409A of the Code.  For purposes of Section 409A of the Code, a Participant’s right to receive any installment payments shall be treated as a right to receive a series of separate and distinct payments.  If pursuant to the provisions of Section 409A of the Code any distribution or payment is required to be delayed as a result of a Participant being deemed to be a “specified employee” within the meaning of that term under Section 409A(a)(2)(B) of the Code, then any such distributions or payments under the Plan shall not be made or provided prior to the earlier of (A) the expiration of the six month period measured from the date of the Participant’s separation from service (as defined under Section 409A of the Code) or (B) the date of the Participant’s death. The Company shall use commercially reasonable efforts to implement the provisions of this Section 5(h) in good faith; provided that none of the Company, the Administrator or any of the Company’s employees, directors or representatives shall have any liability to Participants with respect to this Section 5(h).

i)Successors and Assigns.  The Plan and the obligations of the Company hereunder shall be binding on its successors and assigns, whether by operation of law or otherwise.

 

 

 

 

 

Schedule A

Definitions

“Acquisition” shall mean the acquisition by the Company or any of its subsidiaries, whether by merger, equity sale, sale of assets or other business combination, of the voting or economic interests of any Person or business (or a subsidiary, a division or the assets of such Person or business); provided that an Acquisition shall not include any transaction that results in a Change in Control of the Company.  The Administrator shall determine, in its sole discretion, whether and when an Acquisition has occurred and such determination shall be conclusive and binding on the Company and all Participants.

“Acquisition Incentive Plan Matrix” shall mean the matrix set forth in Schedule B attached hereto.

“Administrator” shall mean the Chief Executive Officer of the Company, or such other committee or officer of the Company that the Committee may designate from time to time; provided that with respect to the Chief Executive Officer or any other “executive officer” (within the meaning of Rule 3b-7 of the Securities Exchange Act of 1934, as amended) of the Company (to the extent they are Participants under the Plan), the Administrator shall be the Committee.

“Board” shall mean the Board of Directors of the Company.

“Change in Control” shall have the meaning given to such term in the Patriot National, Inc. 2014 Omnibus Incentive Plan, as amended from time to time, or any successor plan thereto.

“Closing Date” shall mean, as to any Acquisition, the date on which the consummation of an Acquisition occurs.

“Code” shall mean the Internal Revenue Code of 1986, as amended.

“Committee” ” shall mean the Compensation Committee of the Board or any properly delegated subcommittee thereof or, if no such Compensation Committee or subcommittee thereof exists, the Board.

“Company” shall mean Patriot National, Inc., a Delaware corporation.

“Deal Size” means the aggregate amount of any consideration paid, or payable, by or on behalf of the Company or its subsidiaries in connection with an Acquisition, whether in the form of cash, stock, debt securities, or otherwise. The Administrator shall determine, in its sole discretion, the Deal Size applicable to an Acquisition (including, without limitation, whether contingent payouts based upon “earn-outs”, amounts placed into escrow or the principal amount of all indebtedness assumed by the Company and its subsidiaries in connection with an Acquisition will be included in Deal Size). 

“Incentive” shall mean a cash payment (representing a portion of the Incentive Pool) granted to a Participant pursuant to the terms of the Plan.

“Incentive Pool” shall mean a cash bonus pool that is established by the Company pursuant to the Plan and available for allocation by the Administrator to Participants, from time to time in connection with the closing of an Acquisition, in accordance with the Plan.

“Participant” shall mean any officer or key employee of the Company selected by the Administrator to receive an Incentive under the Plan.

“Person” shall mean a “person”, as such term is used for purposes of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (or any successor section thereto). 

 

 

Schedule B

Acquisition Incentive Plan Matrix

 

						
	
Patriot National, Inc. 
	
 
	
 
	
 

	
Acquisition Incentive Plan Matrix

	
$ in thousands
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
Deal Size
	
 
	
 
	
Total

	
 
	
Min
	
Max
	
 
	
 
	
Incentive Pool

	
 
	
 $                 -   
	
 $              500 
	
 
	
 
	
5.00%

	
 
	
                 501 
	
              1,000 
	
 
	
 
	
4.80%

	
 
	
              1,001 
	
              1,500 
	
 
	
 
	
4.60%

	
 
	
              1,501 
	
              2,000 
	
 
	
 
	
4.40%

	
 
	
              2,001 
	
              2,500 
	
 
	
 
	
4.20%

	
 
	
              2,501 
	
              3,000 
	
 
	
 
	
4.00%

	
 
	
              3,001 
	
              3,500 
	
 
	
 
	
3.80%

	
 
	
              3,501 
	
              4,000 
	
 
	
 
	
3.60%

	
 
	
              4,001 
	
              4,500 
	
 
	
 
	
3.40%

	
 
	
              4,501 
	
              5,000 
	
 
	
 
	
3.20%

	
 
	
              5,001 
	
              5,500 
	
 
	
 
	
3.00%

	
 
	
              5,501 
	
              6,000 
	
 
	
 
	
2.80%

	
 
	
              6,001 
	
              6,500 
	
 
	
 
	
2.60%

	
 
	
              6,501 
	
              7,000 
	
 
	
 
	
2.40%

	
 
	
              7,001 
	
              7,500 
	
 
	
 
	
2.20%

	
 
	
              7,501 
	
              8,000 
	
 
	
 
	
2.00%

	
 
	
              8,001 
	
              8,500 
	
 
	
 
	
1.80%

	
 
	
              8,501 
	
              9,000 
	
 
	
 
	
1.60%

	
 
	
              9,001 
	
              9,500 
	
 
	
 
	
1.40%

	
 
	
              9,501 
	
           10,000 
	
 
	
 
	
1.20%

	
 
	
           10,001 
	
            (Unlimited)
	
 
	
 
	
1.00%

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