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EXHIBIT 10.16
LOAN AGREEMENT
BETWEEN
MILIRISK, INC.
AND
NATIONSBANK OF TEXAS, N.A.
DATED
MARCH 12, 1997
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TABLE OF CONTENTS
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1. DEFINITIONS.............................................................................................1
2. REVOLVING CREDIT FACILITY...............................................................................4
2.1 Revolving Loans.....................................................................................4
2.2 Purposes............................................................................................4
2.3 Borrowing Base Deficiency...........................................................................5
2.4 Procedure for Borrowing.............................................................................5
2.5 Commitment Fee......................................................................................5
2.6 Redemption of Commitment............................................................................5
3. INTEREST RATE OPTIONS FOR REVOLVING LOANS...............................................................5
3.1 Prime Rate Loans....................................................................................5
3.2 Eurodollar Loans....................................................................................6
3.3 Interest Rate Determination.........................................................................6
3.4 Conversion Option: Prime Rate Loans to Eurodollar Loans.............................................6
3.5 Conversion Option: Eurodollar Loans to Prime Rate Loans.............................................6
3.6 Prepayment of Loans.................................................................................7
3.7 Schedule II.........................................................................................7
4. TERM CREDIT FACILITY....................................................................................7
4.1 Term Loan...........................................................................................7
4.2 Purpose.............................................................................................7
4.3 Amortization........................................................................................7
5. INTEREST RATE OPTIONS FOR TERM NOTE:....................................................................7
5.1 Prime Rate Loan.....................................................................................8
5.2 Eurodollar Loans....................................................................................8
5.3 Selection of Interest Rate..........................................................................8
5.4 Conversion Option: Prime Rate to Eurodollar Rate....................................................9
5.5 Conversion Option: Eurodollar Rate to Prime Rate....................................................9
5.6 Prepayment of Eurodollar Loans......................................................................9
5.7 Schedule II.........................................................................................9
6. SECURITY...............................................................................................10
6.1 Accounts Receivable, Etc...........................................................................10
6.2 Pledge of Stock....................................................................................10
6.3 Guaranties.........................................................................................10
6.4 Comfort Letter.....................................................................................10
7. CONDITIONS PRECEDENT TO INITIAL FUNDING................................................................10
7.1 Loan Origination Fee...............................................................................10
(i)
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7.2 Effectiveness of Loan Documents....................................................................10
7.3 Opinions...........................................................................................10
7.4 Representations and Warranties.....................................................................10
7.5 Documentation and Proceedings......................................................................11
7.6 Expenses...........................................................................................11
7.7 Approval of Stock Acquisition Agreement............................................................11
8. CONDITIONS PRECEDENT TO SUBSEQUENT REVOLVING LOANS.....................................................11
8.1 Availability of Commitment.........................................................................11
8.2 Expenses...........................................................................................11
8.3 Other Conditions Precedent.........................................................................11
8.4 Required Acts and Conditions.......................................................................11
9. AFFIRMATIVE COVENANTS..................................................................................11
9.1 Financial Statements and Other Information.........................................................11
9.2 Insurance..........................................................................................12
9.3 Existence and Compliance...........................................................................12
9.4 Notices to Bank....................................................................................12
9.5 Taxes and Other Obligations........................................................................12
9.6 Maintenance........................................................................................13
9.7 Compliance with Agreements.........................................................................13
9.8 Further Assurances.................................................................................13
10. NEGATIVE COVENANTS....................................................................................13
10.1 Minimum Net Worth.................................................................................13
10.2 Sale of Assets....................................................................................14
10.3 Liquidation, Merger, Consolidation, Acquisition...................................................14
10.4 Borrowings........................................................................................14
10.5 Dividends. Distributions and Purchases and Capital Stock..........................................15
10.6 Character of Business.............................................................................15
10.7 Arm's Length Transactions.........................................................................15
11. REPRESENTATIONS AND WARRANTIES........................................................................15
11.1 Good Standing.....................................................................................15
11.2 Authority and Compliance..........................................................................15
11.3 Binding Agreement.................................................................................15
11.4 Litigation........................................................................................16
11.5 No Conflicting Agreements.........................................................................16
11.6 Ownership of Assets...............................................................................16
11.7 Taxes.............................................................................................16
11.8 Financial Statements..............................................................................16
11.9 Continuation of Representations and Warranties....................................................16
12. Default...............................................................................................16
12.1 Nonpayment........................................................................................16
(ii)
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12.2 Representations and Warranties....................................................................16
12.3 Default in Affirmative and Negative Covenants Under Agreement.....................................17
12.4 Default in Other Covenants Under Agreement........................................................17
12.5 Default in Other Loan Dab.........................................................................17
12.6 Default in Other Debt.............................................................................17
12.7 Validity of Loan Documents........................................................................17
12.8 Bankruptcy........................................................................................17
12.9 Judgments and Decrees.............................................................................18
12.10 Termination of Services..........................................................................18
13.REMEDIES...............................................................................................18
14.NOTICES................................................................................................18
15.COSTS, EXPENSES AND ATTORNEY'S FEES....................................................................18
16.MISCELLANEOUS..........................................................................................19
16.1 Cumulative Rights and No Waiver...................................................................19
16.2 Applicable Law....................................................................................19
16.3 Amendment.........................................................................................19
16.4 Documents.........................................................................................19
16.5 Partial Invalidity................................................................................19
16.6 Survivability.....................................................................................20
16.7 Accounting Terms..................................................................................20
16.8 Right to Grant Participants.......................................................................20
17.ARBITRATION............................................................................................20
17.1 Special Rules.....................................................................................20
17.2 Reservation of Rights.............................................................................21
18.AGREEMENT CONTROLLING..................................................................................21
19.NOTICE OF FINAL AGREEMENT..............................................................................21
SCHEDULES AND EXHIBITS
Schedule I...................................Interest Rate Pricing Definitions
Schedule II....................Special Provisions Relating to Eurodollar Loans
Schedule 10.4......Permitted Indebtedness.........................Section 10.4
Exhibit A.............Borrowing Request............................Section 2.4
Exhibit B..........Term Loan Rate Request..........................Section 5.3
Exhibit C..........Compliance Certificate.......................Section 9.1(c)
Exhibit D...........Borrowing Base Report.......................Section 9.1(d)
(iii)
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LOAN AGREEMENT
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March 12, 1997
Between
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BORROWER BANK
MILIRISK, INC. NATIONSBANK OF TEXAS, N.A.
000 XXXXXXX XXXX XXXXX BANKING CENTER
XXXX XXXXX, XXXXX 00000-0000 000 XXXX 0XX XXXXXX
XXXX XXXXX, XXXXX 00000-0000
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In consideration of the Loan or Loans described below and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, Bank and Borrower agree as follows:
1. DEFINITIONS. Certain definitions concerning the interest rate
provisions are set forth on Schedule I. In addition, the following terms shall
have the meaning set forth with respect thereto:
"AQS" means Applied Quoting Systems, Inc., a Wisconsin corporation.
"BASE NET WORTH AMOUNT": See Section 10.1.
"BORROWING BASE" means the greater of $2,500,000 or 80% of Eligible
Accounts Receivable.
"BORROWING BASE REPORT": See Section 9.1(e).
"BORROWING REQUEST": See Section 2.4.
"COMFORT LETTER": See Section 6.4.
"COMMITMENT" means the obligation of Bank, subject to the terms and
conditions of this Agreement, to make Revolving Loans which shall not exceed at
any one time outstanding the lesser of (a) $4,000,000, or (b) the Borrowing
Base.
"CONSOLIDATED NET WORTH": See Section 10.1.
"CONTESTED IN GOOD FAITH" means, as to any payment, tax, assessment,
charge, levy, lien, encumbrance or claim, contesting the amount, applicability
or validity thereof in good faith by appropriate proceedings or other
appropriate actions promptly initiated and diligently conducted in a manner
satisfactory to Bank, provided the enforcement of the contested payment, tax,
assessment, charge, levy, lien, encumbrance or claim is stayed in a manner
satisfactory to Bank pending the resolution of such contest.
LOAN AGREEMENT - Page 1
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"ELIGIBLE ACCOUNTS RECEIVABLE" means all accounts receivable of
Borrower, SDS and AQS in the aggregate which have been created in the ordinary
course of business of these three entities and upon which the right of these
three entities to receive payment is absolute and not contingent upon the
fulfillment of any condition whatsoever, and shall NOT include:
(a) that portion of any account which is unpaid more them
sixty (60) days from the invoice date thereof;
(b) any account against which there exists a right of setoff,
defense or discount, except regular discounts allowed in the ordinary
course of business;
(c) any account which arises out of a contract or order
which, by its terms, forbids or makes void or unenforceable any
assignment to Bank of the account receivable arising with respect
thereto;
(d) any account which represents an obligation to a customer
which is not a resident of the United States unless such account is
supported by a letter of credit in form and substance acceptable to
Bank;
(e) any account which arises from the sale or lease to or
performance of services for, or represents an obligation of, any
employee, affiliate, partner, parent or subsidiary of Borrower, SDS or
AQS;
(f) any account which would otherwise be eligible pursuant to
the foregoing formula, if 50% or more of such account is unpaid more
than sixty (60) days from the date of invoice thereof;
(g) that portion of any account from a customer which
represents the amount by which the total accounts from such customer
exceeds 30% of the total accounts which would otherwise be eligible
pursuant to the foregoing formula; and
(h) any account on which Bank is not or does not continue to
be, in Bank's sole discretion, satisfied with the credit standing of
the customer in relation to the amount of credit extended.
"EVENT OF DEFAULT": See Section 12.0.
"GAAP": See Section 16.7
"GUARANTORS" mean SDS, AQS and any other person or entity now or
hereafter guaranteeing payment of the Obligations.
"GUARANTY AGREEMENTS" mean each guaranty agreement described in
Section 6.3 hereof, together with all modifications and amendments thereof.
"LOAN DOCUMENTS" means this Agreement, the Notes, the Security
Agreements, the Agreements, the Pledge Agreements, and all other documents,
instruments, guaranties, security agreements, deeds of trust,
LOAN AGREEMENT - Page 2
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pledge agreements, certificates and agreements executed and/or delivered by
Borrower, any guarantor or third party in connection with any Loan.
"LOANS" means the Term Loan and all Revolving Loans hereunder.
"MERGER AGREEMENT" means that certain Agreement and Plan of Merger
among Millers Integrated Claims Resources, Inc., Millers Merger Corporation,
SDS and certain Management Shareholders (as defined therein) dated as of
February 18, 1997.
"MINIMUM NET WORTH AMOUNT": See Section 10.1.
"NOTES" mean the Term Note, the Revolving Note, and all renewals,
extensions, modifications and amendments thereto, and substitutions therefor.
"OBLIGATIONS" means the obligations of Borrower:
(a) to pay all indebtedness arising out of this Agreement,
any future advances under this Agreement, and all renewals, extensions
or amendments of such indebtedness or any part thereof or any such
future advances;
(b) to pay the principal of and interest on the Notes in
accordance with the terms thereof, and all renewals, extensions,
modifications and amendments of such Notes or any part thereof, and
any future advances made pursuant thereto;
(c) to repay to Bank all amounts advanced by Bank hereunder
or under the other Loan Documents on behalf of Borrower, including,
without limitation, advances for principal or interest payments to
prior secured parties, mortgagees, or lienors, or for taxes, levies,
insurance, rent, repairs to or maintenance or storage of any of the
collateral;
(d) to pay any and all other indebtedness of Borrower to Bank
of every kind, nature and description, direct or indirect, primary or
secondary, secured or unsecured (including overdrafts), joint or
several, absolute or contingent, due or to become due, now existing or
hereafter arising, regardless of how it may be evidenced, including
without limitation all future advances, whether or not presently
contemplated by the parties hereto;
(e) to perform fully all of the terms and provisions of each
of the instruments constituting the Loan Documents; and
(f) to reimburse Bank, on demand, for all of Bank's expenses
and costs that Borrower is obligated to pay pursuant to the terms of
the Loan Documents.
"PARTICIPANTS": See Section 16.8.
"PLEDGE AGREEMENTS" mean each pledge agreement described in Section
6.2 hereof, together with all modifications and amendments thereof.
LOAN AGREEMENT - Page 3
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"PRINCIPAL REVOLVING DEBT": See Section 2.1.
"PRINCIPAL TERM DEBT" means the outstanding principal balance of the
Term Note as it exists from time to time.
"REVOLVING LOANS": See Section 2.1
"REVOLVING NOTE" means the promissory note described in Section 2.1
hereof, together with all renewals, extensions, modifications and amendments
thereto, and substitutions therefor.
"REVOLVING NOTE MATURITY DATE" means March 12, 1999
"SDS" means Strategic Data Systems, Inc., a Wisconsin corporation.
"SECURITY AGREEMENTS" mean each security agreement described in
Section 6.1 hereof, together with all modifications and amendments thereof.
"TERM LOAN": See Section 4.1.
"TERM LOAN RATE REQUEST": See Section 5.3.
"TERM NOTE" means the promissory note described in Section 4.1 hereof,
together with all renewals, extensions, modifications and amendments thereto,
and substitutions therefor.
"TERM NOTE MATURITY DATE" means March 12, 2001.
2. REVOLVING CREDIT FACILITY.
2.1 REVOLVING LOANS. Bank agrees, subject to the terms and
conditions hereof, to lend Borrower at any time and from time to time
on or before the Revolving Note Maturity Date sums (each herein called
a "Revolving Loan" and collectively the "Revolving Loans") which may
be repaid and reborrowed pursuant to the terms hereof and which shall
not exceed at any one time outstanding the amount of the Commitment.
The obligation of Borrower to repay the aggregate principal balance of
all Revolving Loans hereunder outstanding at any one time (the
"Principal Revolving Debt") shall be evidenced by a promissory note of
Borrower, which Revolving Note shall (a) be dated March 12, 1997; (b)
be payable on the Revolving Note Maturity Date for the amount of
$4,000,000, or the Principal Revolving Debt then outstanding,
whichever is less; (c) bear interest from the date thereof until paid
in the manner hereafter provided; (d) be entitled to the benefits of
this Agreement and the security provided herein; and (e) be in such
form as is acceptable to Bank.
2.2 PURPOSES. Borrower agrees that proceeds of Revolving
Loans shall be used solely to provide a portion of the purchase price
for the acquisition of the stock of SDS and AQS, and for general
working capital purposes. In addition, Revolving Loan proceeds may be
used as a source for the payment of interest due OD the Notes from
time to time.
LOAN AGREEMENT - Page 4
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2.3 BORROWING BASE DEFICIENCY. If by reason of any
adjustment to the Borrowing Base, the Principal Revolving Debt then
outstanding exceeds the Commitment, then Bank shall notify Borrower of
same, and Borrower shall within ten (10) days following receipt of
such notice prepay an amount which will reduce the Principal Revolving
Debt to an amount which is equal to or less than the Commitment.
2.4 PROCEDURE FOR BORROWING. Whenever Borrower desires a
Loan hereunder, Borrower shall give Rank notice in the form of Exhibit
"A" attached hereto (a "Borrowing Request") specifying (a) the date
(which shall be a Business Day in the case of a Prime Rate Loan or a
Eurodollar Business Day in the case of a Eurodollar Loan) of the
proposed borrowing, (b) the amount to be borrowed, (c) the portion of
the borrowing constituting a Prime Rate Loan and/or a Eurodollar Loan
(which may only be in Incremental Portions), and (d) if any portion of
the proposed borrowing constitutes a Eurodollar Loan, the initial
Eurodollar Interest Period selected by Borrower (thirty days, sixty
days, ninety days, or one hundred eighty days). Such notice shall be
given by 10 a.m. (Fort Worth, Texas time) on the date of the proposed
borrowing in the case of a Prime Rate Loan, and by 10 a.m. (Fort
Worth, Texas time) two (2) Business Days prior to the date of the
proposed borrowing in the case of a Eurodollar Loan. The notice
required may be given telephonically by Borrower to Bank, but upon
giving such telephonic notice Borrower shall immediately thereafter
provide Bank with the written notice attached hereto as Exhibit "A."
AU notices given under this Section 2.4 shall be irrevocable. Not
later than 2:00 p.m. (Fort Worth, Texas time) on the date of the
proposed borrowing and upon fulfillment of all other conditions
required by this Agreement, Bank will make such Loan available to
Borrower by crediting the amount thereof to Borrower's account with
Bank or otherwise disbursing it as Borrower shall request in writing.
No Revolving Loans may be obtained after the Revolving Note Maturity
Date.
2.5 COMMITMENT FEE. Borrower agrees to pay Bank a commitment
fee for the period commencing with the date of this Agreement to the
Revolving Note Maturity Date, computed at the rate of 1/4 of 1% per
annum on the average daily unused portion of the Commitment. Such
commitment fee shall be payable on the last day of each calendar
quarter and on the Revolving Note Maturity Date.
2.6 REDEMPTION OF COMMITMENT. Borrower shall have the right
to reduce the amount of the Commitment, at any time and from time to
tune, in any integral multiple of $1 provided however, that any such
reduction shall be accompanied by the payment in full of any
commitment fee then accrued on the amount of such reduction.
Contemporaneously with each such reduction, Borrower shall repay to
Bank the amount, if any by which the Principal Revolving Debt exceeds
the Commitment. After each such reduction, (a) the commitment fee
provided for in Section 2.5 hereof shall be calculated with respect to
the Commitment as so reduced, and (b) the Commitment may not be
increased without the consent of Bank.
3. INTEREST RATE OPTIONS FOR REVOLVING LOANS. The interest rate
options available hereunder for Revolving Loans shall be for Prime Rate Loans
and for Eurodollar Loans. No more than three (3) different Eurodollar Loans may
be outstanding at any one time.
3.1 PRIME RATE LOANS. Borrower agrees to pay interest
(calculated on the basis of the actual days elapsed in a year
consisting of 360 days) with respect to the unpaid principal amount of
each Prime
LOAN AGREEMENT - Page 5
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Rate Loan from the date the proceeds thereof are made available to
Borrower until maturity (whether by acceleration or otherwise) at a
varying rate per annum equal to the lesser of (i) the Maximum Rate or
(ii) the Prime Rate. The interest in respect of each Prime Rate Loan
shall be payable on the last day of each Prime Rate Interest Period.
Each Prime Rate Loan may be prepaid in whole or in part at any time
and from time to time without premium or penalty.
3.2 EURODOLLAR LOANS. Borrower agrees to pay interest
(calculated on the basis of actual days elapsed in a year consisting
of 360 days) with respect to the unpaid principal amount of each
Eurodollar Loan from the date the proceeds thereof are made available
to Borrower until maturity (whether by acceleration or otherwise) at a
rate per annum equal to the lesser of (i) the Maximum Rate or (ii) the
Eurodollar Rate applicable to such Eurodollar Loan. Subject to the
provisions of this Agreement as to prepayment, interest with respect
to each Eurodollar Loan shall be payable (i) on the last day of each
Eurodollar Interest Period, where the Eurodollar Interest Period in
question is thirty days, sixty days, or ninety days, and (ii) on the
ninetieth day and on the last day of each Eurodollar Interest Period,
where the Eurodollar Interest Period in question is one hundred eighty
days. Subject to the provisions of this Agreement as to prepayment,
the principal of each Eurodollar Loan shall be due and payable on the
last day of each applicable Eurodollar Interest Period and may be paid
or renewed or shall automatically be converted to a Prime Rate Loan on
the last day of such Eurodollar Interest Period as hereinafter
provided. If no Event of Default exists hereunder and Borrower desires
to renew such Eurodollar Loan and the amount thereof is at least an
Incremental Portion, Borrower shall deliver the notice required in
Section 2.4 hereof and designate whether the Eurodollar Interest
Period to commence on the expiration date of the prior Eurodollar
Interest Period shall be a thirty day, sixty day, ninety day or one
hundred eighty day period. If Bank has not received timely permissible
notice of designation of such Eurodollar Interest Period as herein
provided, Borrower shall be deemed to have elected to convert such
maturing Eurodollar Loan to a Prime Rate Loan.
3.3 INTEREST RATE DETERMINATION. Bank shall determine each
interest rate applicable hereunder and shall give prompt notice to
Borrower of each rate of interest so determined.
3.4 CONVERSION OPTION: PRIME RATE LOANS TO EURODOLLAR LOANS.
Borrower may convert its Prime Rate Loans to Eurodollar Loans by
giving Bank irrevocable written notice of such election at least two
(2) Eurodollar Business Days prior to the proposed conversion date.
The notice of conversion to a Eurodollar Loan shall include (1) the
amount of the Prime Rate Loan to be converted (which must be converted
in Incremental Portions), and (2) the duration of the Eurodollar
Interest Period selected (thirty days, sixty days, ninety days or one
hundred eighty days). If no Event of Default exists hereunder, such
conversion shall be made on the requested conversion date or, if such
requested conversion date is not a Eurodollar Business Day, on the
next succeeding Eurodollar Business Day, but if an Event of Default
exists hereunder, no conversion may occur.
3.5 CONVERSION OPTION: EURODOLLAR LOANS TO PRIME RATE LOANS.
Borrower may convert all or any part of its Eurodollar Loans to Prime
Rate Loans by giving Bank irrevocable written notice of such election
prior to 10 a.m. (Fort Worth, Texas time) on the conversion date, if
such conversion date is the last day of a Eurodollar Interest Period
with respect thereto, or at least two (2) Eurodollar Business Days
prior written notice if the conversion date is a day other than the
last day of the Eurodollar Interest Period with respect thereto. Such
conversion shall be made on the requested conversion date or, if such
LOAN AGREEMENT - Page 6
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requested conversion date is not a Business Day, on the next
succeeding Business Day. A conversion of a Eurodollar Loan to a Prime
Rate Loan on a day other than the last day of the Eurodollar Interest
Period for the Eurodollar Loan in question shall constitute a
prepayment which may require the payment of the breakage fee described
in Section 6 of Schedule II attached hereto. AU conversion notices
given hereunder shall be irrevocable.
3.6 PREPAYMENT OF LOANS. (a) Borrower may at any time and
from time to time prepay any Prime Rate Loan, in whole or in part,
without premium or penalty, and (b) Borrower may at any time and from
time to time prepay any Eurodollar Loan in whole or in part, without
premium or penalty except as provided in Section 6 of Schedule II,
provided that Borrower first complies with the conditions hereinafter
set forth. With respect to eurodollar Loans, Borrower shall give Bank
at least two (2) Eurodollar Business Days prior written notice of (i)
its intent to prepay, (ii) the amount of principal which will be
prepaid, and (iii) the date on which the prepayment will be made. Each
prepayment of principal of eurodollar Loans shall be in a minimum
amount of $100,000 (or the aggregate principal amount outstanding, if
less) and in increments of S100,000 in excess thereof (unless the
prepayment retires the outstanding principal balance of the Note in
full) = accrued interest thereon to the date of prepayment. Borrower
may also be required to pay Bank the breakage fee described in Section
6 of Schedule II attached hereto because such payment is made on a
date other than the last day of the applicable eurodollar Interest
Period.
3.7 SCHEDULE II. Reference is made to Schedule II attached
hereto for special provisions relating to eurodollar Loans.
4. TERM CREDIT FACILITY.
4.1 TERM LOAN. Bank agrees, subject to the terms and
conditions hereof, to lend to Borrower $5,000,000 (the "Term Loan").
The Term Loan shall be evidenced by a promissory note of Borrower,
which Term Note shall (a) be dated March 12, 1997; (b) bear interest
from the date of advancement until paid in the manner provided herein;
(c) be payable as to interest in the manner hereinafter provided; (d)
be finally due and payable on the Term Note Maturity Date; (e) be
entitled to the benefits of this Agreement and the security provided
herein; and (0 be in such loan as is acceptable to Bank.
4.2 PURPOSE. Borrower agrees that proceeds of the Term Loan
shall be used solely to provide a portion of the purchase price for
the acquisition of the stock of SDS and AQS.
4.3 AMORTIZATION. The principal and accrued interest of the
Term Note shall be due and payable in fifteen (15) consecutive
quarterly principal installments of $312,500, each plus accrued
interest on the unpaid principal balance to the date of each
installment payment, on March 31, June 30, September 30 and December
31 of each year commencing March 31, 1997, and continuing through and
including September 30, 2000. Then, the outstanding principal balance
of the Term Note together with accrued unpaid interest thereon shall
be due and payable in one installment on March 12, 2001.
5. INTEREST RATE OPTIONS FOR TERM NOTE: The interest rate options
available for the Term Note hereunder shall be the Prime Rate and the
Eurodollar Rate. The outstanding principal balance of the Term Note shall bear
interest at either the Prime Rate or the Eurodollar Rate or a combination
LOAN AGREEMENT - Page 7
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thereof selected in the manner set forth below provided no more than three (3)
separate tranches of Principal Term Debt may bear interest at the Eurodollar
Rate at any one time.
5.1 PRIME RATE LOAN. Borrower agrees to pay interest
(calculated on the basis of the actual days elapsed in a year
consisting of 360 days) with respect to that portion of the Principal
Term Debt which is a Prime Rate Loan at a varying rate per annum equal
to the lesser of (i) the Maximum Rate or (ii) the Prime Rate. Accrued
interest on that portion of the Principal Term Debt which constitutes
a Prime Rate Loan shall be due and payable on the last day of each
Prime Rate Interest Period. That portion of the Principal Term Debt
which constitutes a Prime Rate Loan may be prepaid in whole or in part
at any time and from time to time without premium or penalty.
5.2 EURODOLLAR LOANS. Borrower agrees to pay interest
(calculated on the basis of actual days elapsed in a year consisting
of 360 days) with respect to the unpaid principal amount of each
Eurodollar Loan at a rate per annum equal to the lesser of (i) the
Maximum Rate or (ii) the Eurodollar Rate applicable to such Eurodollar
Loan. Subject to the provisions of this Agreement as to prepayment,
interest with respect to each Eurodollar Loan shall be payable (i) on
the last day of each Eurodollar Interest Period, where the Eurodollar
Interest Period in question is thirty days, sixty days, or ninety
days, and (ii) on the ninetieth day and on the last day of each
eurodollar Interest Period, where the Eurodollar Interest Period in
question is one hundred eighty days. Subject to the provisions of this
Agreement as to prepayment, the principal of each Eurodollar Loan
shall be due and payable on the last day of each applicable Eurodollar
Interest Period and may be paid or renewed or shall automatically be
converted to a Prime Rate Loan on the last day of such Eurodollar
Interest Period as hereinafter provided. If no Event of Default exists
hereunder and Borrower desires to renew such Eurodollar Loan and the
amount thereof is at least an Incremental Portion, Borrower shall
deliver the Term Loan Rate Request required in Section S.3 hereof and
designate whether the Eurodollar Interest Period to commence on the
expiration date of the prior Eurodollar Interest Period shall be a
thirty day, sixty day, ninety day, or one hundred eighty day period.
If Bank has not received timely permissible notice of designation of
such Eurodollar Interest Period as herein provided, Borrower shall be
deemed to have elected to convert such maturing Eurodollar Loan to a
Prime Rate Loan.
5.3 SELECTION OF INTEREST RATE. Borrower shall select the
interest rate or rates for the Term Note by means of completing a
request (the "Term Loan Rate Request") in the form of Exhibit "B."
attached hereto with blanks completed in conformity herewith. Where
Borrower desires to select an interest rate, convert from one interest
rate to another or renew a Eurodollar Loan, Borrower shall submit to
Bank a Term Loan Rate Request specifying (a) the date for the
requested selection to be effective (which shall be a Business Day in
the case of a Prime Rate Loan or a eurodollar Business Day in the case
of a eurodollar Loan); (b) the type of transaction (selection of an
interest rate, conversion from one rate to another or a renewal of a
eurodollar Loan); (c) the amount involved (which in the case of the
initial selection of the eurodollar Rate or in the case of a
conversion from the Prime Rate to the Eurodollar Rate or in the case
of a renewal of an existing eurodollar Loan must be an Incremental
Portion); and (d) if any portion of the request involves a Eurodollar
Loan, the length of the Eurodollar Interest Period selected (thirty
days, sixty days, ninety days, or one hundred eighty days). Each Term
Loan Rate Request shall be delivered to Bank by 10 a.m. (Fort Worth,
Texas time) on the date of the proposed transaction in the case of a
Prime Rate Loan, and by 10 a.m. (Fort Worth, Texas time) two (2)
Business Days prior to the date of the proposed transaction in the
case of a eurodollar Loan. The
LOAN AGREEMENT - Page 8
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information required to be specified in a Term Loan Rate Request may
be given telephonically by Borrower to Bank, but upon giving such
telephonic notice, Borrower shall immediately thereafter provide Bank
with the fully completed and executed Term Loan Rate Request. All Term
Loan Rate Requests given pursuant to this Agreement shall be
irrevocable. Not later than 12 noon (Fort Worth, Texas time) on the
date of the requested transaction and upon fulfillment of all other
conditions required by this Agreement, Bank will effect the requested
transaction. Bank shall determine each Eurodollar Rate applicable
hereunder and shall give prompt notice thereof to Borrower.
5.4 CONVERSION OPTION: PRIME RATE TO EURODOLLAR RATE.
Borrower may convert one or more Incremental Portions (subject to the
restriction that no more than three (3) separate tranches of the
Principal Term Debt may bear interest at the eurodollar Rate at any
one time) to one or more Eurodollar Loans by giving Bank irrevocable
written notice of such election at least two (2) Eurodollar Business
Days prior to the proposed conversion date. The notice of conversion
to a Eurodollar Loan shall include (1) the amount of the Prime Rate
Loan to be converted (which must be converted in Incremental
Portions), and (2) the duration of the Eurodollar Interest Period
selected (thirty days, sixty days, ninety days or one hundred eighty
days). If no Event of Default exists hereunder, such conversion shall
be made on the requested conversion date or, if such requested
conversion date is not a Eurodollar Business Day, on the next
succeeding eurodollar Business Day, but U an Event of Default exists
hereunder, no conversion may occur.
5.5 CONVERSION OPTION: EURODOLLAR RATE TO PRIME RATE.
Borrower may convert all or any part of its eurodollar Loans to the
Prime Rate by giving Bank irrevocable written notice of such election
prior to 10 a.m. (Fort Worth, Texas time) on the conversion date, U
such conversion date is the last day of a eurodollar Interest Period
with respect thereto, or at least two (2) eurodollar Business Days
prior written notice if the conversion date is a day other than the
last day of the eurodollar Interest Period with respect thereto. Such
conversion shall be made on the requested conversion date or, if such
requested conversion date is not a Business Day, on the next succeed
Business Day. A conversion of a eurodollar Loan to the Prime Rate on a
day other than the last day of the eurodollar Interest Period for the
eurodollar Loan in question shall constitute a prepayment which may
require the payment of the breakage fee described in Section 6 of
Schedule II attached hereto. All conversion notices given hereunder
shall be irrevocable.
5.6 PREPAYMENT OF EURODOLLAR LOANS. Borrower may at any time
and from time to time prepay any eurodollar Loan in whole or in part,
provided that Borrower first complies with the conditions hereinafter
set forth. Borrower shall give Bank at least two (2) eurodollar
Business Days prior written notice of (i) its intent to prepay, (ii)
the amount of principal which will be prepaid, and (iii) the date on
which the prepayment will be made. Each prepayment of principal shall
be in a minimum amount of S100,000 (or the aggregate principal amount
outstanding, if less) and in increments of $100,000 in excess thereof
(unless the prepayment retires the outstanding principal balance of
the Term Note in full) plus accrued interest thereon to the date of
prepayment. Borrower may also be required to pay Bank the breakage fee
described in Section 6 of Schedule II attached hereto to the extent
that such payment is made on a date other than the last day of the
applicable eurodollar Interest Period.
5.7 SCHEDULE II. Reference is made to Schedule II attached
hereto for special provisions relating to Eurodollar Loans.
LOAN AGREEMENT - Page 9
14
6. SECURITY.
6.1 ACCOUNTS RECEIVABLE, ETC. The payment and performance of
the Obligations shall be secured by a lien and security interest in
all of the accounts receivable, inventory, equipment, servicing
contract rights and other personal property of Borrower, SDS and AQS
pursuant to security agreements (each agreement, as the same may
hereafter be amended or supplemented from time to time being a
"Security Agreement") which shall be in such form as is satisfactory
to Bank, subject only to exceptions noted therein. The liens created
by the Security Agreements shall be first and prior liens, subject
only to liens expressly permitted therein.
6.2 PLEDGE OF STOCK. The payment and performance of the
Obligations shall be secured by a first priority lien and security
interest in 100% of the outstanding shares of SDS and AQS pursuant to
pledge agreements (each agreement, as the same may hereafter be
amended or supplemented from time to time being a "Pledge Agreement")
which shall be in such form as is satisfactory to Bank. The liens
created by the Pledge Agreements shall be first and prior liens.
6.3 GUARANTIES. The payment and performance of the
Obligations shall be secured by the unconditional guarantee of SDS and
the unconditional guarantee of AQS pursuant to the terms of agreements
(each agreement, as the same may be amended or supplemented from time
to time being a "Guaranty Agreement") which shall be in such form as
is satisfactory to Bank.
6.4 COMFORT LETTER. Borrower shall cause The Millers Mutual
Fire Insurance Company ("Millers Mutual") to issue a comfort letter
(the "Comfort Letter") assuring Borrower's payment and performance of
the Obligations on a basis which is satisfactory to Bank which shall
address, among other things, suspension of management fee and Borrower
net worth maintenance issues.
7. CONDITIONS PRECEDENT TO INITIAL FUNDING. The obligation of Bank to
fund the initial Loan hereunder is subject to the satisfaction (in the opinion
of the Bank), unless waived by Bank, of each of the following conditions:
7.1 LOAN ORIGINATION FEE. Borrower shall have paid Bank a
loan origination fee of $45,000.
7.2 EFFECTIVENESS OF LOAN DOCUMENTS. Each of the Loan
Documents shall be in full force and effect.
7.3 OPINIONS. There shall have been delivered favorable
opinions of counsel for Borrower and the Guarantors, covering such
matters incident to the Loans or any of the Loan Documents as Bank may
reasonably request.
7.4 REPRESENTATIONS AND WARRANTIES. All representations sad
warranties contained herein or in the documents referred to herein or
otherwise made in writing in connection herewith or therewith shad be
true and correct in all material respects with the same force and
effect as though such representations and warranties have been made on
and as of this date.
LOAN AGREEMENT - Page 10
15
7.5 DOCUMENTATION AND PROCEEDINGS. Bank shall have received
such evidence as Bank requires of the existence, good standing,
authority and capacity of Borrower and each Guarantor to execute,
deliver and perform the Loan Documents.
7.6 EXPENSES. Borrower shall have paid all reasonable
out-of-pocket expenses of Bank in connection with the preparation of
the Loan Documents and the making of the Loans, including but not
limited to, the reasonable fees and out-of-pocket expenses of counsel
for Bank.
7.7 APPROVAL OF STOCK ACQUISITION AGREEMENT. Bank shall have
received and approved the Merger Agreement.
8. CONDITIONS PRECEDENT TO SUBSEQUENT REVOLVING LOANS. The obligation
of Bank to make each Revolving Loan to Borrower subsequent to the initial
Revolving Loan is subject, at the time of the funding of each such Revolving
Loan, to the satisfaction (in the opinion of Bank), unless waived in writing by
Bank, of each of the following conditions:
8.1 AVAILABILITY OF COMMITMENT. The then Principal Revolving
Debt plus the amount of the requested Revolving Loan shall be equal to
or less than the Commitment.
8.2 EXPENSES. Borrower shall have paid all reasonable
out-of-pocket expenses of Bank in connection with the preparation of
the Loan Documents and the making of the Revolving Loan, including but
not limited to, the reasonable fees and out-of-pocket expenses of
counsel of Bank.
8.3 OTHER CONDITIONS PRECEDENT. The conditions precedent set
forth in Sections 7.2, 7.4 and 7.5 shall have been met.
8.4 REQUIRED ACTS AND CONDITIONS. All acts, conditions and
things required to be done and performed and to have happened
precedent to the making of each Revolving Loan and the continued
performance and effectiveness of each of the Loan Documents, and in
order to continue to constitute the same the valid and binding
obligations of Borrower, enforceable in accordance with their terms,
shall have been done and performed and shall have happened in due
compliance with all applicable laws.
9. AFFIRMATIVE COVENANTS. Until full payment and performance of all
Obligations, Borrower will, unless Bank consents otherwise in writing (and
without limiting any requirement of any other Loan Document):
9.1 FINANCIAL STATEMENTS AND OTHER INFORMATION. Maintain a
system of accounting satisfactory to Bank and in accordance with GAAP
applied on a consistent basis throughout the period involved, permit
Bank's officers or authorized representatives to visit and inspect
Borrower's books of account and other records at such reasonable times
and as often as Bank may desire, and pay the reasonable fees and
disbursements of any accountants or other agents of Bank selected by
Bank for the foregoing purposes. Unless written notice of another
location is given to Bank, Borrower's books and records will be
located at Borrower's chief executive office set forth above. All
financial statements provided to Bank shall be in form acceptable to
Bank. In addition, Borrower will:
LOAN AGREEMENT - Page 11
16
(a) Furnish to Bank annual, audited financial
statements of Borrower for each fiscal year of Borrower,
within 120 days after the close of each such fiscal year.
(b) Furnish to Bank (i) annual, audited financial
statements of SDS and its consolidated subsidiaries for each
fiscal year of SDS, within 120 days after the close of each
such period, and (2) annual, unaudited, consolidating
financial statements of SDS and AQS, within 120 days after
the dose of each such period.
(c) Furnish to Bank quarterly, unaudited,
internally-prepared financial statements of Borrower and
Guarantors within 45 days after the end of each fiscal
quarter of each such entity.
(d) Furnish to Bank within 45 days after the end of
each fiscal quarter, a compliance certificate of the
president or chief financial officer of Borrower in the form
of Exhibit "C" attached hereto.
(e) Furnish to Bank on the monthly basis on the
first day of each month a Borrowing Base Report in the form
of Exhibit "D" attached hereto.
(f) Furnish to Bank promptly such additional
information, reports and statements respecting the business
operations and financial condition of Borrower and
Guarantors, respectively, from time to time, as Bank may
reasonably request.
9.2 INSURANCE. Maintain insurance with responsible insurance
companies on such of its properties, in such amounts and against such
risks as is customarily maintained by similar businesses similarly
situated.
9.3 EXISTENCE AND COMPLIANCE. Maintain its existence, good
standing and qualification to do business, where required and comply
with all laws, regulations and governmental requirements including,
without limitation, environmental laws applicable to it or to any of
its property, business operations and transactions, except where
failure to do so would not reasonably be expected to have a material
adverse effect on Borrower.
9.4 NOTICES TO BANK. Promptly advise Bank in writing of (i)
any condition, event or act which comes to its attention that would or
might reasonably be expected to make any adversely affect Borrower's
financial condition or operations, the collateral, or Bank's rights
under the Loan Documents, (ii) any litigation filed by or against
Borrower involving an amount in excess of $100,000, (iii) the
occurrence of any Event of Default, or of any fact, condition or event
that only with the giving of notice or passage of time or both, could
become an Event of Default, or the failure of Borrower or any
Guarantor to observe any of its undertakings hereunder, and (iv) any
uninsured or partially uninsured loss through fire, theft, liability
or property damage in excess of an aggregate of $100,000.
9.5 TAXES AND OTHER OBLIGATIONS. Pay all of its taxes,
assessments and other obligations, including, but not limited to taxes
and assessments and lawful claims which, if unpaid, might by law
become a lien against the assets of Borrower, as the same become due
and payable, except to the extent the same are being Contested in Good
Faith or such lien would secure obligations of less than $100,000.
LOAN AGREEMENT - Page 12
17
9.6 MAINTENANCE. Maintain all of its tangible property in
good condition and repair and make all necessary replacements thereof,
and preserve and maintain all licenses, trademarks, privileges,
permits, franchises, certificates and the like necessary for the
operation of its business, except where failure to do so would not
reasonable be expected to have a material adverse effect on Borrower.
9.7 COMPLIANCE WITH AGREEMENTS. Comply in all material
respects with all existing and future material agreements, indentures,
mortgages or documents which are binding on it or affecting any of its
properties or business.
9.8 FURTHER ASSURANCES. Make, execute or endorse, and
acknowledge and deliver or cause the same to be done, all such
notices, certifications and additional agreements, undertakings,
transfers, assignments, financing statements or other assurances, and
take any and all such other action, as Bank may, from time to time,
deem reasonably necessary or proper in connection with this Agreement
or any of the other Loan Documents, the obligations of the Borrower
hereunder or thereunder, (i) to cure any defects in the creation of
the Loan Documents, or (ii to further evidence or more fully describe
the collateral intended as security for the Obligations, or (iii) to
correct any omissions in the Loan Documents, or (iv) to state more
fully the security obligations set forth in this Agreement or in any
of the Loan Documents, or (v) to perfect, protect or preserve any
liens created pursuant to any of the Loan Documents, or (vi) to make
any recordings or file any notices or obtain any consents, or (vii)
for better assuring and confirming unto the Bank all or any part of
the security for any of the Obligations.
10. NEGATIVE COVENANTS. Until full payment and performance of all
Obligations, Borrower will not, without the prior written consent of Bank (and
without limiting any requirement of any other Loan Documents):
10.1 MINIMUM NET WORTH. Permit Consolidated Net Worth at the
end of each fiscal quarter to be less than the Minimum Net Worth
Amount. For purposes of this covenant, the following terms have the
respective meanings set forth below:
"CONSOLIDATED NET WORTH" means the excess of total
assets over total liabilities of Borrower and its
subsidiaries on a consolidated basis, total assets and total
liabilities each being determined in accordance with GAAP
consistent with those applied in the preparation of the
financial statements referenced in Section 11.8 hereof,
expressly including all assets which will be classified as
intangible assets under GAAP.
"MINIMUM NET WORTH AMOUNT" means (a) for
determinations of the net worth covenant made at the end of
the first three fiscal quarters of each fiscal year, the sum
of the Base Net Worth Amount plus the amount which is
seventy-five percent (75%) of the consolidated net income of
Borrower and its subsidiaries, commencing at the end of the
previous fiscal year and ending with such fiscal quarter, and
(b) for determinations of the net worth covenant made at the
fiscal year end, the greater of:
LOAN AGREEMENT - Page 13
18
(1) the sum of the Base Net Worth Amount
plus the amount which is seventy-five percent (75%)
of consolidated net income of Borrower and its
subsidiaries for the entire fiscal year, or
(2) the Consolidated Net Worth reflected on
Borrower's year end audited financial statements;
provided however, that in no event may the Minimum Net Worth
Amount as of the end of any fiscal quarter be less than the
Minimum Net Worth Amount as at the end of the immediately
preceding fiscal quarter.
"BASE NET WORTH AMOUNT" means (a) for computations
of the Minimum Net Worth Amount made for each fiscal quarter
during the 1997 fiscal year of Borrower, $12,250,000, and (b)
for computations of the Minimum Net Worth Amount made for
fiscal quarters during fiscal years subsequent to the 1997
fiscal year, the greater of the following amounts as of the
year end of the fiscal year next preceding the fiscal year
for which the computation is made:
(3) The sum of the Base Net Worth Amount
plus the amount which is seventy-five percent (75%)
of consolidated net income of Borrower and its
subsidiaries for the entire fiscal year, or
(4) The Consolidated Net Worth reflected on
Borrower's year end audited financial statements.
10.2 SALE OF ASSETS. Sell, lease, assign or otherwise
dispose of or transfer any assets except for sales and licensing of
assets in the ordinary course of business.
10.3 LIQUIDATION, MERGER, CONSOLIDATION, ACQUISITION. Wind
up, liquidate or dissolve affairs or enter any merger or consolidation
(other than pursuant to the Merger Agreement), or form or acquire any
subsidiary, or transfer control or ownership of Borrower or permit the
transfer of control or ownership of SDS or AQS.
10.4 BORROWINGS. Create, contract, incur, assume or suffer
to exist any indebtedness (including without limitation, any liability
for the deferred purchase price of property or other liability
evidenced or to be evidenced by bonds, debentures, notes or other
similar instruments), or permit any of its subsidiaries to do so,
except (a) indebtedness arising out of the Loan Documents, (b) current
liabilities for taxes and assessments, (c) current accounts payable or
accrued or other claims (other than for borrowed money or purchase
money obligations) incurred in the ordinary course of business,
provided that all such liabilities, accounts and claims shall be
promptly paid and discharged or Contested in Good Faith, (d) capital
and operating lease obligations incurred in the ordinary course of
business, (e) indebtedness of Borrower to any subsidiary or of any
subsidiary to Borrower or another subsidiary, (f) indebtedness
described on Schedule 10.4 attached hereto, and (g) renewals,
extensions and refinancing of the foregoing (without increase in
principal amount).
LOAN AGREEMENT - Page 14
19
10.5 DIVIDENDS. DISTRIBUTIONS AND PURCHASES AND CAPITAL
STOCK. Declare or pay any dividends, or return any capital to its
stock holders or authorize or make any other distribution, payment or
delivery of property or cash to its stock holders as such, or redeem,
retire, purchase or otherwise acquire, or permit any of its
subsidiaries to purchase or acquire, directly or indirectly, for any
consideration, any shares Of any class of Borrower's capital stock now
or hereafter outstanding, or set aside any funds for any of the
foregoing purposes.
10.6 CHARACTER OF BUSINESS. Change the general character of
business as conducted at the date hereof, or engage on a regular basis
in any type of business not reasonably related to its business as
presently conducted.
10.7 ARM'S LENGTH TRANSACTIONS. Enter into or permit any
subsidiary to enter into, any transaction with any affiliate, except
(a) a transaction upon terms that are not less favorable to Borrower
than would be obtained in a transaction negotiated at arm's length
with an unrelated third party, and (b) a transaction with an affiliate
involving goods or services having a value which is less than
S100,000.
11. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants to Bank as follows:
11.1 GOOD STANDING. Borrower is a corporation duly
organized, validly existing and in good standing under the laws of
Texas and has the power and authority to own its property and to carry
on its business in Texas and in each other jurisdiction in which
Borrower does business except where failure to be qualified to carry
on its business would not reasonably be expected to have a material
adverse effect on Borrower. SDS is a corporation duly organized,
validly existing and in good standing under the laws of Wisconsin and
has the power and authority to own its property and to carry on its
business in each jurisdiction in which SDS does business except where
failure to be qualified to carry on its business would not reasonably
be expected to have a material adverse effect on SDS. AQS is a
corporation duly organized, validly existing and in good standing
under the laws of Wisconsin and has the power and authority to own its
property and to carry on its business in each jurisdiction in which
AQS does business except where failure to be qualified to carry on its
business would not reasonably be expected to have a material adverse
effect on AQS.
11.2 AUTHORITY AND COMPLIANCE. Borrower and Guarantors have
full power and authority to execute and deliver the Loan Documents to
which they are parties and to incur and perform the obligations
provided for therein, all of which have been duly authorized by all
proper and necessary action. No consent or approval of any public
authority or other third party is required as a condition to the
validity of any Loan Document, and Borrower and Guarantors are in
compliance in all material respects with all laws and regulatory
requirements to which they are subject.
11.3 BINDING AGREEMENT. This Agreement and the other Loan
Documents executed Borrower and Guarantors constitute valid and
legally binding obligations of Borrower and Guarantors, respectively,
enforceable in accordance with their terms, except where the
enforcement thereof may be limited by applicable bankruptcy or debtor
relief laws affecting the rights of creditors generally and general
principles of equity.
LOAN AGREEMENT - Page 15
20
11.4 LITIGATION. There is no proceeding involving Borrower
or Guarantors pending or, to the knowledge of Borrower, threatened
before any court or governmental authority agency or arbitration
authority, except as disclosed to Bank in writing on or prior to the
date of this Agreement.
11.5 NO CONFLICTING AGREEMENTS. There is no charter, bylaw,
stock provision, agreement or other document pertaining to the
organization, power or authority of Borrower or Guarantors and no
provision of any existing material agreement, mortgage, indenture or
contract binding on Borrower or Guarantors or affecting their
property, which would conflict with or in any way prevent the
execution, delivery or carrying out of the terms of this Agreement and
the other Loan Documents.
11.6 OWNERSHIP OF ASSETS. Borrower and Guarantors have good
title to their assets, and their assets are free and clear of liens,
except those (i) expressly permitted by the terms of this Agreement
and the other Loan Documents, (ii) granted to Bank and (iii) as
disclosed to Bank in writing prior to the date of this Agreement.
11.7 TAXES. AU taxes and assessments due and payable by
Borrower and Guarantors have been paid or are being Contested in Good
Faith, and the Borrower and Guarantors have filed all tax returns
which it is required to file.
11.8 FINANCIAL STATEMENTS. The financial statements of
Borrower and Guarantors heretofore delivered to Bank have been
prepared in accordance with GAAP applied on a consistent basis
throughout the period involved and fairly pr sent in all material
respects Borrower's and Guarantors' financial condition as of the date
or dates thereof, and there has been no material adverse change in
Borrower's and Guarantors' financial condition or operations since
November 30, 1996. To the best of Borrower's knowledge, all factual
information furnished by Borrower and Guarantors to Bank in connection
with this Agreement and the other Loan Documents is and will be
accurate and complete in all material respects on the date as of which
such information is delivered to Bank and is not and will not be
incomplete by the omission of any material fact necessary to make such
information not misleading.
11.9 CONTINUATION OF REPRESENTATIONS AND WARRANTIES. AU
representations and warranties made under this Agreement shall be
deemed to be made at and as of the date hereof and at and as of the
date of any future advance under any Loan and in all such instances
shall be true and correct in all material respects.
12. DEFAULT. Any of the following shall constitute events of default
(each an "Event of &fault"):
12.1 NONPAYMENT. (a) Borrower shall default in the due and
punctual payment of any principal or interest of the Note or any of
the other Obligations when due and payable, whether at maturity or
otherwise, and such default unremedied shall continue for a period of
ten (10) days after notice thereof from Bank, or (b) Borrower shall
default in the due performance by it of the provisions of Section 2.3
hereof.
12.2 REPRESENTATIONS AND WARRANTIES. Any representation,
warranty or statement made by Borrower or any guarantor herein or
otherwise in writing in connection herewith or in connection with any
of the other Loan Documents and the agreements referred to herein or
therein or in any financial
LOAN AGREEMENT - Page 16
21
statement, certificate or statement signed by any officer or employee
of Borrower or any guarantor and furnished pursuant to any provision
of the Loan Documents shall be materially false, incorrect or
incomplete when made.
12.3 DEFAULT IN AFFIRMATIVE AND NEGATIVE COVENANTS UNDER
AGREEMENT. (a) Borrower shall default in the due performance or
observance by it of any term, covenant or agreement on its part to be
performed or observed pursuant to Section 9.4 or Sections 10.2 through
10.7 hereof; or (b) Borrower shall default in the due performance or
observance of any term, covenant or agreement on its part to be
observed or performed pursuant to Sections 9.1 through 9.3 or 9.5
through 9.8 hereof, and such failure shall continue unremedied for a
period of fifteen (15) days after (i) notice of such default from
Bank, or (ii) Bank is notified of such default or should have been so
notified pursuant to the provisions of Section 9.4 hereof, whichever
is earlier; or (c) Borrower shall default in the due performance or
observance by it of the provisions of Section 10.1 hereof, and then
Millers Mutual shall default in the due performance or observance by
it of any term, covenant or agreement contained in the Comfort Letter.
12.4 DEFAULT IN OTHER COVENANTS UNDER AGREEMENT. Borrower
shall default in the due performance or observance by it of any term,
covenant or agreement contained in this Agreement other than those
specified in Sections 12.1, 12.2 and 12.3 hereof, and such default
shall continue unremedied for a period of thirty (30) days after (i)
notice of such default from Bank, or (u) Bank is notified of such
default or should have been so notified pursuant to the provisions of
Section 9.4 hereof, whichever is earlier.
12.5 DEFAULT IN OTHER LOAN DAB. Borrower or any Guarantor
shall default in the due performance of or observance by such party of
any term, covenant or agreement on such party's part to be performed
pursuant to the terms of any of the other Loan Documents other than
those specified in Sections 12.1, 12.2, 12.3 and 12.4 hereof, and the
default shall continue unremedied for a period of thirty (30) days
after (i) notice of such default from Bank, or (ii) Bank is notified
of such default or should have been so notified pursuant to the
provisions of Section 9.4 hereof, whichever is earlier.
12.6 DEFAULT IN OTHER DEBT. An event of default shall occur
under the provisions of any instrument (other than the Loan Documents)
evidencing indebtedness of Borrower or any Guarantor for the payment
of borrowed money (including any capital lease) or of any agreement
relating thereto (the effect of which is to permit the holder or
holders of such instrument to cause the indebtedness evidenced by such
instrument to become due prior to its stated maturity) and such holder
or holders rightfully demand payment of indebtedness aggregating S
100,000 or more.
12.7 VALIDITY OF LOAN DOCUMENTS. Any of this Agreement, the
Notes, the Security Agreements, the Guaranty Agreements, the Pledge
Agreements or the UCC-1 financing statements shall cease to be a
legal, valid and binding agreement enforceable against any party
executing the same in accordance with the respective terms thereof, or
shall in any way be terminated or become or be declared ineffective or
inoperative, or shall in any way whatsoever cease to give or provide
the respective rights, remedies, powers and privileges intended to be
created thereby.
12.8 BANKRUPTCY. Borrower or any Guarantor shall suspend or
discontinue its business operations, or shall generally fail to pay
its debts as they mature, or shall file a petition commencing a
LOAN AGREEMENT - Page 17
22
voluntary case concerning Borrower or any Guarantor under any chapter
of the United States Bankruptcy Code; or any involuntary case shall be
commenced against Borrower or any guarantor under the United States
Bankruptcy Code that remains unstayed and in effect for sixty (60)
days; or Borrower or any Guarantor shall become insolvent (howsoever
such insolvency may be evidenced).
12.9 JUDGMENTS AND DECREES. Borrower or any Guarantor shall
suffer a final judgment for the payment of money in excess of $100,000
beyond insurance coverage and shall not discharge the same within a
period of thirty (30) days unless, pending further proceedings,
execution has not been commenced, or, if commenced, has been
effectively stayed. Any order, judgment or decree shall be entered in
any proceeding against Borrower or any Guarantor decreeing the
dissolution or split up of Borrower or any guarantor and such order
shall remain undischarged or unstayed for a period in excess of thirty
(30) days.
12.10 TERMINATION OF SERVICES. Borrower shall fail to provide
third party services to Millers Mutual and Millers Casualty Insurance
Company on an ongoing basis.
13. REMEDIES. Upon the occurrence of an Event of Default described in
Section 12.8 hereof, the entire principal of and accrued interest on the Notes
shall forthwith be due and payable without demand, presentment for payment,
notice of nonpayment, protest, notice of protest, notice of intent to
accelerate, notice of acceleration and all other notices and further actions of
any kind, all of which are hereby expressly waived by Borrower. In the event
that any other Event of Default occur and be continuing, Bank may, without
demand or notice of its election declare the entire unpaid balance of the Notes
and all other indebtedness of Borrower to Bank, or any part thereof,
immediately due and payable, whereupon the principal of and accrued interest on
such Note and other indebtedness shall be forthwith due and payable without
demand, presentment for payment, notice of nonpayment, protest, notice of
protest, notice of intent to accelerate, notice of acceleration and all other
notices and further actions of any kind, all of which are hereby expressly
waived by Borrower. Upon the occurrence and during the continuance of any Event
of Default, Bank may (a) exercise any and all rights under or pursuant to any
of the Loan Documents, and (b) exercise any and all rights afforded to Bank by
the laws of the State of Texas or any other applicable jurisdiction or in
equity or otherwise, as Bank may deem appropriate, and (c) terminate the
Commitment.
14. NOTICES. All notices, requests or demands which any party is
required or may desire to give to any other party under any provision of this
Agreement must be in writing (including telegraphic, telex and facsimile
transmission) delivered to the other party at the addresses set forth on the
first page of this Agreement or to such other address as any party may
designate by written notice to the other party. Each such notice, request and
demand shall be deemed given or made (whether actually received or not) (a) if
sent by mail, upon the earlier of the date of receipt or five (5) days after
deposit in the U.S. Mail, first class postage prepaid, and (b) if sent by any
other means, upon delivery. Until otherwise changed by notice given pursuant to
this Section, the facsimile transmission number for Borrower shall be (817)
348-3765, and the facsimile transmission number for Bank shall be (817) 390
6545.
15. COSTS, EXPENSES AND ATTORNEY'S FEES. Borrower shall pay to Bank
immediately upon demand the full amount of all reasonable, out-of-pocket costs
and expenses, including reasonable attorneys' fees incurred by Bank in
connection with (a) negotiation and preparation of this Agreement and each of
the Loan Documents, and all other costs and attorneys' fees incurred by Bank
for which Borrower is
LOAN AGREEMENT - Page 18
23
obligated to pay in accordance with the terms of the Loan Documents, and (b)
any modifications of or consents or waivers under or amendments to or
interpretations of or enforcement of this Agreement, the Notes, the other Loan
Documents and the agreements described therein. Borrower further agrees to
indemnify Bank and its employees and agents from and hold it harmless against
any and all losses, liabilities, e ms, damages or expenses which any of them
suffers or incurs as a result of its entering into this Agreement, or the
consummation of the transactions contemplated by this Agreement and the Loan
Documents, or the use or contemplated use of the proceeds of the Loans,
including, without limitation, the out-of pocket disbursements and reasonable
fees of counsel incurred in connection with any litigation, arbitration or
other proceeding arising out of or by reason of any of the aftersaid, but
expressly excluding any losses, liabilities, claims, damages or expenses which
Bank may suffer or incur arising from any actions asserted by Bank against its
own employees or agent.
16. MISCELLANEOUS. Borrower and Bank further covenant and agree as
follows, limiting any requirement of any other Loan Document:
16.1 CUMULATIVE RIGHTS AND NO WAIVER. Each and every right
granted to Bank under any Loan Document, or allowed it by law or
equity shall be cumulative of each other and may be exercised in
addition to any and all other rights of Bank, and no delay in
exercising any right s all operate as a waiver thereof, nor shall any
single or partial exercise by Bank of any right preclude any other or
future exercise thereof or the exercise of any other right. Borrower
expressly waives any presentment, demand, protest or other notice Of
any kind, including but not limited to notice of intent to accelerate
and notice of acceleration. No notice to or demand on Borrower in any
case shall, of itself, entitle Borrower to any other or future notice
or demand in similar or other circumstances.
16.2 APPLICABLE LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF TEXAS AND APPLICABLE UNITED
STATES FEDERAL LAW.
16.3 AMENDMENT. No modification, consent, amendment or waiver
of any provision of this Agreement, nor consent to any departure by
Borrower therefrom, shall be effective unless the same shall be in
writing and signed by an officer of Bank, and then shall be effective
only in the specified instance and for the purpose for which given.
This Agreement is binding upon Borrower, its successors and assigns,
and inures to the benefit of Bank, its successors and assigns;
however, no assignment or other transfer of Borrower's rights or
obligations hereunder shall be made or be effective without Bank's
prior written consent, nor shall it relieve Borrower of any
obligations hereunder. There is no third party beneficiary of this
Agreement.
16.4 DOCUMENTS. All documents, certificates and other items
required under this Agreement to be executed and/or delivered to Bank
shall be in form and content satisfactory to Bank and its counsel.
16.5 PARTIAL INVALIDITY. The unenforceability or invalidity
of any provision of this Agreement shall not affect the enforceability
or validity of any other provision herein and the invalidity or
unenforceability of any provision of any Loan Document to any person
or circumstance shall not affect the enforceability or validity of
such provision as it may apply to other persons or circumstances.
LOAN AGREEMENT - Page 19
24
16.6 SURVIVABILITY. All covenants, agreements,
representations and warranties made herein or in the other Loan
Documents shall survive the making of the initial Loans and shall
continue in full force and effect so long as the Obligations are
outstanding or the Commitment has not expired.
16.7 ACCOUNTING TERMS. All accounting terms not specifically
defined or specified herein shall have the meanings generally
attributed to such terms under generally accepted accounting
principles ("GAAP"'), as in effect from time to time, consistently
applied, with respect to the financial statements referenced in
Section 11.8 hereof.
16.8 RIGHT TO GRANT PARTICIPANTS. Bank shall have the right
to grant participations (which may be evidenced by one or more
certificates of participation), in the indebtedness of Borrower
incurred under and pursuant to this Agreement and owed to Bank at any
time and from time to time to other banking institutions organized
under the laws of the United States or any state thereof and
reasonably acceptable to Borrower (herein called the "Participants").
The form of participation agreement shall provide, among other things,
that Bank may, in its sole discretion (a) agree to any modification of
any of the terms of the Loan Documents or any other agreement or
instrument evidencing or securing the Obligations; (b) waive any of
such terms or give or withhold consents or approvals to any actions or
failure to act by Borrower; (c) exercise or refrain from exercising,
or waive, any rights or powers that Bank may have in respect thereof;
and (d) agree to release or permit substitutions of collateral in
respect of the Obligations; provided that Bank will not, without each
Participant's written consent, reduce the principal or the interest
rate (below the participation rate) or extend the stated maturity of
any of the Obligations.
17. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES
HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY RELATED INSTRUMENTS, AGREEMENTS OR
DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL
BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION
ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW OF TEXAS), THE RULES OF
PRACTICE AND PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF
J.A.M.S./INDISPUTE OR ANY SUCCESSOR THEREOF (J.A.M.S.), AND THE "SPECIAL RULES"
SET FORTH BELOW. IN THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL
CONTROL. JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING
JURISDICTION. ANY PARTY TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT MAY BRING AN
ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF
ANY CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING
JURISDICTION OVER SUCH ACTION.
17.1 SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN
FORT WORTH, TEXAS, AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN
ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM
ADMINISTERING THE ARBITRATION, THEN THE AMERICAN ARBITRATION
ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL BE COMMENCED
LOAN AGREEMENT - Page 20
25
WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR
SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE
COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS.
17.2 RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION
PROVISION SHALL BE DEEMED TO A) LIMIT THE APPLICABILITY OF ANY
OTHERWISE APPLICABLE STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS
CONTAINED IN THIS INSTRUMENT, AGREEMENT OR DOCUMENT; OR (II) BE A
WAIVER BY THE BANK OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C. SEC.
91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT
OF THE BANK (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT
LIMITED TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL
PROPERTY COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR
ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF,
WRIT OF POSSESSION OR THE APPOINTMENT OF A RECEIVER. THE BANK MAY
EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR
OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER
THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT. NEITHER THIS EXERCISE OF SELF HELP
REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR
FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A
WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY SUCH
ACTION, TO ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM
OCCASIONING RESORT TO SUCH REMEDIES.
18. AGREEMENT CONTROLLING. In the event of a conflict between the
terms and provisions of this Agreement and the terms and provisions of any of
the other Loan Documents, the terms and provisions of this Agreement shall
control.
19. NOTICE OF FINAL AGREEMENT. THIS WRITTEN AGREEMENT REPRESENTS 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.
[This Space Left Intentionally Blank]
LOAN AGREEMENT - Page 21
26
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date u td year first above written.
MILIRISK, INC.
By /s/ F. XXXXXX XXXXXX, III
----------------------------------------
F. Xxxxxx Xxxxxx, III
President and Chief Executive Officer
By /s/ XXX X. XXXXXX
----------------------------------------
Xxx X. Xxxxxx
Executive Vice President and Chief
Financial Officer
NATIONSBANK OF TEXAS, N.A.
By /s/ XXXXX XXXXXXX
----------------------------------------
Xxxxx Xxxxxxx
Vice President
LOAN AGREEMENT - Page 22
27
SCHEDULE I
INTEREST RATE PRICING DEFINITIONS
The definitions set forth on this Schedule I are those which relate
solely to the interest rate pricing options under the Agreement.
"BUSINESS DAY" means the normal banking hours during any day (other
than Saturdays or Sundays) that banks are legally open for business in Fort
Worth, Texas.
"EUROCURRENCY RESERVE REQUIREMENT" means, for any eurodollar Loan for
a eurodollar Interest Period thereunder, the daily average of the stated
maximum rate (expressed as a decimal) at which reserves (including any
marginal, supplemental or emergency reserves) are required to be maintained
during such Eurodollar Interest Period under Regulation D by Bank against
"eurocurrency liabilities" (as such term is used in Regulation D), but without
benefit or credit of proration, exemptions or offsets that might otherwise be
available to Bank from time to time under Regulation D. Without limiting the
effect of the foregoing, the Eurocurrency Reserve Requirement shall reflect any
other reserves required to be maintained by Bank against (a) any category of
liabilities that includes deposits by reference to which the Eurodollar
Interest Rate for Eurodollar Loans is to be determined, or (b) any category of
extension of credit or other assets that includes Eurodollar Loans.
"EURODOLLAR BUSINESS DAY" means a Business Day on which dealings in
U.S. Dollar deposits are on in the eurodollar market.
"EURODOLLAR INTEREST PERIOD " means, with respect to any eurodollar
Loan:
(i) initially, the period commencing on the date such
Eurodollar Loan is made and ending thirty days, sixty days, ninety
days or one hundred eighty days thereafter, as selected by Borrower,
and
(ii) thereafter, each period commencing, on the day following
the last day of the next preceding Interest Period applicable to such
eurodollar Loan and ending thirty days, sixty days, ninety days or one
hundred eighty days thereafter, as selected by Borrower;
provided, however, that (A) if any Eurodollar Interest Period would otherwise
expire on a day that is not a Eurodollar Business Day, such Interest Period
shall expire on the next suing eurodollar Business Day, and (B) any eurodollar
Interest Period that would other vise expire after the Revolving Note Maturity
Date or Term .Note Maturity Date, as is applicable, shall end on such Maturity
Date.
"EURODOLLAR LOAN" means any Revolving Loan, or that portion of the
Principal Term Debt, as the case may be, that bears interest at the Eurodollar
Rate or that would bear interest at such rate if the Maximum Rate ceiling was
not in effect at a particular time.
"EURODOLLAR MARGIN" means one and one-half percent (1.5%) per annum.
SCHEDULE I - Page 1
28
"EURODOLLAR RATE" means, with respect to each eurodollar Loan, a rate
per annum (rounded upward, if necessary, to the nearest 1/100 of 196)
determined by Bank as follows:
Interbank Market Rate + Eurodollar
1 - Eurocurrency Reserve Requirement Margin
"INTERBANK MARKET RATE" means the rate of interest per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) at which deposits in
immediately available and freely transferable funds in U.S. Dollars are offered
to Bank by money center banks in the interbank eurocurrency market for delivery
on the first day of each such Eurodollar Interest Period, such deposits being
for a period of time equal or comparable to such Eurodollar Interest Period in
an amount equal to or comparable to the principal amount of the Eurodollar Loan
to which such eurodollar Interest Period relates. The Interbank Market Rate
shall be determined at approximately 10:00 a.m. (Fort Worth, Texas time) two
(2) eurodollar Business Days prior to the first day of each Eurodollar Interest
Period.
"INCREMENTAL PORTION'" means any amount which is $100,000 or amounts
in excess thereof in integral multiples of $100,000.
"INTEREST PERIOD" means any Prime Rate Interest Period or eurodollar
Interest Period, as is applicable.
"MAXIMUM RATE" means the lesser of the maximum nonusurious rate of
interest all wed by applicable United States or Texas law as amended or the
Prime Rate plus 5% from time to time and in effect on the date for which a
determination of interest accrued hereunder is made.
"PRIME RATE" means the variable rate of interest per annum established
from time to time by Bank as its Prime Rate (which rate of interest may or may
not be the lowest rate or best charged by Bank on similar loans, and Bank may
make various commercial or other loans at rates of interest having no
relationship to such rate). Each change in the Prime Rate shall become
effective without prior notice to Borrower automatically as of the opening of
business on the date of such change in the Prime Rate.
"PRIME RATE INTEREST PERIOD" means, with respect to any Prime Rate
Loan, the period ending on the last day of each calendar quarter; provided,
however, that (i) if any Prime Rate Interest Period would end on a day that is
not a Business Day, such Interest Period shall end on the next preceding
Business Day, and (ii) if any Prime Rate Interest Period would otherwise end
after the Revolving Note Maturity Date, or the Term Note Maturity Date, as is
applicable, such Interest Period shall end on such Maturity Date.
"PRIME RATE LOAN" means any Revolving Loan, or that portion of the
Principal Term Debt, as the case may be, that bears interest at the Prime Rate
or that would bear interest at the Prime Rate if the Maximum Rate ceiling was
not in effect at that particular time.
"REGULATION D" means Regulation D of the Board of Governors of the
Federal Reserve System as amended or supplemented from time to time.
SCHEDULE I - Page 2
29
SCHEDULE II
SPECIAL PROVISIONS RELATING TO EURODOLLAR LOANS
The following provisions shall apply to all Eurodollar Loans under
this Agreement.
1. UNAVAILABILITY OF FUND. DISASTER. ETC. If, in connection with any
proposed Eurodollar Loan, Bank determines (which determination shall be
conclusive, absent manifest error) that
(a) that U.S. Dollar deposits of the relevant amount and for
the relevant Eurodollar Interest Period for Eurodollar Loans are not
available to Bank in the interbank eurocurrency market,
(b) the Eurodollar Interest Rate will not adequately reflect
the cost to Bank of maintaining or funding the Eurodollar Loans for
such Interest Period, or
(a) adequate means do not exist in the market to determine
the Eurodollar Interest Rate,
then the obligations of Bank to make the applicable Eurodollar Loan shall be
suspended until such time as Bank determines that the event resulting in such
suspension has ceased to exist, and Borrower s all either repay in full the
then outstanding principal amount of each applicable eurodollar Loan owed to
Bank, without penalty, on the last day of the applicable Interest Period or
convert the same to the Prime Rate. If Bank makes such determination, it shall
promptly notify Borrower in writing and Borrower shall either repay the
outstanding Eurodollar Loans owed to Bank, without penalty, on the last day of
the current Interest Period or convert the same to Prime Rate Loans.
2. RESERVE REQUIREMENTS. In the event of any change in any applicable
law, treaty, or regulation or in the interpretation or administration thereof
or in the event any central bank or other fiscal monetary or other authority
having jurisdiction over Bank or the Loans contemplated by this Agreement
imposes, modifies, or deems applicable to any Eurodollar Loan or Loans any
reserve requirement of the Board of Governors of the Federal Reserve System or
any other reserve, special deposit, or similar requirements against assets of,
deposits with or for the account of, or credit extended by, Bank, or imposes on
Bank or the interbank eurocurrency market, as the case may be, any other
condition affecting this Agreement or the eurodollar Loans which is not
otherwise expressly included in the determination of the applicable rate or
rates of interest hereunder (but excluding Excluded Taxes, as hereinafter
defined), and the result of any of the foregoing is to increase the cost to
Bank in making or maintaining its Eurodollar Loans or to reduce any amount (or
the effective return on any amount) received by Bank hereunder, then Borrower
shall pay to Bank within five (5) days of demand of Bank as additional interest
on the Note evidencing the eurodollar Loans such additional amount or amounts
as Bank may determine as will reimburse Bank for such additional cost or such
reduction. Upon the earlier of one hundred eighty (180) days after such change
or of Bank becoming aware of such change or imposition that may result in any
such increase or reduction, Bank shall give written notice to Borrower thereof
together with certificate of Bank setting forth the amount necessary to
compensate Bank as aforesaid and the basis for the determination of such
amount. Determinations made by Bank for purposes of this Section 2 of the
effect of any such change in its costs of making or maintaining its eurodollar
Loans or on amounts receivable by it in respect
SCHEDULE II - Page 1
30
of such eurodollar Loans and of the additional amounts required to compensate
Bank in respect thereof shall be condusive, absent manifest error.
3. TAXES. Both principal and interest on the Note evidencing the
eurodollar Loans are payable without withholding or deduction for or on account
of any taxes. If any taxes, duties or other charges of any kind whatsoever are
levied or imposed on or with respect to the Note evidencing the eurodollar
Loans or on any payment on the Note evidencing the Eurodollar Loans made to
Bank, or if there is any change in the basis of taxation of payment to Bank of
principal, interest and other amounts due and payable hereunder with respect to
any Loan (except for the imposition of, or change in the rate of, any tax on
the overall net income, gross receipts or capital of Bank or franchise taxes
(the "Excluded Taxes")), then, and in any such event, Borrower shall pay to
Bank within five (5) days of demand of Bank such additional amounts as Bank may
determine to be necessary so that every net payment of principal and interest
on the Note evidencing the Eurodollar Loans, after withholding or deduction for
or on account of any such taxes, will not be less than any amount provided
herein. In addition, if at any time when the eurodollar Loans are outstanding
any laws are enacted or promulgated, or any court of law or governmental agency
interprets or administers any law, which, in any such case, changes the basis
of taxation of payments to Bank of principal of or interest on the Note
evidencing the eurodollar Loans by subjecting such payments to double taxation
or otherwise (except Excluded Taxes) then Borrower will pay Bank such amounts
as Bank may determine to be necessary to compensate Bank for any such increased
costs and/or losses resulting therefrom. Bank shall give notice to Borrower
upon becoming aware of the amount of any loss incurred by it through enactment
or promulgation of any such law that changes the basis of taxation of payments
to Bank or of any such enactment or promulgation that may result in such
payments becoming subject to double taxation or otherwise. Bank shall also
deliver to Borrower a certificate of Bank setting forth the basis for the
determination of such loss and the computation of such amounts. Determinations
made by Bank for purposes of this Section 3 of the effect of such taxes on its
costs of making or maintaining Eurodollar Loans or on amounts receivable by it
in respect of such eurodollar Loans and of the additional amounts required to
compensate Bank in respect thereof shall be conducive, absent manifest error.
4. ILLEGALITY, CHANGE IN LAWS, ETC. If at any time the adoption of any
new law, change in existing laws, or interpretation of any new or existing laws
make it unlawful or impossible for Bank to (a) maintain its commitment to make
eurodollar Loans, then upon such notice to Borrower of such fact Bank's
commitment to make eurodollar Loans shall terminate; or (b) maintain or fund
its eurodollar Loans hereunder, then Bank shall promptly notify Borrower in
writing and Borrower shall either (i) repay the outstanding Eurodollar Loans
owed to Bank, without penalty, on the last day of the current Interest Periods
(or immediately with the breakage fee specified in Section C below if Bank may
not lawfully continue to maintain and fund such Eurodollar Loans) or (ii)
convert such eurodollar Loans at such appropriate time to Prime Rate Loans.
5. RISK-BASED CAPITAL REQUIREMENTS. If Bank determines that (a)
compliance with any judicial, administrative, or other governmental
interpretation of any law or regulation or (b) compliance by Bank or any
corporation controlling Bank with any guideline or request from any central
bank or other governmental authority (whether or not having the force of law)
has the effect of requiring an increase in the amount of capital required or
expected to be maintained by Bank or any corporation controlling Bank, and Bank
determines that such increase is based upon its obligations hereunder, and
other similar obligations, Borrower shall pay Bank within five (5) days of de
demand of Bank such additional amount as shall be certified by Bank to be the
amount allocable to Bank's obligation to Borrower hereunder. Bank will notify
Borrower of any event occurring that will a entitle Bank to compensation
pursuant to this Section upon the earlier of one hundred (180) days after
SCHEDULE II - Page 2
31
such change or promptly after Bank obtains knowledge thereof. Bank's notice to
Borrower shall include a certificate of Bank setting forth the amount necessary
to compensate Bank as aforesaid and the basis for the determination of such
amount. Determinations by Bank for purposes of this Section of the effect of
any increase in the amount of capital required to be maintained by Bank and of
the amounts allocable to Bank's obligations to Borrower hereunder shall be
conclusive, absent manifest error.
6. FAILURE TO BORROW. Borrower hereby indemnifies Bank against any
loss, cost or expense incurred by Bank as a result of (a) any payment of a
Eurodollar Loan on a date other than the last day of the Interest Period for
such Eurodollar Loan, including but not limited to acceleration by Bank
pursuant to this Agreement, or (b) any failure by Borrower to borrow or
convert, as the case may be, a Eurodollar Loan on the date of borrowing or
conversion, as the case may be, after Borrower has given Bank the relevant
notices of Borrower's election to borrow or convert, as the case may be,
specified in this Agreement.
SCHEDULE II - Page 3
32
SCHEDULE 10.4
PERMITTED INDEBTEDNESS
MiliRisk. Inc.
None
Strategic Data Systems. Inc.
1. Indebtedness in connection with that certain Loan Agreement,
dated as of September 21, 1994, between Strategic Data
Systems, Inc. a Wisconsin corporation ("SDS"), and Norwest
Bank Wisconsin, N. A ("Norwest"), as amended by the First
Amendment to Loan Agreement, dated as of April 28, 1995, a
letter agreement to the loan agreement, dated as of August 7,
1995, and the Second Amendment to Loan Agreement, dated as of
September 12, 1996 (the "Letter Agreement"), and certain
related instruments, agreements, and documents, including
without limitation the $500,000 Term Note, dated as of
September 21, 1994, the $600,000 Second Term Note, dated as
of August 8, 1995, the $778,000 Installment Promissory Note,
dated as of December 27, 1993, and the $250,000 Installment
Promissory Note, dated as of December 27, 1993, executed and
delivered in connection with or pursuant to the Letter
Agreement, as amended by that certain Intercreditor
Agreement, made as of March 12, 1997, among the Borrower,
SDS, AQS, the Bank, and Norwest, and as such may be further
amended from time to time hereafter
2. Indebtedness due to IBM in connection with computer hardware
purchased by SDS as inventory.
Applied Quoting Systems. Inc.
None
33
EXHIBIT A
BORROWING REQUEST
Reference is made to that certain Loan Agreement between MILIRISK,
INC. and NATIONSBANK OF TEXAS, N.A. dated as of March 12, 1997 as amended, (the
"Agreement"). The terms used herein shall have the same meanings as provided
therefor in the Agreement unless the context hereof otherwise requires or
provides.
1. Date of proposed Revolving Loan
------------------
2. Designate whether new Revolving Loan or renewal of existing
Eurodollar Loan:
_____ New Revolving Loan _____ Renewal of Eurodollar Loan
3. Interest rate options and amounts:
Amount of requested Revolving Loan which
will be Prime Rate Loan $
------------------
Amount of requested Revolving Loan which
will be Eurodollar Loan $
------------------
TOTAL: $
------------------
4. If all or a portion of the Revolving Loan
will be a Eurodollar Loan, state the
requested Eurodollar Interest Period
-------------------------------------------
Borrower hereby certifies that (a) on the date hereof the
representations and warranties contained in the Agreement are true in all
material respects as if made on the date hereof, except representations and
warranties that relate to a specific prior date; and (b) no Event of Default or
no event which, with the lapse of time or the giving of notice, or both, would
constitute an Event of Default under the Agreement, exists.
Dated _____________, 199__.
MILIRISK, INC.
By
------------------------------
Title
---------------------------
EXHIBIT A - Page Solo
34
EXHIBIT B
TERM LOAN RATE REQUEST
Reference is made to that certain Loan Agreement among MILIRISK, INC.
and NATIONSBANK OF TEXAS, N.A. dated as of March 12, 1997 (as amended, the
"Agreement"). The terms used herein shall have the same meanings as provided
therefor in the Agreement unless the context hereof otherwise requires or
provides.
1. Date requested for interest rate selection:
--------------------
2. TYPE OF TRANSACTION AMOUNT
_____ Renewal of Eurodollar Loan $
-------------------
_____ Conversion of Eurodollar Loan to Prime
Rate $
-------------------
_____ Conversion of Incremental Portion of
Principal Debt to Eurodollar Loan $
-------------------
_____ Other: $
-------------------------------------- -------------------
3. If all or a portion of the requested transaction will be a
Eurodollar Loan, state the requested Eurodollar Interest
Period
Dated _________, 199__.
MILIRISK, INC.
By
------------------------------
Title
---------------------------
EXHIBIT B - Page Solo
35
EXHIBIT C
COMPLIANCE CERTIFICATE
TO: NATIONSBANK OF TEXAS, N.A.
Reference is made to that certain Loan Agreement between MILIRISK,
INC. and NATIONSBANK OF TEXAS, N.A. dated as of March 12, 1997 (the "Loan
Agreement"). The terms used herein shall have the same meanings as provided
therefor in the Loan Agreement, unless the context hereof otherwise requires or
provides.
The undersigned HEREBY CERTIFIES that she is the duly elected and
qualified officer of the Borrower holding the office set forth opposite her
signature below, AND DOES FURTHER CERTIFY, on behalf of the Borrower, that:
1. Attached hereto are complete and detailed financial
statements of the Borrower and the Guarantors as of, and for the last
day of , 199_, which fairly present in all material respect Borrower's
and Guarantors' financial position as of such date.
2. A review of the activities of the Borrower during the
preceding fiscal quarter has been made under her supervision with a
view to determining whether, during such fiscal quarter the Borrower
has kept, observed, performed and fulfilled all of its obligations
under the Loan Documents, and that to the best of her knowledge the
Borrower has kept, observed, performed and fulfilled all of such
obligations, except as set forth in Schedule I attached hereto. (If no
Schedule I is attached, then such exception does not apply and no such
failures exist.)
3. Section 10.1 provides that the Consolidated Net Worth of
the Borrower and its subsidiaries as at the end of the preceding
fiscal quarter must not be less than the Minimum Net Worth Amount of
the Borrower and its subsidiaries as at the end of the preceding
fiscal quarter.
* Consolidated Net Worth of Borrower and
subsidiaries as at end of fiscal quarter
identified in Item 1 above $
----------------
* Minimum Net Worth Amount of Borrower and
subsidiaries as at end of fiscal quarter
identified in Item 1 above $
----------------
4. Section 10.1 provides that the Minimum Net Worth Amount as
at the end of any fiscal quarter may not be less than the Minimum Net
Worth Amount as at the end of the immediately preceding fiscal
quarter.
EXHIBIT C - Page 1
36
* Minimum Net Worth Amount as at end of
fiscal quarter identified in Item 1 above $
----------------
* Minimum Net Worth Amount as at end of
fiscal quarter immediately preceding the
fiscal quarter identified in Item 1 above $
----------------
IN WITNESS WHEREOF, the undersigned has executed this Certificate on
________________, 199__.
MILIRISK, INC.
By
----------------------------------
Xxx X. Xxxxxx
Executive Vice President and Chief
Financial Officer
EXHIBIT C - Page 2
37
EXHIBIT D
BORROWING BASE REPORT
Reference is made to that certain Loan Agreement among MILIRISK, INC.
and NATIONSBANK OF TEXAS, N.A. dated as of March 12, 1997 (as amended, the
"Agreement"). The terms used herein shall have the same meanings as provided
therefor in the Agreement unless the context hereof otherwise requires or
provides.
Borrower hereby certifies to Bank that the following information is
true, correct and complete as of the last day of _____________, 199__:
1. Total accounts receivable of Borrower,
SDS and AQS $
----------------
2. Less ineligible accounts receivable of Borrower,
SDS and AQS $
----------------
3. Eligible Accounts Receivable
(line 1 minus line 2) $
----------------
4. 80% of Eligible Accounts Receivable $
----------------
5. Borrowing Base (enter greater of
$2,500,000 or amount shown on line 4) $
----------------
Borrower further certifies to Bank that attached hereto is a true,
correct and complete aging of all accounts receivable of Borrower, SDS and AQS
as of the last day of the month covered by this Borrowing Base Report.
Borrower further certifies that the computation of the Borrowing Base
as set forth herein has been made in compliance with the terms and provisions
of the Agreement.
Dated _____________, 199__.
MILIRISK, INC.
By
----------------------------------
Xxx X. Xxxxxx
Executive Vice President and Chief
Financial Officer
EXHIBIT D - Page Solo
