<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
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Commission file number: 0-12544
MAXSERV, INC.
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(Exact name of Registrant as specified in its charter)
DELAWARE 74-2707626
- ------------------------------- --------------------------
(State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
8317 CROSS PARK DRIVE, AUSTIN, TEXAS 78754
- -------------------------------------------
(Address of principal executive offices)
(512) 834-8341
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(Registrant's telephone number, including area code)
- ----------------------------------------------------
(Former name, former address and former fiscal, if
changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 of 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such report(s), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
The number of shares of common stock outstanding as of November 30, 1996 was
10,926,006.
1
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FORM 10-Q INDEX
<TABLE>
<S> <C> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
Condensed Balance Sheet as of November 30, 1996 and May 31, 1996 ............... 3
Condensed Statement of Operations for the three months and six months
ended November 30, 1996 and for the three months and
six months ended November 30, 1995 ........................................... 4
Condensed Statement of Cash Flows for the six months ended
November 30, 1996 and 1995 ................................................... 5
Notes to Condensed Financial Statements ........................................ 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations .................................................... 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings .............................................................. 9
Item 2. Changes in Securities .......................................................... 9
Item 3. Defaults Upon Senior Securities ................................................ 9
Item 4. Submission of Matters to a Vote of Security Holders ............................ 9
Item 5. Other Information .............................................................. 9
Item 6. Exhibits and Reports on Form 8-K ............................................... 9
SIGNATURES ......................................................................................... 10
</TABLE>
2
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PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
MAXSERV, INC.
CONDENSED BALANCE SHEET
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(Unaudited, in thousands)
<TABLE>
<CAPTION>
ASSETS November 30, May 31,
1996 1996
------------ -------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,517 $ 2,234
Accounts receivable 4,813 5,172
Income taxes receivable 194 -
Deferred tax asset 460 407
Prepaid expenses and other 367 222
------- -------
Total current assets 9,351 8,035
Property and equipment 10,640 11,046
Intangible asset 1,325 1,514
Deferred tax asset 749 1,018
Other assets 159 47
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$22,224 $21,660
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 787 $ 1,328
Accrued compensation 2,089 1,785
Accrued expenses 1,186 1,083
Income taxes payable - 663
Notes and capital lease obligations 20 61
------- -------
Total current liabilities 4,082 4,920
Stockholders' equity:
Common stock, $.01 par value; 25,000 shares
authorized; 10,926 and 10,899 issued and
outstanding at November 30, 1996 and May 31, 1996 109 109
Additional paid-in capital 18,175 18,106
Accumulated deficit (142) (1,475)
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Total stockholders' equity 18,142 16,740
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$22,224 $21,660
======= =======
</TABLE>
3
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MAXSERV, INC.
CONDENSED STATEMENT OF OPERATIONS
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(Unaudited, in thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
November 30, November 30,
1996 1995 1996 1995
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Service fees $13,717 $11,854 $28,531 $25,084
Cost of services 11,962 11,985 24,357 24,372
------- ------- ------- -------
Service margin 1,755 (131) 4,174 712
Selling, general and administrative expenses 1,067 939 2,090 1,707
Interest income (expense) 35 (30) 64 (52)
------- ------- ------- -------
Income (loss) before provision (benefit) for income taxes 723 (1,100) 2,148 (1,047)
Provision (benefit) for income tax expense 275 (413) 816 (393)
------- ------- ------- -------
Net income (loss) $ 448 $ (687) $ 1,332 $ (654)
======= ======= ======= =======
Net income (loss) per share and equivalents:
Primary $ .04 $ (.06) $ .12 $ (.06)
======= ======= ======= =======
Fully diluted $ .04 $ (.06) $ .12 $ (.06)
======= ======= ======= =======
Weighted average shares and equivalents 11,480 11,251 11,422 11,242
======= ======= ======= =======
</TABLE>
4
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MAXSERV, INC.
CONDENSED STATEMENT OF CASH FLOWS
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(Unaudited, in thousands)
<TABLE>
<CAPTION>
Six Months Ended
November 30,
1996 1995
-------- --------
<S> <C> <C>
Operating activities:
Net income (loss) $ 1,332 $ (654)
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 2,457 2,123
Deferred income taxes 216 (413)
Changes in operating assets and liabilities:
Accounts receivable 359 (33)
Prepaid and other (257) 330
Accounts payable (541) (2,270)
Accrued compensation and expenses (450) 659
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Cash provided by operating activities 3,116 (258)
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Investing activities:
Purchase of property and equipment (1,835) (1,590)
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Financing activities:
Payments on notes and capital leases (41) (159)
Proceeds from issuance of common stock 43 18
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Cash provided by financing activities 2 (141)
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Increase (decrease) in cash and cash equivalents 1,283 (1,989)
Cash and cash equivalents at the beginning of the period 2,234 2,097
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Cash and cash equivalents at the end of the period $ 3,517 $ 108
======= ======
</TABLE>
5
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MAXSERV, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
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November 30, 1996
1. THE COMPANY AND BASIS OF PRESENTATION
MaxServ, Inc. is an information services company for household products
delivering diagnostic assistance and support to consumers and professional
technicians involved with the installation, repair, care and operation of a
full range of appliances, personal computers, entertainment and other
electronic products, heating and air conditioning systems, and lawn and garden
equipment. MaxServ also provides telemarketing services for replacement parts
and accessories covering all major home products, service order reservations
and logistical support services. The Company's information products and
services include in-bound and out-bound telephone services, systems
consulting, and design and development for network environments and electronic
publishing. MaxServ delivers its services throughout the United States and
Canada, from four telephone support centers in Alabama, Arizona and Texas,
utilizing advanced technology and telecommunications systems.
The unaudited condensed financial statements have been prepared in accordance
with generally accepted accounting principles and SEC regulations for interim
financial information. Accordingly, they do not include all the information
and notes required for complete financial statements. In the opinion of
management, all adjustments, consisting of normal recurring items considered
necessary for a fair presentation, have been included. Operating results for
the quarter and six months ended November 30, 1996 are not necessarily
indicative of the results that may be expected for the year ending May 31,
1997. These financial statements may contain forward looking information that
involve risks and uncertainties and should be read in conjunction with the
Company's Annual Report on Form 10-KSB for the year ended May 31, 1996 and the
Quarterly Report on Form 10-Q for the period ending August 31, 1996.
2. RELATED PARTY TRANSACTIONS
Sears, Roebuck and Co. owns 64% of the Company's outstanding common stock.
For the six months ended November 30, 1996 and 1995, 93% of the Company's
service revenues were derived from Sears. Services are provided under two
long-term agreements and pricing is generally reviewed annually and adjusted as
agreed by both companies. Accounts receivable with Sears at November 30, 1996
and May 31, 1996 totaled $4.2 million and $4.8 million, or 88% and 87% of total
accounts receivable. Sears pays its accounts on a timely basis in accordance
with the terms of the service agreements.
On December 5, 1996, MaxServ received an expression of interest by Sears to
acquire all outstanding shares of common stock it does not currently own. The
Company's board of directors has designated a special committee to evaluate
the fairness of and to negotiate any offer received from Sears or any third
party. Discussions with Sears have commenced and there can be no assurance
that any transaction will be concluded. The potential impact, if any, of this
matter on the Company's financial condition and future results of operations
cannot be presently determined.
3. INCOME TAXES
The effective income tax rate is based on the expected annual rate for federal
and state income taxes.
4. FINANCING AGREEMENT
In September 1996, the Company amended its secured bank credit agreement
extending it until September 1998 and increasing the total amount available to
$10 million. Subject to the collateral requirements of the agreement, up to $10
million is available for revolving working capital loans and up to $4 million
for equipment loans. Amounts available for revolving working capital loans are
reduced by amounts outstanding for equipment financed and the Company may elect
to bear interest at (a) the greater of the bank's prime rate or the federal
funds rate plus 1/2% or (b) a LIBOR-based interest rate for specific borrowings
for designated time periods as defined in the agreement. Borrowings under the
equipment financing facility are payable over 48 months and bear interest at
1/4% over the bank's prime rate, or the Company may elect a fixed interest rate
of 2 1/4% over the bank's cost of funds rate. Other terms and covenants of the
agreement remained substantially unchanged.
At November 30, 1996, no amounts were outstanding under the credit agreement
and the Company was in compliance with all covenants.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
This discussion contains forward looking statements which are subject to
certain risks and uncertainties which could cause actual future results to
differ materially from the opinions presented. Such risks and uncertainties
include business conditions; demand for and acceptance of the Company's
services; local, national, and global economic environments; the impact of
competitive products and services; the Company's relationship with Sears and
other risks detailed from time to time in the Company's SEC reports.
On December 5, 1996, MaxServ received an expression of interest by Sears to
acquire all outstanding shares of common stock it does not currently own. The
Company's board of directors has designated a special committee to evaluate
the fairness of and to negotiate any offer received from Sears or any third
party. Discussions with Sears have commenced and there can be no assurance
that any transaction will be concluded. The potential impact, if any, of this
matter on the Company's financial condition and future results of operations
cannot be presently determined.
FINANCIAL CONDITION
MaxServ's financial condition is excellent with cash of $3.5 million, working
capital of $5.3 million, no long-term debt and a fully available $10 million
credit facility at November 30, 1996.
Operations for the six months generated cash of $3.1 million compared to a
deficit of $258,000 for the same period a year ago when $2.3 million of
accounts payable primarily associated with capital additions incurred late in
1995 were liquidated. The favorable collection of accounts receivable in
generally less than 30 days, coupled with depreciation of substantial
technology equipment over only three years, produces relatively high cash flow
from operations compared to net income. The percentage of cash generated by
earnings before interest, income taxes, depreciation and amortization (EBITDA)
to revenue is stronger at 16% for the first six months of 1997 compared to 5%
for the same period last year and 11% for all of 1996.
MaxServ continues to internally fund its capital investments as it did in 1996
without incurring long-term debt. Capital investments of $1.8 million were
made during the first six months, following $3.8 million during the previous
fiscal year, continuing to enhance operating capability and network service
capacity. The Company's pretax rate of return on assets continues to improve
at 19% for the first six months of 1997 compared to 8% for all of 1996.
The Company derives over 90% of its revenue and margin from services to Sears
and its results of operations would be adversely affected should Sears
materially diminish the service relationship. However, management believes
MaxServ's performance history, Sears' commanding market presence as the
dominant domestic retailer of household products and related services,
MaxServ's long-term outsource position with Sears under service contracts with
remaining terms of four and eight years, and Sears' ownership interest,
combine to provide a sound long-term operating and financial foundation.
In addition, MaxServ is positioned to competitively benefit from the general
trend of domestic corporations to concentrate on their core businesses and
streamline ancillary in-house services through outsourcing. Leveraging the
Company's resources to grow and diversify its customer base and service
offerings to the emerging Home Services market, an industry expanding beyond
home product repair to encompass a broader scope of lifestyle services sought
by consumers and homeowners nationwide, is a strategic priority. MaxServ's
information and systems network capabilities, coupled with key business
alliances, should enable the Company to respond to such increasing customer
requirements.
Management believes continuing operations and the bank credit agreement will
provide sufficient resources to allow the Company to meet its obligations,
fund capital requirements and pursue moderate growth through 1997. Although
there can be no assurance, management also believes it can obtain the
necessary resources to fund desirable acquisition or growth opportunities
should any arise.
RESULTS OF OPERATIONS
Quarter and Six Months Ended November 30, 1996 Compared to Quarter and Six
Months Ended November 30, 1995
MaxServ increased its service fees 16% and 14% for the quarter and six months
on slightly less call volume. The Company's telemarketing services for
replacement parts, representing about 40% of overall service fees, generated
most of the revenue increase due to higher service prices. Service fees for
information and diagnostic services provided to consumers regarding personal
computers generated about 30% of the revenue increase as a result of service
expansion and call volume growth. Smaller revenue and call volume increases
for other services were offset by a decline in service fees and call volume
from technicians for logistical support services due to conversions from
telephone communications to mobile data entry and inquiry terminals begun
earlier in calendar 1996.
7
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The Company's large service margin improvements primarily resulted from the
higher service prices and productivity achievements for telemarketing
services. Such services required 9% and 12% less cost per call for the
quarter and six months reflecting the continuing positive impact of the
substantial completion, during the third quarter of 1996, of the year long
development and implementation of the systems and processes necessary to fully
integrate these new and very large services acquired in the last half of 1995.
Although selling, general and administrative expenses have increased, such
costs continue to be stable as a percentage of service fees at 8% for the
quarter and 7% for the six months. Key management personnel are being
selectively added to support strategic marketing and growth initiatives.
8
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Annual Meeting of Stockholders of MaxServ, Inc. was held on October
25, 1996. Two matters were submitted to a vote of security holders,
the election of eight directors and the ratification of the selection
of Price Waterhouse LLP as independent accountants for 1997. The vote
tabulation was as follows:
Election of Directors:
<TABLE>
<CAPTION>
Nominee For Against
------- --- -------
<S> <C> <C>
Charles F. Bayless 10,578,583 3,325
Nathaniel P. Turner 10,578,583 3,325
James F. Leary 10,577,783 4,125
Steven J. Keane 10,578,583 3,325
Daniel A. Mihalovich 10,578,383 3,525
Thomas D. Overton III 10,578,383 3,525
Patrick A. Rivelli 10,578,583 3,325
Stephanie S. Springs 10,578,383 3,525
</TABLE>
Mr. Leary resigned as a director effective December 19, 1996.
Mr. Leary indicated his resignation was necessitated by the
demands of a new business affiliation.
Ratification of Price Waterhouse LLP as Independent Accountants:
<TABLE>
<CAPTION>
For Against Abstain
---------- ------- -------
<S> <C> <C>
10,577,083 2,625 2,200
</TABLE>
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
10.1* Amended and Restated Loan Agreement, dated
September 30, 1996, with Texas Commerce Bank National
Association
(b) Reports on Form 8-K
None.
----------------------------------
* Filed herewith.
9
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MAXSERV, INC.
-------------------------------------------------------
(Registrant)
Date: January 13, 1997 \s\ NEIL A. JOHNSON
-------------------------------------------------------
Neil A. Johnson
Senior Vice President, Finance, Treasurer and Secretary
(Principal Financial and Accounting Officer)
10
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EXHIBIT INDEX
EXHIBIT
NO.
10.1 Amended and Restated Loan Agreement, dated September 30, 1996, with
Texas Commerce Bank National Association.
11
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AMENDED AND RESTATED LOAN AGREEMENT
Reference is hereby made to that certain Loan Agreement dated April 29,
1994, by and between MAXSERV, INC. ("Borrower"), a Delaware corporation, and
TEXAS COMMERCE BANK NATIONAL ASSOCIATION ("Lender"), a national banking
association, as amended by the terms and provisions of that certain First
Amendment of Loan Agreement dated effective as of February 17, 1995, by and
between Borrower and Lender, and as further amended by the terms and provisions
of that certain Second Amendment of Loan Agreement also dated effective as of
February 17, 1995, by and between Borrower and Lender. Said Loan Agreement, as
previously amended, shall hereinafter be collectively referred to as the
"Original Agreement."
In connection with (a) an extension of the Maturity Date, (b) an increase
in the amount of the Revolving Commitment, (c) an increase in the maximum
aggregate amount of permitted Advance Loans, (d) the addition of certain
interest rate options to be applicable to the Revolving Loans and the Advance
Loans, and (e) certain other changes to the Loan Agreement, the parties to the
Original Agreement now desire to amend and restate the Original Agreement in
its entirety. Accordingly, the Original Agreement is hereby amended and
restated in its entirety to hereafter be and read as follows:
This Amended and Restated Loan Agreement (the "Agreement") is made as of
September 30, 1996, by and between MAXSERV, INC. ("Borrower"), a Delaware
corporation, and TEXAS COMMERCE BANK NATIONAL ASSOCIATION ("Lender"), a
national banking association. Borrower has requested that Lender make loans to
Borrower in the following manner and subject to the following terms and
conditions:
1. Certain Definitions. Unless a particular word or phrase is otherwise
defined or the context otherwise requires, capitalized words and phrases used
in this Agreement shall have the following meanings (all definitions that are
defined in this Agreement in the singular to have the same meanings when used
in the plural and vice versa):
Accounts, Equipment and General Intangibles shall have the
respective meanings assigned to them in the Texas Business and Commerce Code in
force on the date hereof.
Adjusted LIBOR Interbank Rate shall mean, with respect to each LIBOR
Interest Period, a rate per annum equal to the quotient (converted to a
percentage) of (a) the LIBOR Interbank Rate with respect to such LIBOR Interest
Period divided by (b) one (1) minus the LIBOR Reserve Requirement in effect on
the first day of such LIBOR Interest Period.
Advance Loan Interest Option shall have the meaning ascribed to such
term in Paragraph 4(b) hereof.
Advance Loans shall mean the Loans described in Paragraph 3 hereof.
Advance Loan shall mean any such Loan.
Advance Notes shall mean the promissory notes of Borrower described
in Paragraph 3 hereof, and any and all renewals, extensions, modifications,
rearrangements and replacements thereof and any and all substitutions therefor.
Affiliate shall mean any Person controlling, controlled by or under
common control with any other Person. For purposes of this definition,
"control" (including "controlled by" and "under common control with") shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of any indicia of equity rights (whether issued and outstanding
capital stock, partnership interests or otherwise) or by any other means.
Agreement shall mean this Loan Agreement, as it may from time to
time be amended, modified, restated or supplemented.
<PAGE> 2
Alternate Base Rate shall mean for any day a rate per annum (rounded
upwards to the nearest 1/100 of 1%) equal to the lesser of (a) the sum of (1)
the greater of (A) the Prime Rate (computed on the basis of the actual number
of days elapsed over a year of 365 or 366 days, as the case may be) in effect
on such day, and (B) the Federal Funds Rate (computed on the basis of the
actual number of days elapsed over a 360-day year) in effect for such day plus
1/2 of 1%, plus (2) the Applicable Margin in effect on such day or (b) the
Ceiling Rate. For purposes of this Agreement any change in the Alternate Base
Rate due to a change in the Prime Rate or Federal Funds Rate shall be effective
on the effective date of such change in the Prime Rate or Federal Funds Rate,
respectively. If for any reason Lender shall have determined (which
determination shall be conclusive and binding, absent manifest error) that it
is unable to ascertain the Federal Funds Rate for any reason, including the
inability or failure of Lender to obtain sufficient quotations in accordance
with the terms hereof, the Alternate Base Rate shall be the lesser of (a) the
Prime Rate plus the Applicable Margin or (b) the Ceiling Rate until the
circumstances giving rise to such inability no longer exist.
Alternate Base Rate Borrowing shall mean that portion of the
principal balance of the Revolving Loans at any time bearing interest at the
Alternate Base Rate.
Annual Financial Statements shall mean the annual financial
statements of a Person, including all notes thereto, which statements shall
include a balance sheet as of the end of such fiscal year and an income
statement, statement of changes in stockholders equity, statement of cash flows
and a copy of such Person's 10-K Report filed or to be filed with the Securities
Exchange Commission for such fiscal year, all setting forth in comparative form
the corresponding figures from the previous fiscal year, all prepared in
conformity with GAAP and accompanied by a report and unqualified opinion of
independent certified public accountants of recognized standing satisfactory to
Lender, which shall state that such financial statements, in the unqualified
opinion of such accountants, present fairly, in all material respects, the
financial position of such Person as of the date thereof and the results of its
operations for the period covered thereby in conformity with GAAP. The Annual
Financial Statements for Borrower shall be prepared on a consolidated basis. In
connection with each set of Annual Financial Statements, if Borrower ever
acquires any Subsidiary or Subsidiaries in accordance with the other provisions
of this Agreement, annual consolidating statements shall also be prepared by
Borrower for delivery to Lender, and such consolidating statements shall be
prepared in accordance with GAAP only to the extent normal and customary.
Applicable Margin shall mean with respect to any Revolving Loan, the
applicable per annum percentage set forth below which corresponds to the
applicable Debt to Tangible Net Worth Ratio:
<TABLE>
<CAPTION>
===================================================================
Per Annum
Per Annum Percentage for
Debt to Percentage for LIBOR Alternate Base Rate
Tangible Net Worth Ratio Rate Borrowings Borrowings
- -------------------------------------------------------------------
<S> <C> <C>
Less than .75x 1.75% 0.000%
.75x or greater 2.00% 0.000%
===================================================================
</TABLE>
Bankruptcy Code shall mean the United States Bankruptcy Code, as
amended, and any successor statute.
Borrowing Authorization shall mean a certificate, in Proper Form, of
the Secretary or an Assistant Secretary of a corporation as to the resolutions
of the Board of Directors of such corporation authorizing the execution,
delivery and performance of the documents to be executed by such corporation;
the incumbency and signature of the officer of such corporation executing such
documents on behalf of such corporation, and the Organizational Documents of
such corporation.
2
<PAGE> 3
Borrowing Base shall mean, as at any date, the amount of the
Borrowing Base shown on the Borrowing Base Certificate then most recently
delivered pursuant to Paragraph 8(b) hereof, determined by the following
calculation:
(i) 80% of the Eligible Accounts of Borrower at said date
which are owed by account debtors other than Sears, Roebuck and
Co.; plus
(ii) 90% of the Eligible Accounts of Borrower which are owed
by Sears, Roebuck and Co.
In the absence of a current Borrowing Base Certificate, Lender shall determine
the Borrowing Base from time to time in its discretion, taking into account all
information available to it, and the Borrowing Base from time to time so
determined shall be the Borrowing Base for all purposes of this Agreement until
a current Borrowing Base Certificate, in Proper Form, is furnished to and
accepted by Lender.
Borrowing Base Certificate shall mean a certificate, duly executed
by an appropriate officer or other responsible party acceptable to Lender on
behalf of Borrower, appropriately completed and in substantially the form of
Exhibit A hereto. Each Borrowing Base Certificate shall be effective only as
accepted by Lender (and with such revisions, if any, as Lender may require as a
condition to such acceptance).
Business Day shall mean any day on which Lender is open for
business.
Capital Expenditures shall mean, as to any Person, expenditures in
respect of fixed or capital assets by such Person, including the capital portion
of lease payments made in respect of capital lease obligations, but excluding
expenditures for the restoration, repair or replacement of any fixed or capital
asset which was destroyed or damaged, in whole or in part, to the extent
financed by the proceeds of an insurance policy maintained by such Person.
Expenditures in respect of replacements and maintenance consistent with the
business practices of a Person in respect of plant facilities, machinery,
fixtures and other like capital assets utilized in the ordinary course of
business are not Capital Expenditures to the extent such expenditures are not
capitalized in preparing a balance sheet of such Person in accordance with
GAAP.
Cash Flow shall mean, for any period, (a) the sum of (i) Net Income
after taxes, (ii) depreciation and (iii) amortization, less (b) Net Capital
Expenditures, all determined in accordance with GAAP.
Cash Flow Coverage Ratio shall mean, at the end of any calendar
month, the ratio of (a) Cash Flow for the preceding twelve (12) month period to
(b) the amount of scheduled principal payments due with respect to Long-Term
Indebtedness and the amount of scheduled lease payments due with respect to
capital lease obligations for the next successive twelve (12) month period.
Ceiling Rate shall mean, on any day, the maximum nonusurious rate of
interest permitted for that day by whichever of applicable federal or Texas laws
permits the higher interest rate, stated as a rate per annum. On each day, if
any, that Chapter One establishes the Ceiling Rate, the Ceiling Rate shall be
the "indicated rate ceiling" (as defined in Chapter One) for that day. Lender
may from time to time, as to current and future balances, implement any other
ceiling under Chapter One by notice to Borrower, if and to the extent permitted
by Chapter One. Without notice to Borrower or any other person or entity, the
Ceiling Rate shall automatically fluctuate upward and downward as and in the
amount by which such maximum nonusurious rate of interest permitted by
applicable law fluctuates.
Chapter One shall mean Chapter One of the Texas Credit Code, as in
effect on the date hereof.
Code shall mean the Internal Revenue Code of 1986, as amended, as
now or hereafter in effect, together with all regulations thereof or thereunder
by the Internal Revenue Service.
3
<PAGE> 4
Collateral shall mean all Property, tangible or intangible, real,
personal or mixed, now or hereafter subject to the Security Documents.
Compliance Certificate shall have the meaning given to it in
Paragraph 8(b) hereof.
Consequential Loss shall mean, with respect to (a) Borrower's
payment of principal of a LIBOR Rate Borrowing on a day other than the last day
of the applicable LIBOR Interest Period, (b) Borrower's failure to borrow a
LIBOR Rate Borrowing on the date specified by Borrower for any reason, (c)
Borrower's failure to make any prepayment of the Revolving Loans (other than
Alternate Base Rate Borrowings) on the date specified by Borrower, or (d) any
cessation of the LIBOR Rate to apply to the Revolving Loans or any part thereof
pursuant to Paragraph 5 hereof, in each case whether voluntary or involuntary,
any loss, expense, penalty, premium or liability incurred by Lender, including
any interest paid by Lender to lenders of funds borrowed by it to make or carry
the Revolving Loans. And "Consequential Loss" shall mean, with respect to the
termination or cancellation of any LIBOR Rate Borrowing pursuant to Paragraph 5
hereof, in each case whether voluntary or involuntary, any loss, expense,
penalty, premium or liability incurred by Lender on account of any reduction
resulting from such premature termination or cancellation of such borrowing in
Lender's margins or spreads between its cost of funds and the interest earned on
the principal of the borrowing so terminated or canceled, including an amount
equal to the excess (if any) of (x) interest that would have accrued on any such
borrowing during the remainder of the applicable LIBOR Interest Period had such
borrowing not been terminated or canceled early, over (y) the interest actually
accrued on the principal amount of that terminated or canceled borrowing for
such remainder of such LIBOR Interest Period.
Controlled Group shall mean all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the applicable Person, are treated as a
single employer under Section 414 of the Code.
Cost of Funds Rate shall mean, on any day, the rate of interest per
annum quoted by Lender to Borrower as the rate which Lender estimates as of such
day as its cost of funds with respect to the original principal amount of the
applicable Advance Note to which such Cost of Funds Rate shall apply for a
period of time equal to the original term of such Advance Note. The Cost of
Funds Rate is a reference rate and does not necessarily represent Lender's
actual cost of funds with respect to the outstanding balance of the applicable
Advance Note as of the date such rate is quoted and Lender disclaims any
statement, representation or warranty to the contrary. Borrower shall not be
entitled to any refund, credit or offset if such actual cost of funds is
determined to be less than the quoted Cost of Funds Rate.
Credit Documents shall mean any and all papers now or hereafter
governing, evidencing, guaranteeing or securing or otherwise relating to all or
any part of the indebtedness evidenced by the Notes, including the Notes, this
Agreement, Borrowing Authorizations with respect to all such Persons as Lender
may require, the Security Documents, all instruments, certificates and
agreements now or hereafter executed or delivered to Lender pursuant to any of
the foregoing or in connection with the Loans or any commitment regarding the
Loans and all amendments, modifications, renewals, extensions, increases and
rearrangements of, and substitutions for, any of the foregoing.
Current Accounts Receivable shall mean all Accounts, that as of the
date of any determination of Current Accounts Receivable: (a) are evidenced by
invoice and are due and payable not more than 30 days from the date of the
invoice or agreement evidencing same; (b) have been billed within 30 days after
the shipment of the goods or the providing of services giving rise to the
Account; (c) are not unpaid more than 90 days past date of invoice; (d) arise
from the performance of services by the obligee of the Account which have been
fully and satisfactorily performed or from the sale of goods in which the
obligee had the sole and complete ownership which have been sold to the account
debtor on an absolute sale basis on open account and not on consignment, on
approval or on a "forced buyback" or "sale or return" basis or subject to any
other repurchase or return agreement, and the goods have been shipped and
delivered to the account debtor (evidenced by such obligee's possession of
shipping and delivery receipts); (e) are valid obligations of the account
debtors thereunder and are not subject to set-off, counterclaim, defense,
allowance or adjustment (other than discounts for prompt payment shown on the
invoice) or to
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litigation, dispute, objection or complaint by the account debtor concerning its
liability on the Account, and the goods, the sale of which gave rise to the
Account, have not been returned, rejected, lost or damaged on shipment; (f)
arose in the ordinary course of business of the obligee thereon, are stated to
be payable in lawful money of the United States and are not evidenced by chattel
paper (as such term is defined in the Texas Business and Commerce Code), a
promissory note or any other instrument (as such term is defined in the Texas
Business and Commerce Code) of any kind; and (g) no notice of bankruptcy,
insolvency or financial embarrassment of the account debtor has been received by
the obligee of such Account or Lender.
Current Assets shall mean all assets, including without limitation,
the applicable Accounts, which would be included in "current assets" in
accordance with GAAP. Current Assets shall be determined on a consolidated
basis.
Current Liabilities shall mean all liabilities and other items which
in accordance with GAAP would be included as "current liabilities." Current
Liabilities shall be determined on a consolidated basis.
Current Ratio shall mean, as of any day, the ratio of Current Assets
to Current Liabilities.
Debt to Tangible Net Worth Ratio shall mean, as of any day, the
ratio of (a) Indebtedness to (b) Tangible Net Worth.
Default shall mean an Event of Default or an event which with notice
or lapse of time or both would, unless cured or waived, become an Event of
Default.
Eligible Accounts shall mean, as at any date of determination
thereof, each Current Account Receivable (which is subject to a Security
Document and on which Lender shall have a first-priority perfected Lien as
security for the Revolving Loans) which is at said date payable to Borrower and
which complies with the following requirements: (a) the applicable account
debtor is not a foreign country or any subdivision or agency or department
thereof or located outside of the fifty (50) states of the United States or
Puerto Rico (other than such accounts of debtors located outside of the 50
states of the United States or Puerto Rico specifically approved in writing by
Lender as "Eligible Accounts" for purposes hereof); (b) the applicable account
debtor is not the United States of America or any of its agencies, departments,
commissions, boards or bureaus or is not otherwise subject to the Federal
Assignment of Claims Act (other than such accounts of the United States of
America or any of its agencies, departments, commissions, boards or bureaus
specifically approved in writing by Lender as "Eligible Accounts" for purposes
hereof); (c) the Account is subject to no Lien whatsoever, except for the Liens
created pursuant to the Security Documents; (d) the Account has not arisen out
of transactions with a Subsidiary, employee, officer, agent, director,
stockholder, partner, trustee or other owner or holder of any indicia of equity
rights (whether issued and outstanding capital stock, partnership interests or
otherwise) of Borrower or any Affiliate of any such Person, provided, however,
that the Accounts owing by Sears, Roebuck and Co. shall not be excluded from
Eligible Accounts even though Sears, Roebuck and Co. owns and holds stock of
Borrower, has one or more representatives serving as directors of Borrower and
is an Affiliate of Borrower; (e) each of the representations and warranties set
forth in the Security Documents with respect to such Account is true and correct
in all material respects; and (f) Lender has not deemed such Account ineligible
because of Lender's reasonable belief in the uncertainty about the
creditworthiness of the account debtor or because Lender otherwise reasonably
considers the collateral value thereof to be impaired or its ability to realize
such value to be insecure; provided, however, (a) if more than twenty percent
(20%) of any account debtor's total Accounts with Borrower (other than Accounts
owing by Sears, Roebuck and Co.) then remain unpaid for more than 90 days after
the date of invoice, the total Accounts owed to Borrower by such account debtor
shall be excluded from Eligible Accounts; and (b) in the event that the
aggregate Accounts owed to Borrower by any account debtor (other than Sears,
Roebuck and Co.) exceeds ten percent (10%) of the total Accounts owed to
Borrower by all account debtors, the Accounts owed by such account debtor to
Borrower in excess of such ten percent (10%) amount shall be excluded from
Eligible Accounts. In the event of any dispute under the foregoing criteria
about whether an Account is or has ceased to be an Eligible Account, the
reasonable decision of Lender shall be
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conclusive and binding. Nothing in this definition of "Eligible Accounts" shall
be construed to limit or release any right of Lender to any Collateral.
Environmental Claim shall mean any third party (including
Governmental Authorities and employees) action, lawsuit, claim or proceeding
(including claims or proceedings at common law or under the Occupational Safety
and Health Act or similar laws relating to safety of employees) which seeks to
impose liability for (i) noise; (ii) pollution or contamination of the air,
surface water, ground water or land or the clean-up of such pollution or
contamination; (iii) solid, gaseous or liquid waste generation, handling,
treatment, storage, disposal or transportation; (iv) exposure to Hazardous
Substances; (v) the safety or health of employees; or (vi) the manufacture,
processing, distribution in commerce or use of any Hazardous Substances. An
"Environmental Claim" includes a common law action, as well as a proceeding to
issue, modify or terminate an Environmental Permit, or to adopt or amend a
regulation to the extent that such a proceeding attempts to redress violations
of an applicable permit, license, or regulation as alleged by any Governmental
Authority.
Environmental Liabilities includes all liabilities arising from any
Environmental Claim, Environmental Permit or Requirement of Environmental Law
under any theory of recovery, at law or in equity, and whether based on
negligence, strict liability or otherwise, including remedial, removal,
response, abatement, restoration (including natural resources), investigative,
monitoring, personal injury and damage to property or natural resources or
injuries to persons, and any other related costs, expenses, losses, damages,
penalties, fines, liabilities and obligations, and all costs and expenses
necessary to cause the issuance, reissuance or renewal of any Environmental
Permit, including reasonable attorneys' fees and court costs.
Environmental Permit shall mean any permit, license, approval or
other authorization under any applicable Legal Requirement relating to pollution
or protection of health or the environment, including laws, regulations or other
requirements relating to emissions, discharges, releases or threatened releases
of pollutants, contaminants or hazardous substances or toxic materials or wastes
into ambient air, surface water, ground water or land, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants or Hazardous Substances.
Environmental Matters shall mean matters relating to pollution or
protection of the environment, including emissions, discharges, releases or
threatened releases of Hazardous Substances into the environment (including
ambient air, surface water or ground water, or land surface or subsurface), or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Substances.
ERISA shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and all rules and regulations adopted by the
Internal Revenue Service or the U.S. Department of Labor thereunder.
Event of Default shall have the meaning assigned to it in Paragraph
12 hereof.
Federal Funds Rate shall mean, for any period, a fluctuating
interest rate per annum equal for each day during such period to the weighted
average of the rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as published for such
day (or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations for such day
on such transactions received by the Reference Bank from three (3) Federal funds
brokers of recognized standing selected by it.
Financing Statements shall mean all such Uniform Commercial Code
financing statements as Lender shall require, in Proper Form, duly executed by
Borrower or others to give notice of and to perfect or continue perfection of
Lender's Liens in all Collateral.
GAAP shall mean, as to a particular Person, such accounting practice
as, in the opinion of the independent certified public accountants of recognized
national standing retained by such Person and acceptable to Lender, conforms at
the time to generally accepted accounting
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principles, consistently applied. GAAP shall mean those principles and practices
(a) which are recognized as such by the Financial Accounting Standards Board,
(b) which are applied for all periods after the date hereof in a manner
consistent with the manner in which such principles and practices were applied
to the most recent audited financial statements of the relevant Person furnished
to Lender, and (c) which are consistently applied for all periods after the date
hereof so as to reflect properly the financial condition, and results of
operations and changes in financial position, of such Person. If any change in
any accounting principle or practice is required by the Financial Accounting
Standards Board in order for such principle or practice to continue as a GAAP or
practice, all reports and financial statements required hereunder may be
prepared in accordance with such change only after written notice of such change
is given to Lender.
Governmental Authority shall mean any foreign governmental
authority, the United States of America, any State of the United States and any
political subdivision of any of the foregoing, and any central bank, agency,
department, commission, board, bureau, court or other tribunal having
jurisdiction over Lender, Borrower or their respective Property.
Hard Costs shall mean the purchase price for specific Equipment, as
outlined on a vendor's invoice and shall exclude freight, shipping,
installation, insurance and maintenance agreement costs and expenses.
Hazardous Substance shall mean petroleum products and any hazardous
or toxic waste or substance defined or regulated as a hazardous substance from
time to time by any law, rule, regulation or order described in the definition
of "Requirements of Environmental Law".
Indebtedness shall mean and includes (a) all items which in
accordance with GAAP would be included on the liability side of a balance sheet
on the date as of which Indebtedness is to be determined (excluding capital
stock, surplus and surplus reserves) and (b) all guaranties, letter of credit
contingent reimbursement obligations, endorsements and other contingent
obligations in respect of, or any obligations to purchase or otherwise acquire,
Indebtedness of others; provided, that such term shall not mean or include any
Indebtedness in respect of which monies sufficient to pay and discharge the same
in full (either on the expressed date of maturity thereof or on such earlier
date as such Indebtedness may be duly called for redemption and payment) shall
be deposited with a depository, agency or trustee acceptable to Lender in trust
for the payment thereof.
Interest Payment Dates shall mean with respect to each Revolving
Loan, (a) for Alternate Base Rate Borrowings, (1) the last Business Day of each
March, June, September and December, and (2) the Maturity Date, and (b) for
LIBOR Rate Borrowings, (1) if the LIBOR Interest Period applicable to such LIBOR
Rate Borrowing is equal to or less than three (3) months, the end of such LIBOR
Interest Period, and (2) if the LIBOR Interest Period applicable to such LIBOR
Rate Borrowing is equal to six (6) months, on that day which is three (3)
calendar months following the first day of the applicable LIBOR Interest Period
(or, if there be no corresponding day, on the next succeeding day which is a
Business Day) and at the end of such LIBOR Interest Period.
Legal Requirement shall mean any law, statute, ordinance, decree,
requirement, order, judgment, rule, or regulation (or interpretation of any of
the foregoing) of, and the terms of any license or permit issued by, any
Governmental Authority, whether presently existing or arising in the future.
Notwithstanding anything contained herein to the contrary, however, the term
"Legal Requirement" shall not include, and shall specifically exclude,
Requirements of Environmental Law.
LIBOR Business Day shall mean a Business Day on which transactions
in United States Dollar deposits between banks may be carried on in the London
interbank dollar market.
LIBOR Interbank Rate shall mean, for each LIBOR Interest Period, the
rate of interest per annum, rounded, if necessary, to the next highest whole
multiple of one-sixteenth percent (1/16%), determined by Lender based upon rates
quoted at approximately 11:00 a.m. in the London interbank market, on the date
two (2) LIBOR Business Days prior to the first day of such LIBOR Interest
Period, for the offering to the Reference Bank by leading dealers in the London
interbank market selected by Lender in its sole discretion, acting in good
faith, at the time of
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determination and in accordance with the then existing practice in the London
interbank market, of deposits in United States dollars for delivery on the first
day of such LIBOR Interest Period and having a maturity equal to the length of
such LIBOR Interest Period and in an amount equal (or as nearly equal as may be)
to the LIBOR Rate Borrowing to which such LIBOR Interest Period relates. Each
determination by Lender of the LIBOR Interbank Rate shall be conclusive and
binding, absent manifest error, and may be computed using any reasonable
averaging and attribution method.
LIBOR Interest Period shall mean, for each LIBOR Rate Borrowing, a
period commencing:
(a) on the date of such LIBOR Rate Borrowing, or
(b) on the last day of the immediately preceding
LIBOR Interest Period in the case of a roll-over to a
successive LIBOR Interest Period,
and ending on the numerically corresponding day one, two, three or six months
thereafter, as Borrower shall elect in accordance herewith; provided, (w) any
LIBOR Interest Period which would otherwise end on a day which is not a LIBOR
Business Day shall be extended to the next succeeding LIBOR Business Day,
unless such LIBOR Business Day falls in another calendar month, in which case
such LIBOR Interest Period shall end on the next preceding LIBOR Business Day;
(x) any LIBOR Interest Period which begins on the last LIBOR Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such LIBOR Interest Period) shall end on
the last LIBOR Business Day of the appropriate calendar month; (y) no LIBOR
Interest Period shall ever extend beyond the Maturity Date; and (z) LIBOR
Interest Periods shall be selected by Borrower in such a manner that the LIBOR
Interest Period with respect to any portion of the Revolving Loans which shall
become due shall not extend beyond such due date.
LIBOR Rate shall mean, for the entire term of each LIBOR Interest
Period, a rate per annum equal to the lesser of (a) the sum of (1) the Adjusted
LIBOR Interbank Rate in effect on the first day of such LIBOR Interest Period
plus (2) the Applicable Margin from time to time in effect during such term, and
(b) the Ceiling Rate.
LIBOR Rate Borrowing shall mean each portion of the principal
balance of the Revolving Loans at any time bearing interest at the LIBOR Rate.
LIBOR Reserve Requirement shall mean, on any day, for any LIBOR
Interest Period, the stated maximum rate (expressed as a decimal) for all
reserves (including basic, supplemental, marginal and emergency reserves)
required to be maintained during such LIBOR Interest Period under Regulation D
by any member bank of the Federal Reserve System against "Eurocurrency
liabilities," as currently defined in Regulation D, all as specified by any
Governmental Authority. Without limiting the effect of the foregoing, the LIBOR
Reserve Requirement shall reflect any other reserves required to be maintained
by such member banks by reason of any Regulatory Change against (a) any category
of liabilities which includes deposits by reference to which the Adjusted LIBOR
Interbank Rate is to be determined as provided in the definition of "LIBOR
Interbank Rate" or (b) any category of extensions of credit or other assets
which include LIBOR Rate Borrowings. Each determination of the LIBOR Reserve
Requirement by Lender shall be conclusive and binding, absent manifest error,
and may be computed using any reasonable averaging and attribution method.
Lien shall mean any mortgage, pledge, charge, encumbrance, security
interest, collateral assignment or other lien or restriction of any kind,
whether based on common law, constitutional provision, statute or contract, and
shall include reservations, exceptions, encroachments, easements, rights of way,
covenants, conditions, restrictions, leases and other title exceptions.
Loans shall mean the loans described in and provided for by
Paragraph 2 and Paragraph 3 hereof.
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Long-Term Indebtedness shall mean all Indebtedness which by its
terms matures more than one year from its respective origination date and any
Indebtedness maturing within one year from such date which is renewable at the
option of the obligor to a date beyond one year from such date.
Maturity Date shall mean the maturity of the Revolving Note, which
is currently September 30, 1998, as the same may hereafter be accelerated
pursuant to the provisions of any of the Credit Documents.
Net Capital Expenditures for a Person shall mean, at the end of any
calendar month, the greater of (a) zero, or (b) Capital Expenditures for the
preceding twelve (12) month period reduced by the sum of (i) the increase in
capital leases for the preceding twelve (12) month period, (ii) the increase in
Indebtedness secured by Equipment for the preceding twelve (12) month period,
(iii) the net cash proceeds received by such Person during the preceding twelve
(12) month period from the sale of common or other stock in such Person, and
(iv) the balance of cash-on-hand for such Person at the beginning of the twelve
(12) month period for which Net Capital Expenditures is being calculated, but
only to the extent such cash-on-hand component does not duplicate any amounts
described in phrases (i), (ii) and (iii) above. Net Capital Expenditures shall
be determined on a consolidated basis in accordance with GAAP.
Net Income shall mean gross revenues and other proper income
credits, less all proper income charges (including taxes on income), all
determined in accordance with GAAP; provided, that there shall not be included
in such revenues (a) any earnings of any Subsidiary for any period prior to the
date such Subsidiary was acquired or any undistributed earnings of any
Subsidiary; (b) any gains resulting from the write-up of assets; or (c) any gain
which is classified is "extraordinary" in accordance with GAAP. Net Income
shall be determined on a consolidated basis.
Notes shall mean the Revolving Note and the Advance Notes, together
with any and all renewals, extensions, modifications, rearrangements and/or
replacements of any thereof.
Organizational Documents shall mean, with respect to a corporation,
the certificate of incorporation, articles of incorporation and bylaws of such
corporation, including any and all modifications thereof as of the date of the
Credit Document referring to such Organizational Document and any and all future
modifications thereof which are consented to by Lender.
Parties shall mean all Persons other than Lender executing any
Credit Document.
Past Due Rate shall mean, on any day, a rate per annum equal to the
Ceiling Rate for that day, or only if applicable law imposes no maximum
nonusurious rate of interest for that day, then at a rate per annum equal to
the Prime Rate for that day plus five percent (5%).
PBGC shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
Person shall mean any individual, corporation, partnership, joint
venture, joint stock association, business or other trust, unincorporated
organization, Governmental Authority or any other form of entity.
Plan shall mean an employee pension benefit plan which is covered by
Title IV of ERISA or subject to the minimum funding standards under Section 412
of the Code and is either (a) maintained by Borrower or any member of a
Controlled Group for employees of Borrower or (b) maintained pursuant to a
collective bargaining agreement or any other arrangement under which more than
one employer makes contributions and to which Borrower or any member of a
Controlled Group for employees of Borrower is then making or accruing an
obligation to make contributions or has within the preceding five plan years
made contributions.
Prime Rate shall mean, on any day, the prime rate for that day as
determined from time to time by Lender for the guidance of its loan officers,
whether otherwise published or announced. Without notice to Borrower or any
other Person, the Prime Rate shall automatically
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<PAGE> 10
fluctuate upward and downward as and in the amount by which said Prime Rate
fluctuates, with each change to be effective as of the date of each change in
said Prime Rate. The Prime Rate is a reference rate and does not necessarily
represent the lowest or best rate or a favored rate, and Lender disclaims any
statement, representation or warranty to the contrary. Lender may make
commercial loans or other loans at rates or interest at, above or below the
Prime Rate.
Proper Form shall mean in form and substance satisfactory to Lender.
Property shall mean any interest in any kind of property or asset,
whether real, personal or mixed, tangible or intangible.
Quarterly 10-Q Reports shall mean the 10-Q Reports of a Person,
including all notes thereto, which are filed or is to be filed with the
Securities Exchange Commission by such Person for the applicable fiscal quarter
of such Person.
Quarterly Financial Statements shall mean the quarterly financial
statements of a Person, including a balance sheet as of the end of such fiscal
quarter and an income statement for the fiscal year to date, subject to normal
year-end adjustments, prepared in accordance with GAAP and certified as true
and correct to the best knowledge of an appropriate officer or other party
acceptable to Lender on behalf of such Person. The Quarterly Financial
Statements for Borrower shall be prepared on a consolidated basis. In
connection with each set of Quarterly Financial Statements, if Borrower ever
acquires any Subsidiary or Subsidiaries in accordance with the other provisions
of this Agreement, quarterly consolidating statements shall also be prepared by
Borrower for delivery to Lender, and such consolidating statements will be
prepared in accordance with GAAP only to the extent normal and customary.
Rate Selection Date shall mean, with respect to Revolving Loans,
that Business Day which is (a) in the case of Alternate Base Rate Borrowings,
the date of such borrowing or (b) in the case of LIBOR Rate Borrowings, the date
three (3) LIBOR Business Days preceding the first day of any proposed LIBOR
Interest Period.
Rate Selection Notice shall have the meaning ascribed to it in
Paragraph 4(c)(1) hereof.
Reference Bank shall mean Lender or such other financial institution
as Lender may from time to time designate with Borrower's prior written approval
(such approval to not be unreasonably withheld, delayed or conditioned).
Regulation D shall mean Regulation D of the Board of Governors of
the Federal Reserve System from time to time in effect and shall include any
successor or other regulation relating to reserve requirements applicable to
member banks of the Federal Reserve System.
Regulatory Change shall mean, with respect to Lender, any change on
or after the date of this Agreement in any Legal Requirement (including
Regulation D) or the adoption or making on or after such date of any
interpretation, directive or request applying to a class of banks including
Lender under any Legal Requirement (whether or not having the force of law) by
any Governmental Authority charged with the interpretation or administration
thereof.
Request for Advance shall mean (a) with respect to Revolving Loans,
a completed Request for Extension of Credit submitted to Lender by an authorized
officer of Borrower in the form attached hereto as Exhibit C, and (b) with
respect to Advance Loans, a written request for advance of an Advance Loan
submitted to Lender by an authorized officer of Borrower, irrevocably
designating the term of said Advance Loan (not to exceed 48 months) and the
applicable Advance Loan Interest Option selected by Borrower to apply to such
Advance Loan.
Request for Extension of Credit shall mean a written request for a
Revolving Loan, duly executed by an appropriate officer of Borrower,
appropriately completed and in substantially the form of Exhibit C attached
hereto.
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Requirements of Environmental Law shall mean all requirements
imposed by any law (including The Resource Conservation and Recovery Act and The
Comprehensive Environmental Response, Compensation, and Liability Act), rule,
regulation or order of any Governmental Authority in effect at the applicable
time which relate to (i) noise; (ii) pollution, protection or clean-up of the
air, surface water, ground water or land; (iii) solid, gaseous or liquid waste
generation, recycling, reclamation, treatment, storage, disposal or
transportation; (iv) exposure to Hazardous Substances; (v) the safety or health
of employees or (vi) regulation of the manufacture, processing, distribution in
commerce, use, discharge, release, threatened release, emission or storage of
Hazardous Substances.
Revolving Commitment shall mean the amount of the Total Commitment
less the aggregate principal amount outstanding under all Advance Loans as of
the date of determination.
Revolving Loan Interest Option shall have the meaning ascribed to
such term in Paragraph 4(a) hereof.
Revolving Loans shall mean the Loans described in Paragraph 2
hereof. Revolving Loan shall mean any such Loan.
Revolving Note shall mean the promissory note of Borrower described
in Paragraph 2 hereof, and any and all renewals, extensions, modifications,
rearrangements and replacements thereof and any and all substitutions therefor.
Security Agreements shall mean, collectively, (a) the security
agreement dated effective April 29, 1994, executed by Borrower in favor of
Lender as security for the Revolving Loans, covering all Accounts and related
General Intangibles now or hereafter owned by Borrower, (b) the security
agreements hereafter executed by Borrower in favor of Lender as security for one
or more of the Advance Loans, each covering the specific Equipment of Borrower
which is purchased with the proceeds of the applicable Advance Loan secured by
such security agreement, (c) the Conditional Security Agreement described in
Paragraph 7(b) below, and (d) any and all security agreements hereafter executed
in favor of Lender in connection with, or as security for the payment or
performance of, any Credit Document, as any of them may from time to time be
amended, modified, restated or supplemented.
Security Documents shall mean, collectively, this Agreement, the
Security Agreements, the Financing Statements and any and all other agreements,
deeds of trust, mortgages, chattel mortgages, security agreements, pledges,
guaranties, assignments of production or proceeds of production, assignments of
income, assignments of contract rights, assignments of partnership interests,
assignments of royalty interests, assignments of performance, completion or
surety bonds, standby agreements, subordination agreements, undertakings and
other instruments and Financing Statements now or hereafter executed and
delivered in connection with, or as security for the payment or performance of,
any Credit Document, as any of them may from time to time be amended, modified,
restated or supplemented.
Subsidiary shall mean, as to a particular parent Person, any other
Person of which more than 50% of the indicia of equity rights (whether
outstanding capital stock, partnership interests or otherwise) is at the time
directly or indirectly owned or held by such parent Person.
Tangible Net Worth shall mean total assets (valued at lower of
market value or cost less normal depreciation), less (a) all intangibles and (b)
all liabilities (including contingent and indirect liabilities), all determined
in accordance with GAAP. The term "intangibles" shall include, without
limitation, (1) deferred charges, including without limitation, any deferred tax
assets of Borrower; (2) the amount of any write-up in the book value of any
assets contained in any balance sheet resulting from revaluation thereof or any
write-up in excess of the cost of such assets acquired; and (3) the aggregate of
all amounts appearing on the assets side of any such balance sheet for
franchises, licenses, permits, patents, patent applications, copyrights,
trademarks, trade names, goodwill, treasury stock, experimental or
organizational expenses and other like intangibles. Tangible Net Worth shall be
determined on a consolidated basis.
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Texas Credit Code shall mean Title 79, Texas Revised Civil Statutes,
1925, as amended.
Total Commitment shall mean the obligation of Lender under this
Agreement to make Loans to Borrower in an aggregate principal amount at any one
time outstanding up to (but not exceeding) $10,000,000.00.
Unfunded Liabilities shall mean, with respect to any Plan, at any
time, the amount (if any) by which (a) the present value of all benefits under
such Plan exceeds (b) the fair market value of all Plan assets allocable to such
benefits, all determined as of the then most recent actuarial valuation report
for such Plan, but only to the extent that such excess represents a potential
liability of any member of the applicable Controlled Group to the PBGC or a
Plan under Title IV of ERISA.
The words "hereof," "herein," and "hereunder" and words of similar import when
used in this Agreement shall refer to this Agreement as a whole and not any
particular provision of this Agreement.
2. Revolving Loans.
(a) Lender agrees, subject to all of the terms and conditions of
this Agreement (including Paragraph 8 hereof), to make Revolving Loans under
this Paragraph to Borrower prior to the Maturity Date in an aggregate principal
amount at any one time outstanding up to, but not exceeding, the lesser of (i)
the Revolving Commitment or (ii) the Borrowing Base then in effect. All funds
advanced under any Revolving Loan shall be utilized by Borrower for working
capital purposes, including without limitation, support or working capital
needs resulting from Borrower's December 29, 1994 Parts Service Agreement with
Sears, Roebuck & Co. Subject to the conditions set forth in this Agreement,
any such Revolving Loan repaid prior to the Maturity Date may be reborrowed
pursuant to the terms of this Agreement; provided, that any and all such
Revolving Loans shall be due and payable in full on the Maturity Date.
Borrower and Lender agree that Chapter 15 of the Texas Credit Code shall not
apply to this Agreement, the Revolving Note or any Loan obligation. The
Revolving Loans shall be evidenced by the Revolving Note dated concurrently
herewith executed by Borrower, payable to the order of Lender in the original
principal amount of $10,000,000.00. Lender shall in no event be obligated to
fund more than one (1) Revolving Loan per each Business Day. The Revolving
Loan proceeds shall be made available to Borrower by depositing them in an
account designated by Borrower and maintained with Lender.
(b) If the aggregate outstanding amount of the Revolving Loans ever
exceeds either the Borrowing Base or the Revolving Commitment then in effect,
Borrower shall within two (2) Business Days after demand by Lender prepay the
Revolving Loans in such amounts as shall be necessary to cause the aggregate
outstanding amount of the Revolving Loans to be equal to or less than the
lesser of the Borrowing Base or the Revolving Commitment then in effect.
(c) Borrower shall also cause the outstanding principal balance of
the Revolving Note to be prepaid in full and reduced to a zero balance for
thirty (30) consecutive days at any time during each of the following periods:
(i) from September 30, 1996 until and including September 30, 1997; and (ii)
from September 30, 1997 until and including the Maturity Date.
(d) Borrower hereby agrees to pay to Lender a commitment fee on the
unused portion of the Revolving Commitment for the period of time from the date
of this Agreement until the Maturity Date. Such Commitment Fee shall be
calculated at a rate per annum equal to one-quarter of one percent (1/4%),
shall be computed daily (on the basis of the actual number of days elapsed in
the year composed of 360 days) and shall be based on the difference between the
Revolving Commitment amount and the unpaid and outstanding principal balance of
the Revolving Note for the applicable day. Accrued and unpaid commitment fees
shall be paid in arrears on or before the fifth (5th) Business Day after Lender
has given Borrower a written statement setting forth the amount of commitment
fees owing for each applicable fiscal quarter prior to the Maturity Date and as
of the Maturity Date itself. All past due commitment fees payable under this
subparagraph shall, at the option of Lender, bear interest at Past Due Rate.
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3. Advance Loans. Subject to all of the terms and conditions of this
Agreement (including Paragraph 8 hereof), Borrower shall have the right to
utilize a portion of the Total Commitment from time to time prior to or on
September 30, 1998 by obtaining from Lender one or more Advance Loans for the
purposes of financing up to eighty percent (80%) of the actual Hard Costs
incurred by Borrower in connection with the purchase of new Equipment;
provided, that in no event shall Lender have any obligation to advance any
Advance Loan if (a) the original principal amount of such Advance Loan plus the
aggregate principal amount of all other Advance Loans then outstanding at such
time would exceed $4,000,000.00, or (b) the original principal amount of such
Advance Loan plus the aggregate principal amount of all other Loans then
outstanding at such time (including all Revolving Loans) would exceed the Total
Commitment. Each Advance Loan shall be evidenced by a separate promissory note
executed by Borrower, payable to the order of Lender in the original principal
amount of the funds advanced under the applicable Advance Loan. Each of such
promissory notes shall have a maturity not greater than forty-eight (48) months
from the date of the applicable Advance Loan and shall require equal monthly
principal installments in the amount necessary to fully amortize the original
principal balance thereof over the term of the applicable Advance Note.
Accrued and unpaid interest shall also be due and payable with and in addition
to each installment of principal. Each Request for Advance of an Advance Loan
must also be accompanied by satisfactory invoices, vouchers and other evidence
necessary to confirm the actual amount of "hard costs" incurred by Borrower in
connection with the applicable purchase of Equipment. The principal amount of
any Advance Loans repaid may be reborrowed pursuant to the terms of this
Agreement, and Borrower and Lender further acknowledge and agree that Chapter
15 of the Texas Credit Code shall not apply to any of the Advance Loans or the
Advance Notes. Both parties hereto agree that the terms and conditions of this
Agreement shall hereafter govern the Advance Loans until payment in full of the
amounts outstanding thereunder.
4. Interest Options for Loans.
(a) Options Available for Revolving Loans. Subject to Paragraph 14
hereof, the Revolving Notes shall bear interest on their respective outstanding
principal balances at the Alternate Base Rate; provided, that (1) all past due
principal and interest under each Revolving Note shall bear interest at the
Past Due Rate which shall be payable on demand, and (2) subject to the
provisions hereof, Borrower shall have the option of having all or any portion
of the principal balance from time to time outstanding under the Revolving
Notes bear interest until their respective maturities at a rate per annum equal
to the LIBOR Rate (together with the Alternate Base Rate, individually herein
called an "Revolving Loan Interest Option" and collectively called "Revolving
Loan Interest Options"). The records of Lender with respect to Revolving Loan
Interest Options, LIBOR Interest Periods and the amounts of Revolving Loans to
which they are applicable shall be binding and conclusive, absent manifest
error. Interest on the Revolving Loans shall be calculated at the Alternate
Base Rate except where it is expressly provided pursuant to this Agreement that
the LIBOR Rate is to apply.
(b) Options Available for Advance Loans. Subject to Paragraph 14
hereof, each of the Advance Notes shall bear interest on their respective
outstanding principal balances at either (1) a floating rate per annum equal to
the Prime Rate plus 1/4% or (2) a fixed rate per annum equal to the Cost of
Funds Rate as of the date of the applicable Advance Note plus 2.25% (together
with the Prime Rate, individually herein called an "Advance Loan Interest
Option" and collectively called "Advance Loan Interest Options"); provided, that
all past due principal and interest under all of the Advance Notes shall bear
interest at the Past Due Rate which shall be payable on demand. The Advance
Loan Interest Option to apply to each particular Advance Note shall be selected
and designated by Borrower in the Request for Advance to be submitted by
Borrower to Lender in accordance with Paragraph 8(a)(ii) hereof, and Borrower
shall have no further right to designate or convert the Advance Loan Interest
Option applicable to such Advance Note during the term thereof. The records of
Lender with respect to Advance Loan Interest Options and the respective Advance
Loans to which they are applicable shall be binding and conclusive, absent
manifest error.
(c) Designation and Conversion of Revolving Loan Interest Options.
Borrower shall have the right to designate or convert its Revolving Loan
Interest Options in accordance with the provisions hereof. Provided no Default
or Event of Default has occurred and is continuing and subject to the
provisions of the last sentence of Paragraph 4(a) hereinabove and of Paragraph
5 hereof, Borrower may elect to have the LIBOR Rate apply or continue to apply
to all or any portion
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of the principal balance of the Revolving Notes. Each change in Revolving Loan
Interest Options shall be a conversion of the rate of interest applicable to the
specified portion of the Revolving Loans, but such conversion alone shall not
change the outstanding principal balance of the Revolving Notes. The Revolving
Loan Interest Options shall be designated or converted in the manner provided
below:
(1) Borrower shall give Lender notice by telephone, promptly
confirmed by written notice (the "Rate Selection Notice") substantially
in the form of Exhibit D attached hereto. Each such telephone and
written notice shall specify the amount and type of borrowings which are
the subject of the designation, if any; the amount and type of borrowings
into which such borrowings are to be converted or for which a Revolving
Loan Interest Option is designated; the proposed date for the designation
or conversion (which, in the case of conversion of LIBOR Rate Borrowings,
shall be the last day of the LIBOR Interest Period applicable thereto)
and the LIBOR Interest Period or Periods, if any, selected by Borrower.
Such notice by telephone shall be irrevocable and shall be given to
Lender no later than the applicable Rate Selection Date. If (a) a new
Revolving Loan is to be a LIBOR Rate Borrowing, (b) an existing LIBOR
Rate Borrowing is maturing at the time that a new Revolving Loan is being
requested and Borrower is electing to have such existing portion of the
outstanding principal balance of the Revolving Notes going forward bear
interest at the same Revolving Loan Interest Option and for the same
LIBOR Interest Period as the new Revolving Loan, or (c) a portion of the
Alternate Rate Borrowing is to be converted so as to bear interest at the
same Revolving Loan Interest Option and for the same LIBOR Interest
Period as the new Revolving Loan, then the Rate Selection Notice shall be
included in the Request for Extension of Credit applicable to the new
Revolving Loan (with no additional or separate Rate Selection Notice
being required), which shall be given to Lender no later than the
applicable Rate Selection Date.
(2) No more than three (3) LIBOR Interest Periods shall be in
effect at any one time. Each LIBOR Rate Borrowing shall be in the amount
of at least $500,000.
(3) Principal included in any borrowing shall not be included in
any other borrowing which exists at the same time.
(4) Each designation or conversion shall occur on a Business Day
(and, for LIBOR Rate Borrowings, on a LIBOR Business Day).
(5) Except as provided in Paragraph 5 hereof, no LIBOR Rate
Borrowing shall be converted on any day other than the last day of the
applicable LIBOR Interest Period.
(d) Accrual Computations. All interest and fees shall be computed
on the basis of a year of 360 days and actual days elapsed (including the first
day but excluding the last day) occurring in the period for which payable,
unless the effect of so computing shall be to cause the rate of interest to
exceed the Ceiling Rate, in which event, to the extent necessary to avoid
exceeding the Ceiling Rate, interest and fees shall be computed on the basis of
the actual days elapsed in the applicable calendar year in which they accrued.
5. Special Provisions Applicable to LIBOR Rate Borrowings.
(a) Options Unlawful. If, after the date of this Agreement, the
adoption of any applicable Legal Requirement or any change in any applicable
Legal Requirement or in the interpretation or administration thereof by any
Governmental Authority or compliance by Lender with any request or directive
(whether or not having the force of law) of any Governmental Authority shall at
any time make it unlawful or impossible for Lender to permit the establishment
of or to maintain any LIBOR Rate Borrowing, the commitment of Lender to
establish or maintain the LIBOR Rate affected by such adoption or change shall
forthwith be canceled and Borrower shall forthwith, upon demand by Lender to
Borrower, (1) convert the LIBOR Rate with respect to which such demand was made
to the Alternate Base Rate; (2) pay all accrued and unpaid interest to date on
the amount so converted; and (3) pay any amounts required to compensate Lender
for any additional cost or expense which Lender may incur as a result of such
adoption of or change in such
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<PAGE> 15
Legal Requirement or in the interpretation or administration thereof and any
Consequential Loss which Lender may incur as a result of such conversion to the
Alternate Base Rate. If, when Lender so notifies Borrower, Borrower has given a
Rate Selection Notice specifying one or more borrowings of the type with respect
to which such demand was made but the selected LIBOR Interest Period or LIBOR
Interest Periods has not yet begun, such Rate Selection Notice shall be deemed
to be of no force and effect, as if never made, and the balance of the Revolving
Loans specified in such Rate Selection Notice shall bear interest at the
Alternate Base Rate until a different available Revolving Loan Interest Option
shall be designated in accordance herewith.
(b) Increased Cost of Borrowings. If the adoption of any applicable
Legal Requirement or any change in any applicable Legal Requirement or in the
interpretation or administration thereof by any Governmental Authority or
compliance by Lender with any request or directive (whether or not having the
force of law) from any Governmental Authority shall at any time as a result of
any portion of the principal balance of the Revolving Notes being maintained on
the basis of the LIBOR Rate:
(1) subject Lender (or make it apparent that Lender is subject)
to any tax (including any United States interest equalization tax), levy,
impost, duty, charge, fee (collectively, "Taxes"), or any deduction or
withholding for any Taxes on or from the payment due under any LIBOR Rate
Borrowing or other amounts due hereunder, other than income and franchise
taxes of the United States and its political subdivisions; or
(2) change the basis of taxation of payments due from Borrower
to Lender under any LIBOR Rate Borrowing (otherwise than by a change in
the rate of taxation of the overall net income of Lender); or
(3) impose, modify, increase or deem applicable any reserve
requirement (excluding that portion of any reserve requirement included in
the calculation of the LIBOR Reserve Requirement), special deposit
requirement or similar requirement (including state law requirements and
Regulation D) imposed, modified, increased or deemed applicable by any
Governmental Authority against assets held by Lender, or against deposits
or accounts in or for the account of Lender, or against loans made by
Lender, or against any other funds, obligations or other Property owned or
held by Lender; or
(4) impose on Lender any other condition regarding any LIBOR
Rate Borrowing; and the result of any of the foregoing is to increase
the cost to Lender of agreeing to make or of making, renewing or
maintaining such borrowing on the basis of the LIBOR Rate, or reduce the
amount of principal or interest received by Lender, then, upon demand by
Lender, Borrower shall pay to Lender, from time to time as specified by
Lender, additional amounts which shall compensate Lender for such
increased cost or reduced amount. Lender will promptly notify Borrower in
writing of any event, upon becoming actually aware of it, which will
entitle Lender to additional amounts pursuant to this paragraph. Lender's
determination of the amount of any such increased cost, increased reserve
requirement or reduced amount shall be conclusive and binding, absent
manifest error, provided that the calculation thereof is set forth in
reasonable detail in such notice.
Borrower shall have the right, if it receives from Lender any notice referred
to in the preceding paragraph, upon three (3) Business Days' notice to Lender,
either (i) to repay in full (but not in part) any borrowing with respect to
which such notice was given, together with any accrued interest thereon, or
(ii) to convert the LIBOR Rate in effect with respect to such borrowing to the
Alternate Base Rate; provided, that any such repayment or conversion shall be
accompanied by payment of (x) the amount required to compensate Lender for the
increased cost or reduced amount referred to in the preceding paragraph; (y)
all accrued and unpaid interest to date on the amount so repaid or converted,
and (z) any Consequential Loss which may be incurred as a result of such
repayment or conversion.
(c) Inadequacy of Pricing and Rate Determination. If for any reason
with respect to any LIBOR Interest Period Lender shall have determined (which
determination shall be
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conclusive and binding upon Borrower) that: (1) Lender is unable through its
customary general practices to determine a rate at which the Reference Bank is
offered deposits in United States dollars by prime banks in the London interbank
market in the appropriate amount for the appropriate period, or by reason of
circumstances affecting the London interbank market generally, the Reference
Bank is not being offered deposits in United States dollars in the London
interbank market, for the applicable LIBOR Interest Period and in an amount
equal to the amount of the LIBOR Rate Borrowing requested by Borrower, or (2)
the LIBOR Rate will not adequately and fairly reflect the cost to Lender of
making and maintaining any LIBOR Rate Borrowing hereunder for any proposed LIBOR
Interest Period, then Lender shall give Borrower notice thereof and thereupon,
(A) any Rate Selection Notice previously given by Borrower designating a LIBOR
Rate which has not commenced as of the date of such notice from Lender shall be
deemed for all purposes hereof to be of no force and effect, as if never given,
and (B) until Lender shall notify Borrower that the circumstances giving rise to
such notice from Lender no longer exist, each Rate Selection Notice requesting a
LIBOR Rate shall be deemed a request for an Alternate Base Rate Borrowing, and
each outstanding LIBOR Rate Borrowing then in effect shall be converted, without
any notice to or from Borrower, upon the termination of the LIBOR Interest
Period then in effect, to an Alternate Base Rate Borrowing.
(d) INDEMNIFICATION. BORROWER SHALL INDEMNIFY LENDER AGAINST
AND HOLD LENDER HARMLESS FROM ANY LOSS OR EXPENSE WHICH LENDER MAY INCUR OR
SUSTAIN AS A CONSEQUENCE OF ANY UNTIMELY PAYMENT (MANDATORY OR OPTIONAL) OR
DEFAULT BY BORROWER IN THE PAYMENT OF ANY PRINCIPAL AMOUNT OF OR INTEREST ON
EACH REVOLVING NOTE, OR ANY FAILURE BY BORROWER TO CONVERT OR TO BORROW ANY
LIBOR RATE BORROWING ON THE DATE SPECIFIED BY BORROWER, IN EACH CASE INCLUDING
ANY INTEREST PAYABLE BY LENDER TO THE LENDERS OF THE FUNDS OBTAINED BY IT IN
ORDER TO MAKE OR MAINTAIN ANY LIBOR RATE BORROWING (OR ANY PORTION THEREOF),
AND, TO THE EXTENT NOT COVERED ABOVE, ANY CONSEQUENTIAL LOSS. THIS AGREEMENT
SHALL SURVIVE THE PAYMENT OF EACH REVOLVING NOTE. A CERTIFICATE AS TO ANY
ADDITIONAL AMOUNTS PAYABLE PURSUANT TO THIS PARAGRAPH SUBMITTED BY LENDER TO
BORROWER SHALL BE CONCLUSIVE AND BINDING UPON BORROWER, ABSENT MANIFEST ERROR,
PROVIDED THE CALCULATION THEREOF IS SET FORTH IN REASONABLE DETAIL IN SUCH
NOTICE.
(e) Rate Quotes and Lists of Business Days. If Borrower requests
quotes of the LIBOR Rate for different LIBOR Interest Periods being considered
for election by Borrower, Lender will use reasonable efforts to provide such
quotes to Borrower promptly. However, all such quotes provided shall be
representative only and shall not be binding on Lender, nor shall they be
determinative, directly or indirectly, of any LIBOR Rate or any component of any
such rate, nor will Borrower's failure to receive or Lender's failure to provide
any requested quote or quotes either (1) excuse or extend the time for
performance of any obligation of Borrower or for exercise of any right, option
or election of Borrower or (2) impose any duty or liability on Lender. If
Borrower requests a list of the Business Days or LIBOR Business Days in any
calendar month, Lender will use reasonable efforts to provide such list
promptly. However, any such list provided shall be understood to identify only
those days which Lender believes in good faith at the time such list is prepared
will be the Business Days or LIBOR Business Days for such month. Lender shall
have no liability for any failure to provide, delay in providing, error or
mistake in or omission from, any such quote or list.
(f) Payment Dates. Whenever any payment to be made hereunder or
under any Revolving Note shall be stated to be due on a day which is neither a
Business Day nor a LIBOR Business Day, such payment may be made on the next
succeeding Business Day, or, subject to the definition of LIBOR Interest Period
in the case of any payment of the Revolving Notes to which the LIBOR Rate
applies, on the next succeeding LIBOR Business Day, and such extension of time
shall in each such case be included in computing interest and commitment fees in
connection with such payment.
(g) LIBOR Funding Mechanism. Notwithstanding any provision of this
Agreement to the contrary, Lender shall be entitled to fund and maintain its
funding of all or any part of the Revolving Loans hereunder in any manner it
sees fit, it being understood, however, that for the purposes of this Agreement
all determinations hereunder shall be made as if Lender had actually funded and
maintained each LIBOR Rate Borrowing during each LIBOR Interest Period
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<PAGE> 17
through the purchase of deposits having a maturity corresponding to such LIBOR
Interest Period and bearing an interest rate equal to the LIBOR Interbank Rate
for such LIBOR Interest Period.
(h) Obligations Survive Termination. Borrower's obligation to pay
increased costs and Consequential Loss with regard to each LIBOR Rate Borrowing
as specified in this Paragraph 5 shall survive termination of this Agreement.
6. Prepayments of Loans.
(a) Borrower may at any time prepay all or any portion of any
Alternate Base Rate Borrowings without any prepayment penalty or other charge.
(b) Prepayments of LIBOR Rate Borrowings shall be subject to the
following conditions:
(1) LIBOR Rate Borrowings may be prepaid in full, but in no
event shall any LIBOR Rate Borrowing be partially prepaid.
(2) Prepayments applied to any LIBOR Rate Borrowing may be made
on any LIBOR Business Day, provided, that (i) Borrower shall have given
Lender at least five (5) LIBOR Business Days' prior irrevocable written or
telecopied notice of such prepayment, specifying the principal amount of
the LIBOR Rate Borrowing to be prepaid, the particular LIBOR Rate
Borrowing to which such prepayment is to be applied and the prepayment
date; and (ii) if such prepayment is made on any day other than the last
day of the LIBOR Interest Period corresponding to the LIBOR Rate Borrowing
to be prepaid, Borrower shall pay directly Lender, on the last day of such
LIBOR Interest Period, the Consequential Loss as a result of such
prepayment.
(3) Notice of any prepayment of any LIBOR Rate Borrowing having
been given, the principal amount specified in such notice, together with
interest thereon to the date of prepayment, shall be due and payable on
such prepayment date.
(c) Prepayments of Advance Loans shall be permitted, in whole or in
part, at any time, subject to the other provision of this subparagraph (c).
Advance Loans accruing interest at the floating rate Advance Loan Interest
Option may be prepaid in whole or in part without any prepayment penalty or
other charge. Advance Loans accruing interest at the fixed rate Advance Loan
Interest Option, however, may be prepaid, in whole or in part, only if such
prepayment is accompanied by a prepayment charge as compensation for Lender's
loss of profit which will result from such prepayment. Such prepayment charge
shall be calculated by multiplying (i) the amount of principal prepaid on such
fixed rate Advance Loans by (ii) the remainder obtained by subtracting (1) the
annual yield (reflecting both stated interest rate and discount, if any) to
maturity of obligations of the U.S. Treasury (the "Treasury Rate") as determined
by Lender in an amount equal or comparable to the amount of such fixed rate
Advance Loans being prepaid for the period of time commencing on the date of the
prepayment and ending on or as close as possible to the original scheduled
maturity date of such fixed rate Advance Loans being prepaid, from (2) the cost
of funds Lender would have incurred for the amount of principal prepaid on such
fixed rate Advance Loans had the amount of such prepayment otherwise been paid
as scheduled, and multiplying the product of (i) and (ii) above, if it is
positive, times the number of days from the date of prepayment to the originally
scheduled maturity date of such fixed rate Advance Loans being prepaid, divided
by 360, and discounting the result to present value at the Treasury Rate. Any
determination by Lender of its cost of funds, the Treasury Rate and the amount
of any prepayment charge for purposes of this subparagraph (c) shall each be
conclusive and binding upon Borrower, absent manifest error. If Lender exercises
its right to accelerate the original scheduled maturity date of any fixed rate
Advance Loans following an Event of Default, any tender of payment by Borrower
in the amount necessary to satisfy all of such fixed rate Advance Loans shall
constitute an evasion of this prepayment charge provision, shall be deemed to be
a voluntary prepayment and shall, to the extent not prohibited or sanctioned by
applicable law, be accompanied by payment of the prepayment charge required to
be paid for voluntary prepayment of a like amount.
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(d) All prepayments of any Loan shall be applied first, to any
prepayment charge (if applicable), next to accrued interest, and the balance to
principal installments in inverse order of maturity.
7. Collateral for Loans.
(a) The Revolving Loans shall at all times be secured by a first
priority security interest in all Accounts, related General Intangibles and
products and proceeds thereof now or hereafter owned by Borrower. Each of the
Advance Loans shall be secured by a first priority security interest in the
specific Equipment purchased with funds advanced under the applicable Advance
Loan, together with all products and proceeds of the specific Equipment. Such
security interests in the applicable Collateral shall be evidenced by the
applicable Security Agreements.
(b) After the occurrence of any Event of Default, the Revolving
Loans and the Advance Loans shall automatically be cross-collateralized so as to
cause Lender to receive as security for all Loans a security interest in all
Collateral then securing the Revolving Loans or any of the Advance Loans. Such
cross-collateralization shall be evidenced by that certain Security
Agreement-Accounts and Equipment (the "Conditional Security Agreement")
executed and delivered by Borrower to Lender on or about April 29, 1994. Such
Conditional Security Agreement shall continuously be held by Lender, but shall
not be deemed to be effectively delivered to Lender or enforceable by Lender
unless and until an Event of Default has occurred. As noted above, upon the
occurrence of an Event of Default, the cross-collateralization of the
Collateral as security for all of the Loans, as well as the delivery and
enforceability of said Conditional Security Agreement, shall be automatic and
without any further action by either party hereto. Once each Event of Default
which has previously occurred has been cured to the reasonable satisfaction of
Lender, the cross-collateralization security interest in the Collateral
discussed in this Paragraph shall automatically be released without further
action by either party hereto and said Conditional Security Agreement shall
continue to be held by Lender for safekeeping purposes, but shall not
thereafter be deemed to be effective, enforceable or delivered unless and until
the occurrence of any additional Event of Default.
(c) Notwithstanding the foregoing, prior to the occurrence of a
Default or an Event of Default, Borrower may refinance with a third party lender
(subject to compliance with the provisions of Paragraph 11(a) hereof) the
aggregate amounts outstanding under either (i) the Revolving Note or (ii) all
Advance Notes then in existence. In such event (except as noted in the
following sentence), Lender will not thereafter be entitled to the
above-described cross-collateralization of the Collateral as security for all of
the Loans upon the occurrence of any subsequent Event of Default. If the
aggregate amounts outstanding under the Revolving Note are refinanced as
discussed above, all of the Equipment purchased with any funds advanced under
any Advance Loans shall continue to be automatically cross-collateralized in
accordance with subparagraph (b) above as security for all Advance Loans upon
the occurrence of an Event of Default. If the amounts outstanding under the
Revolving Note are refinanced with a third party lender, the Total Commitment
shall automatically terminate, and if the aggregate amounts outstanding under
the Advance Notes are refinanced with a third party, Lender's obligation to make
further advances of any Advance Loans shall immediately cease.
8. Conditions Precedent.
(a) The obligation of Lender to make any Loan is subject to the
accuracy of all representations and warranties of Borrower in this Agreement or
any other Credit Document on the date thereof (and Lender's receipt of evidence
of such accuracy), to the performance by Borrower of its obligations under the
Credit Documents (and Lender's receipt of evidence of such performance) and to
the satisfaction of the following conditions: (i) Lender shall have received, no
later than 10:00 a.m. Austin, Texas time on the applicable Rate Selection Date
of a requested Revolving Loan, a proper Request for Advance, and if requested by
Lender, a current Borrowing Base Certificate (together with such related
supporting information as Lender may reasonably request) if Lender does not then
have in its possession a current monthly Borrowing Base Certificate due to
Lender's prior receipt of only quarterly Borrowing Base Certificates for the
applicable preceding period(s); (ii) Lender shall have received, no later than
10:00 a.m. Austin, Texas time on the date three (3) Business Days prior to the
date Borrower desires to receive funds under a requested
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<PAGE> 19
Advance Loan, a proper Request for Advance; (iii) prior to the date of the Loan,
there shall have occurred, in the reasonable opinion of Lender, no material
adverse change in the assets, liabilities, financial condition, business or
affairs of Borrower; (iv) no Default or Event of Default shall have occurred and
be continuing; (v) the making of the Loan shall not be prohibited by, or subject
Lender to any penalty or onerous condition under, any applicable Legal
Requirement; (vi) all of the applicable Credit Documents, including without
limitation, the appropriate Security Agreements, have been executed and
delivered, and shall be valid, enforceable and in full force and effect; (vii)
all fees and expenses owed to Lender under any of the Credit Documents as of the
date thereof shall have been paid in full; and (viii) Lender shall have received
such other documents as it may reasonably require. Delivery of any Request for
Advance to Lender shall constitute a representation by Borrower that the
representations and warranties made by Borrower under this Agreement and the
other Credit Documents are true and correct as of the date of delivery of such
Request for Advance.
(b) In addition to the conditions described in Paragraph 8(a)
hereof, the obligation of Lender to make any Advance Loans and the initial
Revolving Loan is subject to the receipt by Lender of each of the following, in
Proper Form: (1) the Notes and the other Credit Documents, including without
limitation, the appropriate Security Agreements; (2) a duly executed Borrowing
Authorization with respect to Borrower; (3) a certificate from the Secretary of
State or other appropriate official of the State of Texas as to the continued
existence and good standing of Borrower; (4) a certificate from the appropriate
public official of each jurisdiction other than the State of Texas as to the due
qualification to do business and good standing of Borrower where such
qualification is necessary to conduct Borrower's business in such jurisdiction;
(5) insurance policies addressed to Lender reflecting the insurance required by
the Credit Documents; and (6) evidence reasonably satisfactory to Lender as to
the perfection and priority of the Liens created by the Security Documents, and
to the further condition that, at the time thereof, all legal matters incident
to the transactions herein contemplated shall be satisfactory to Lender's legal
counsel.
9. Representations and Warranties. Borrower represents and warrants
that:
(a) (i) Borrower is duly organized, validly existing and in good
standing under the laws of the state of its organization and has full legal
right, power and authority to carry on its business as presently conducted and
to execute, deliver and perform its obligations under the Credit Documents
executed by it, (ii) Borrower is duly qualified to do business and in good
standing in each jurisdiction in which the nature of the business it conducts
makes such qualification necessary or desirable and (iii) Borrower's execution,
delivery and performance of the Credit Documents executed by it have been duly
authorized by all necessary action under Borrower's Organizational Documents and
otherwise.
(b) Borrower's execution, delivery and performance of the Credit
Documents do not and will not require (i) any consent of any other Person or
(ii) any consent, license, permit, authorization or other approval (including
foreign exchange approvals) of any court, arbitrator, administrative agency or
other Governmental Authority, or any notice to, exemption by, any registration,
declaration or filing with or the taking of any other action in respect of, any
such court, arbitrator, administrative agency or other Governmental Authority.
(c) Neither execution or delivery of any Credit Document, nor the
fulfillment of or compliance with its terms and provisions will (i) violate any
Legal Requirement or the Organizational Documents of Borrower or (ii) conflict
with or result in a breach of the terms, conditions or provisions of, or cause
a default under, any agreement, instrument, franchise, license or concession to
which Borrower is a party or bound.
(d) Each Credit Document has been duly and validly executed, issued
and delivered by Borrower. They are in proper legal form for prompt enforcement
and they are Borrower's valid and legally binding obligations, enforceable in
accordance with their terms. Borrower's obligations under them rank and will
rank at least equal in priority of payment with Borrower's other debt (except
only for debt preferred by operation of law or debt disclosed in writing to
Lender before execution and delivery of this Agreement).
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(e) All information supplied to Lender, and all statements made to
Lender by or on behalf of Borrower before, concurrently with or after execution
of this Agreement are and will be true, correct, complete, valid and genuine in
all material respects. Borrower's financial statements furnished to Lender
fairly present the financial condition of Borrower as of its date and for the
period then ended. No material adverse change has occurred in the financial
conditions reflected in any such statements since their dates, and all assets
listed on such statements are subject to Borrower's management, control and
disposition and, except as shown therein, are available to satisfy any claims
rightfully made pursuant to the Credit Documents.
(f) Borrower has filed all tax returns required to be filed and paid
all taxes shown thereon to be due, including interest and penalties, except for
taxes which are being diligently contested in good faith and for payment of
which adequate reserves have been set aside.
(g) There is no condemnation or other action, suit or proceeding
pending, or, to the best of Borrower's knowledge, threatened, against or
affecting Borrower or the Collateral, at law or in equity, or before or by any
Governmental Authority, which might result in any material adverse change in
Borrower's business or financial condition or in the Collateral or in other
Property of Borrower or any interest in it.
(h) Borrower is not in default with respect to any order, writ,
injunction, decree or demand of any court or other Governmental Authority, in
the payment of any Indebtedness for borrowed money or under any agreement or
other papers evidencing or securing any such debt.
(i) Borrower is not a party to any contract or agreement which
materially and adversely affects any of its businesses, properties, assets or
financial conditions.
(j) Borrower is now solvent, and no bankruptcy or insolvency
proceedings are pending or contemplated by or, to Borrower's knowledge, against
Borrower. Borrower's liabilities and obligations under the Credit Documents to
which it is a party do not and will not render Borrower insolvent, cause
Borrower's liabilities to exceed Borrower's assets or leave Borrower with too
little capital to properly conduct all of its business as now conducted or
contemplated to be conducted.
(k) No representation or warranty contained in any Credit Document
and no statement contained in any certificate, schedule, list, financial
statement or other papers furnished to Lender by or on behalf of Borrower
contains, or will contain, any untrue statement of material fact, or omits, or
will omit, to state a material fact necessary to make the statements contained
therein not misleading.
(l) Except as disclosed to Lender in writing, none of the proceeds
of the Notes will be used for the purpose of purchasing or carrying, directly or
indirectly, any margin stock or for any other purpose which would make such
credit a "purpose credit" within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System.
(m) Borrower possess all permits, licenses, patents, trademarks,
tradenames and copyrights required to conduct its businesses.
(n) Borrower and the Collateral are in compliance with all material
applicable Legal Requirements and Borrower manages and operates (and will
continue to manage and operate) its businesses in accordance with good industry
practices.
(o) With respect to each Plan, Borrower and each member of a
Controlled Group for the employees of Borrower have fulfilled their obligations,
including obligations under the minimum funding standards of ERISA and the Code
and are in compliance in all material respects with the provisions of ERISA and
the Code. No event has occurred which could result in a liability of Borrower
or any member of a Controlled Group for the employees of Borrower to the PBGC or
a Plan (other than to make contributions in the ordinary course). Since the
effective date of Title IV of ERISA, there have not been any nor are there now
existing any events or conditions that would cause the Lien provided under
Section 4068 of ERISA to attach to any property of Borrower or any member of a
Controlled Group for the employees of Borrower. There are no
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Unfunded Liabilities with respect to any Plan. No "prohibited transaction" has
occurred with respect to any Plan.
(p) To the best knowledge and belief of Borrower, (i) Borrower (and
its properties, assets, business and operations) has been and is in compliance
with all applicable Requirements of Environmental Law and Environmental Permits,
(ii) Borrower (or any of its properties, assets, business and operations) are
not subject to any (A) Environmental Claims or (B) Environmental Liabilities,
in either case direct or contingent, arising from or based upon any act,
omission, event, condition or circumstance occurring or existing on or prior to
the date hereof, and (iii) Borrower has not received any notice of any
violation or alleged violation of any Requirements of Environmental Law or
Environmental Permit or any Environmental Claim in connection with its assets,
properties, business or operations. The liability (including without
limitation any Environmental Liability and any other damage to persons or
property), if any, of Borrower with respect to its properties, assets, business
and operations which is reasonably expected to arise in connection with
Requirements of Environmental Laws currently in effect and other environmental
matters presently known by such entity will not have a material adverse effect
on the business, condition (financial or otherwise), operations, properties or
prospects of such entity or on the ability of such entity to perform its
material obligations under any Credit Document to which it is a party.
Borrower does not know of any event or condition with respect to Environmental
Matters with respect to any of its properties which could reasonably be
expected to have a material adverse effect on the business, condition
(financial or otherwise), operations, properties or prospects of Borrower or on
the ability of Borrower to perform its material obligations under any Credit
Document to which it is a party. The provisions of this Section are cumulative
of the provisions relating to this subject matter in the other Credit
Documents.
(q) Borrower currently has no Subsidiaries.
10. Affirmative Covenants. Borrower covenants and agrees that prior to
termination of this Agreement:
(a) Borrower shall (and shall cause each of its Subsidiaries to) at
all times (i) pay when due all taxes and governmental charges of every kind upon
it or against its income, profits or Property, unless and only to the extent
that the same shall be contested diligently in good faith and reserves deemed
adequate by Lender have been established therefor; (ii) to the extent
applicable, do all things necessary to preserve its existence, qualifications,
rights and franchises in all states where such qualification is necessary or
desirable; (iii) comply with all applicable Legal Requirements (including
Requirements of Environmental Law) in respect of the conduct of its business and
the ownership of its Property; (iv) cause its Property to be protected,
maintained and kept in good repair and make all replacements and additions to
its Property as may be reasonably necessary to conduct its business properly and
efficiently, and (v) pay punctually and discharge when due, or renew or extend,
any debt incurred by it and discharge, perform and observe the covenants,
provisions and conditions to be performed, discharged and observed on its part
in connection therewith, or in connection with any agreement or other instrument
relating thereto or in connection with any mortgage, pledge or lien existing at
any time upon any of its property or assets; provided, however, that nothing
contained in this subparagraph (v) shall require payment, discharge, renewal or
extension of any such indebtedness or discharge, performance or observance of
any such covenants, provisions and conditions so long as any claims which may be
asserted against Borrower with respect to any such indebtedness or any such
covenants, provisions and conditions shall be contested diligently and in good
faith and reserves with respect thereto deemed adequate by Lender shall be
established.
(b) Borrower shall furnish or cause to be furnished to Lender copies
of each of the following: (1) as soon as available and in any event within 90
days after the end of each fiscal year of Borrower, Annual Financial Statements
of Borrower; (2) as soon as available and in any event within 30 days after the
end of each fiscal quarter (including the last fiscal quarter) of each fiscal
year of Borrower, (i) Quarterly Financial Statements of Borrower, (ii) a
compliance certificate ("Compliance Certificate") in the form of Exhibit B
attached hereto, duly executed by an appropriate officer acceptable to Lender on
behalf of Borrower, and (iii) an accounts payable aging from Borrower as of the
end of such fiscal quarter, prepared in reasonable detail and containing such
related information as Lender may reasonably request; (3) as soon as available
and in any
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event, within 30 days after the end of each fiscal quarter (including
the last fiscal quarter) of each fiscal year of Borrower (or within 30 days
after the end of each calendar month if and when Revolving Loans are outstanding
hereunder as of the end of such calendar month), (i) a listing and aging of the
Accounts of Borrower as of the end of such fiscal quarter or calendar month, as
applicable, prepared in reasonable detail and containing such related
information as Lender may reasonably request, and (ii) a Borrowing Base
Certificate, together with such related supporting information as Lender may
reasonably request, as of the end of such fiscal quarter or calendar month, as
applicable; (4) as soon as available and in any event within 45 days after the
end of each fiscal quarter of Borrower, 10-Q Reports of Borrower; (5) on the
date hereof, a Borrowing Base Certificate as of the date hereof, together with
such related supporting information as Lender may reasonably request; and (6)
such other information relating to the financial condition, operations,
prospects or business of Borrower as from time to time may be reasonably
requested by Lender. Each delivery of a financial statement pursuant to this
Paragraph shall constitute a republication of the representations and warranties
contained in Paragraph 9 hereof.
(c) Borrower, on a consolidated basis, shall have and maintain:
(1) a Current Ratio of not less than 1.25 to 1.00 at all times;
(2) a Debt to Tangible Net Worth Ratio not greater than 1.25 to
1.00 at all times;
(3) a Cash Flow Coverage Ratio of not less than 1.25 to 1.00 at
all times; and
(4) a Tangible Net Worth of $12,000,000.00 at all times until
May 31, 1997. On May 31 of each calendar year (commencing with May
31, 1997), said minimum Tangible Net Worth requirement shall be
increased (but not decreased if such amount is a negative number) by
an amount equal to fifty percent (50%) of the Net Income for
Borrower for the previous fiscal year.
(d) Borrower shall permit Lender to inspect its Property, to examine
its files, books and records and make and take away copies thereof, and to
discuss its affairs with its officers and accountants (but Lender shall only be
entitled to discuss Borrower's affairs with Borrower's accountants if Lender has
provided reasonable notice to Borrower in advance of such discussions and any
fees charged by Borrower's accountants in connection therewith are promptly paid
by Lender), all at such times and intervals and to such extent as Lender may
reasonably desire. Lender shall use its best efforts to maintain the
confidentiality of any and all information furnished or provided to Lender by
Borrower in connection with the Loans.
(e) Borrower shall promptly execute and deliver (or cause to be
executed and delivered), at Borrower's expense, any and all other and further
instruments which may be reasonably requested by Lender to cure any defect in
the execution and delivery of any Credit Document or more fully to describe
particular aspects of the agreements and undertakings set forth in the Credit
Documents.
(f) Borrower shall maintain books of record and account in
accordance with GAAP.
(g) Borrower shall (and shall cause each of its Subsidiaries to)
maintain insurance with such insurers, on such of its Property, in such amounts
and against such risks as is reasonably satisfactory to Lender, and furnish
Lender satisfactory evidence thereof promptly upon request. These insurance
provisions are cumulative of the insurance provisions of the Security
Documents. Lender shall be named as loss payee and a beneficiary of such
insurance covering any Collateral and shall be provided with copies of the
policies of insurance and a certificate of the insurer that the insurance
required by this Paragraph may not be canceled, reduced or affected in any
manner without thirty (30) days' prior written notice to Lender.
(h) Borrower shall notify Lender immediately upon acquiring
knowledge of the occurrence of, or if Borrower causes or intends to cause, as
the case may be: (1) the institution of
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any lawsuit or administrative proceeding affecting Borrower, the adverse
determination under which could have a material adverse effect on the business,
condition (financial or otherwise), operations, Property or prospects of
Borrower or on its ability to perform its respective obligations under any
Credit Document to which it is a party; (2) any material adverse change, either
in any case or in the aggregate, in the assets, liabilities, business, condition
(financial or otherwise), operations, Property or prospects of Borrower; (3) any
Event of Default or any Default, together with a detailed statement by an
appropriate officer or other responsible party acceptable to Lender on behalf of
Borrower of the steps being taken to cure the effect of such Event of Default or
Default; (4) the receipt of any notice from, or the taking of any other action
by, the holder of any Indebtedness of Borrower with respect to a claimed
default, together with a detailed statement by an appropriate officer or other
responsible party acceptable to Lender on behalf of Borrower specifying the
notice given or other action taken by such holder and the nature of the claimed
default and what action Borrower is taking or proposed to take with respect
thereto; (5) the occurrence of a default or event of default by Borrower under
any agreement to which it is a party, which default or event of default could
reasonably be expected to have a material adverse effect on the business,
condition (financial or otherwise), operations, Property or prospects of
Borrower; and (6) any change in the accuracy of the representations and
warranties of Borrower in this Agreement or any other Credit Document. Borrower
will notify Lender in writing at least 30 days prior to the date that Borrower
changes its name or the location of its chief executive office or principal
place of business or the place where it keeps its books and records.
(i) Borrower shall cause each Person who is a landlord of any
property occupied and utilized by Borrower in connection with the operation and
conduct of their respective businesses to execute and deliver to Lender
landlord's subordination agreements in Proper Form, whereby each of such
landlords validly subordinate any and all Liens held by such landlords against
all or any portion of the Collateral to the Liens in favor of Lender.
(j) Borrower shall cause that certain Service Agreement dated as of
May 20, 1993, and that certain Parts Service Agreement dated as of December 29,
1994, both by and between Borrower and Sears, Roebuck and Co., to remain in
full force and effect (without any modifications that would have a material
adverse impact on Borrower benefits and rights under either or both of said
agreements, other than those approved in writing by Lender), and Borrower shall
promptly provide Lender with copies of any notices of default or demands
received by Borrower under either or both of said agreements from Sears,
Roebuck and Co.
(k) Borrower is an information services company for household
products and shall remain engaged in the business of providing (a) diagnostic
assistance and support to technicians and consumers involved with the
installation, repair, care and operation of appliances, personal computers,
entertainment and other electronic products, heating and air conditioning
systems, and lawn and garden equipment and (b) telemarketing services for
replacement parts and accessories covering all major home products, service
order reservations and logistical support services for its customers.
Borrower's information products and services include in-bound and out-bound
telephone services, systems consulting, design and development for network
environments and electronic publishing. Any businesses or companies acquired by
Borrower in accordance with the other provisions of this Agreement must also be
engaged predominantly in such business.
11. Negative Covenants. Borrower further covenants and agrees that
prior to termination of this Agreement:
(a) Without the prior written consent of Lender, Borrower will not
create, incur, suffer or permit to exist, or assume or guarantee, directly or
indirectly, or become or remain liable with respect to any Indebtedness,
whether direct, indirect, absolute, contingent or otherwise, except the
following: (1) Indebtedness to Lender; (2) Indebtedness secured by Liens
permitted by Paragraph 11(b) hereof; (3) other liabilities existing on the date
of this Agreement and disclosed in writing to Lender prior to the date hereof,
including those liabilities reflected in Borrower's financial statements
previously delivered to Lender for the period ending September 30, 1996, and
all renewals and extensions (but not increases) of such liabilities; and (4)
current and future accounts payable and unsecured current and future
liabilities, not the result of borrowing, to vendors, suppliers and persons for
goods and services normally required by it in the ordinary course of business
and on ordinary trade terms.
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(b) Without the prior written consent of Lender, Borrower will not
create or suffer to exist any Lien upon any of its Property now owned or
hereafter acquired, or acquire any Property upon any conditional sale or other
title retention device or arrangement or any purchase money security agreement,
or in any manner directly or indirectly sell, assign, pledge or otherwise
transfer any of its Accounts or contract rights; provided, however, that
Borrower may create or suffer to exist: (a) artisans' or mechanics' Liens
arising in the ordinary course of business, and Liens for taxes, but only to the
extent that payment of the foregoing shall not at the time be due or Borrower is
diligently and in good faith contesting the indebtedness or obligation secured
by such Liens and has set aside on its books reserves with respect thereto
deemed adequate by Lender; (b) Liens in effect on the date hereof and disclosed
to Lender in writing prior to the date hereof, provided that neither the
Indebtedness secured thereby nor the Property covered thereby shall increase;
(c) Liens in favor of Lender; and (d) Liens in favor of Borrower's landlords,
but only to the extent that such landlord's Liens have been subordinated to the
Liens in favor of Lender to the extent that such landlord's Liens cover all or
any portion of the Collateral.
(c) Borrower will not, in any single transaction or series of
transactions, directly or indirectly: (1) consolidate, terminate, liquidate or
dissolve; or (2) be a party to any consolidation, termination, merger or
consolidation.
(d) Unless otherwise approved by Lender in writing, Borrower will
not pay any cash dividend (with stock dividends being allowed) or make any other
distribution of any Property or cash to stockholders.
(e) Borrower will not allow its Chief Executive Officer or its Chief
Financial Officer to be replaced, removed or otherwise changed without the prior
written consent of Lender.
(f) Borrower will not change the nature of its business or enter
into any business which is substantially different from the business in which it
is presently engaged.
(g) Borrower will not form, create or acquire any Subsidiary without
the prior written consent of Lender.
(h) Borrower will not change its address, location, name or identity
without notifying Lender of such change in writing at least thirty (30) days
before the effective of such change and unless Borrower shall have taken such
action, satisfactory to Lender, to have caused any security interest in the
Collateral to be at all times fully perfected and in full force and effect.
12. Default. The occurrence of any of the following events shall
hereinafter be referred to as a Default:
(a) any part of the debt evidenced by any of the Notes is not paid
within three (3) days after the same is due, whether by lapse of time or
acceleration or otherwise;
(b) Borrower fails to perform, observe or comply with, or defaults
under, any of the terms, covenants, conditions or provisions of this Agreement
or any other Credit Document;
(c) any representation or warranty made in any Credit Document or in
any other report or other paper now or hereafter provided to Lender pursuant or
incident to any Credit Document or the debt evidenced by any of the Notes
proves to have been untrue or misleading in any material respect as of the date
made or deemed made;
(d) Borrower: (i) voluntarily suspends transaction of business; (ii)
becomes insolvent or unable to pay its debts as they mature; (iii) commences a
voluntary case in bankruptcy or a voluntary petition seeking reorganization or
to effect a plan or other arrangement with creditors; (iv) makes an assignment
for the benefit of creditors; (v) applies for or consents to the appointment of
a receiver or trustee for any such person or entity or for any substantial
portion of its property; or (vi) makes an assignment to an agent authorized to
liquidate any substantial part of its assets;
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(e) in respect of Borrower: (i) an involuntary case shall be
commenced with any court or other authority seeking liquidation, reorganization
or a creditor's arrangement of any such person or entity; (ii) an order of any
court or other authority shall be entered appointing any receiver or trustee for
any such person or entity or for any substantial portion of its property; or
(iii) a writ or warrant of attachment or any similar process shall be issued by
any court or other authority against any substantial portion of the property of
any such person or entity, and such petition seeking liquidation, reorganization
or a creditor's arrangement or such order appointing a receiver or trustee is
not vacated or stayed, or such writ, warrant of attachment or similar process is
not vacated, released or bonded off within sixty (60) days after its entry or
levy;
(f) the dissolution, liquidation or termination of Borrower;
(g) any one or more final judgments for the payment of money shall
be rendered against Borrower and the same shall remain unstayed or undischarged
for a period of sixty (60) days;
(h) Borrower shall be prevented or relieved by any governmental
authority from performing or observing any material term, covenant or condition
of any Credit Document;
(i) any material adverse change shall occur in the assets, financial
condition, business, operations, affairs or circumstances of Borrower;
(j) Borrower shall fail to pay when due (including the lapse of any
applicable cure period, if any) any principal of or interest on any borrowed
money obligation owing to any Person other than Lender or the holder of such
other borrowed money obligation declares, or has the right to declare, such
borrowed money obligation due before its stated maturity because of default;
(k) Borrower shall claim, or any court shall find or rule, that
Lender does not have a valid Lien on any of the Collateral;
(l) the sale, encumbrance or abandonment of any of the Collateral
without the prior written consent of Lender, the making of any levy, seizure or
attachment of or on any of the Collateral or the loss, theft, substantial
damage or destruction of any of the Collateral which is not sufficiently
covered by insurance that is otherwise payable to Lender as loss payee;
(m) Borrower shall have concealed, removed, or permitted to be
concealed or removed, any part of its property, with intent to hinder, delay or
defraud any of its creditors, or made or suffered a transfer of any of its
property which may be fraudulent under any bankruptcy, fraudulent conveyance or
similar law, or shall have made any transfer of its property to or for the
benefit of a creditor at a time when other creditors similarly situated have not
been paid, or, while insolvent, shall have suffered or permitted any creditor to
obtain a lien upon any of its property through legal proceedings or distraint
which is not vacated with sixty (60) days from its date;
(n) Borrower fails to pay when due any amount which he or it is
liable to pay to the PBGC or its successor or to a Plan, or notice of intent to
terminate any Plan is filed under ERISA, or PBGC commences proceedings under
ERISA to terminate any Plan or to cause a trustee to be appointed to administer
any Plan, or a proceeding is commenced by any fiduciary of any Plan to enforce
Section 515 or Section 4219(c)(5) of ERISA, or PBGC becomes entitled to obtain a
decree adjudicating that any Plan must be terminated;
(o) a default or an event of default (however denominated) shall
occur under any Credit Document, unless Lender declares such default, event of
default or similar event fully cured to Lender's satisfaction within any
applicable cure period agreed to in writing by Lender.
Any Default hereunder (in the case of any and all Defaults other than
Noncurable Defaults) shall not constitute an Event of Default for purposes of
this Agreement unless and until written notice of such Default shall have first
been given to Borrower by Lender and Borrower shall have failed to cure such
Default within fifteen (15) days after such notice has been given. For
purposes hereof, a "Noncurable Default" means any Default which results from
Borrower's failure to comply with the
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financial covenants in Paragraph 10(c) above or is specified in subparagraphs
(a), (d), (e), (f), (h), (k) and (m) of this Paragraph 12. Each Noncurable
Default shall automatically constitute an Event of Default, and no notice to
Borrower of any Noncurable Default shall be required and no opportunity to cure
any Noncurable Default shall be afforded. Upon the occurrence of any Default,
and at any time thereafter prior to such Default being cured to the reasonable
satisfaction of Lender, Lender's obligation, if any, to make Revolving Loans and
Advance Loans shall cease and terminate. Upon the occurrence of any Event of
Default, and at any time thereafter, Lender shall have the right, at its option,
(1) to terminate its obligations to make further Revolving Loans (whereupon the
Revolving Commitment shall be terminated) and further Advance Loans (whereupon
the Total Commitment shall be terminated) and to declare the unpaid balance of
the indebtedness evidenced by any or all of the Notes to be immediately due and
payable without further notice (including notice of intent to accelerate and
notice of acceleration), protest or demand or presentment for payment, all of
which are hereby expressly waived by Borrower and (2) to enforce or avail itself
of any and all powers, rights and remedies available at law or provided in this
Agreement, the Notes, the other Credit Documents or any other document executed
pursuant hereto or in connection herewith. Notwithstanding any provision in
this Paragraph to the contrary, upon the occurrence of any Event of Default,
Lender shall have the right, immediately and without notice, to take possession
of and exercise possessory rights with regard to any property securing payment
of the indebtedness evidenced by any of the Notes. All powers, rights and
remedies of Lender set forth in this Paragraph shall be cumulative and not
exclusive of any other power, right or remedy available to Lender under the law
or under this Agreement, the Notes, the other Credit Documents or any other
document executed pursuant hereto or in connection herewith to enforce the
performance or observance of the covenants and agreements contained in this
Agreement, and no delay or omission of Lender to exercise any power, right or
remedy accruing to Lender shall impair any such power, right or remedy, or shall
be construed to be a waiver of the right to exercise any such power, right or
remedy. Every power, right or remedy of Lender set forth in this Agreement, the
Notes, the other Credit Documents or any other document executed pursuant hereto
or in connection herewith, or afforded by law may be exercised from time to
time, and as often as may be deemed expedient by Lender.
13. Lender's Right to Cure. If Borrower should fail to comply with any
of their agreements, covenants or obligations under any Credit Document, then
Lender (in Borrower's name or in Lender's own name) may perform them or cause
them to be performed for Borrower's account and at Borrower's expense, but shall
have no obligation to perform any of them or cause them to be performed. Any and
all expenses thus incurred or paid by Lender shall be Borrower's obligations to
Lender due and payable on demand, and each shall bear interest from the date
Lender pays it until the date Borrower repays it to Lender, at the Past Due
Rate. Upon making any such payment or incurring any such expense, Lender shall
be fully and automatically subrogated to all of the rights of the person,
corporation or body politic receiving such payment. Any amounts owing by
Borrower to Lender pursuant to this paragraph shall be secured by all
instruments securing any of the Notes. The amount and nature of any such
expense and the time when it was paid shall be fully established by the
affidavit of Lender or any of Lender's officers or agents. The exercise of the
privileges granted to Lender in this Paragraph shall in no event be considered
or constitute a cure of the default or a waiver of Lender's right at any time
after an Event of Default to declare the Notes to be at once due and payable,
but is cumulative of such right and of all other rights given by this Agreement,
the Notes and the Credit Documents and of all rights given Lender by law.
14. Usury Not Intended; Savings Provisions. Notwithstanding any
provision to the contrary contained in any Credit Document, it is expressly
provided that in no case or event shall the aggregate of any amounts accrued or
paid pursuant to this Agreement which under applicable laws are or may be
deemed to constitute interest ever exceed the maximum nonusurious interest rate
permitted by applicable Texas or federal laws, whichever permit the higher
rate. In this connection, Borrower and Lender stipulate and agree that it is
their common and overriding intent to contract in strict compliance with
applicable usury laws. In furtherance thereof, none of the terms of this
Agreement shall ever be construed to create a contract to pay, as consideration
for the use, forbearance or detention of money, interest at a rate in excess of
the maximum rate permitted by applicable laws. Borrower shall never be liable
for interest in excess of the maximum rate permitted by applicable laws. If,
for any reason whatever, such interest contracted for, charged or received
during the full term of the applicable indebtedness produces a rate which
exceeds the maximum rate permitted by applicable laws, Lender shall credit
against the principal of such
26
<PAGE> 27
indebtedness (or, if such indebtedness shall have been paid in full, shall
refund to the payor of such interest) such portion of said interest as shall be
necessary to cause the interest paid to produce a rate equal to the maximum rate
permitted by applicable laws. All sums paid or agreed to be paid to Lender for
the use, forbearance or detention of money shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread in equal parts
throughout the full term of the applicable indebtedness, so that the interest
rate is uniform throughout the full term of such indebtedness. The provisions of
this Paragraph shall control all agreements, whether now or hereafter existing
and whether written or oral, between Borrower and Lender.
15. Documentation Requirements. Each written instrument required by
this Agreement, the Notes or the other Credit Documents to be furnished to
Lender shall be duly executed by the person or persons specified (or where no
particular person is specified, by such person as Lender shall require), duly
acknowledged where reasonably required by Lender and, in the case of affidavits
and similar sworn instruments, duly sworn to and subscribed before a notary
public duly authorized to act by governmental authority; shall be furnished to
Lender in one or more copies as required by Lender; and shall in all respects be
in form and substance satisfactory to Lender and to its legal counsel.
16. Credit Documents Cumulative. The benefits, rights and remedies of
Lender and the security contained herein or provided for in the Notes, the
other Credit Documents or any other document executed pursuant hereto or in
connection herewith are cumulative; provided, however, that to the extent of
any conflict between any provision of this Agreement and any provision
contained in the Notes, the other Credit Documents or any other document
executed pursuant hereto or in connection herewith, the provisions of this
Agreement shall control.
17. Satisfaction of Conditions. Where evidence of the existence or
nonexistence of any circumstance or condition is required by this Agreement,
the Notes, the other Credit Documents or any other document executed pursuant
hereto or in connection herewith to be furnished to Lender, such evidence shall
in all respects be in form and substance reasonably satisfactory to Lender, and
the duty to furnish such evidence shall not be considered satisfied until
Lender shall have acknowledged that it is satisfied therewith.
18. Survival. All covenants, agreements, representations and
warranties made by Borrower in this Agreement, the Notes, the other Credit
Documents and any other document executed pursuant hereto or in connection
herewith, and in any certificates or other documents or instruments delivered
pursuant to this Agreement, the Notes, the other Credit Documents or any other
document executed pursuant hereto or in connection herewith shall survive the
execution and delivery of this Agreement, the Notes, the other Credit Documents
and the other documents executed pursuant hereto or in connection herewith, and
shall continue in full force and effect until full payment of the indebtedness
evidenced by the Notes and/or secured by the Credit Documents, complete
performance of all of the obligations of Borrower under the Credit Documents and
final termination of Lender's obligations, if any, to make any further advances
under the Revolving Note, the Advance Loans or to provide any other financial
accommodation to Borrower (provided, however, that all reimbursement
obligations, indemnification and hold harmless obligations and other similar
obligations of Borrower under any of the Credit Documents shall survive such
payment, performance and termination). All such covenants, agreements,
representations and warranties shall be binding upon any successors and assigns
of Borrower, but any attempted assignment of any rights of Borrower hereunder
without the prior written consent of Lender shall be null and void. No Person
other than Borrower shall have any right or action hereon or any rights to Loans
at any time, the Loans shall not constitute a trust fund for the benefit of any
third parties and no third party shall under any circumstances have or be
entitled to any Lien or any trust impressed on any undisbursed Loans.
19. Borrower Agrees to Pay or Reimburse Lender's Expenses. To the
extent not prohibited by applicable law, Borrower will pay all reasonable costs
and expenses and reimburse Lender for any and all reasonable expenditures of
every character incurred or expended from time to time, regardless of whether an
Event of Default shall have occurred, in connection with:
(a) the preparation, negotiation, documentation, closing, renewal,
revision, modification, increase, review or restructuring of any Loan or credit
facility secured by the Credit
27
<PAGE> 28
Documents, including legal, accounting, auditing, architectural, engineering and
inspection services and disbursements, or in connection with collecting or
attempting to enforce or collect any Credit Document;
(b) Lender's evaluating, monitoring, administering and protecting
the Collateral;
(c) Lender's creating, perfecting and realizing upon Lender's Liens
on the Collateral, and all reasonable costs and expenses relating to Lender's
exercising any of its rights and remedies under any Credit Document or at law,
including all reasonable appraisal fees, consulting fees, filing fees, taxes,
brokerage fees and commissions, title review and abstract fees, litigation
report fees, UCC search fees, other reasonable fees and expenses incident to
title searches, reports and security interests, escrow fees, attorneys' fees,
legal expenses, court costs, other reasonable fees and expenses incurred in
connection with any complete or partial liquidation of the Collateral, and all
reasonable fees and expenses for any professional services relating to the
Collateral or any operations conducted in connection therewith. Provided, that
no right or option granted by Borrower to Lender or otherwise arising pursuant
to any provision of any Credit Document shall be deemed to impose or admit a
duty on Lender to supervise, monitor or control any aspect of the character or
condition of the Collateral or any operations conducted in connection therewith
for the benefit of Borrower or any person or entity other than Lender.
Borrower agrees to indemnify, defend and hold Lender, its shareholders,
directors, officers, agents, attorneys, advisors and employees (collectively
"Indemnified Parties") harmless from and against any and all Environmental
Liabilities and any and all other loss, liability, obligation, damage, penalty,
judgment, claim, deficiency, expense, action, suit, cost and disbursement of
any kind or nature whatsoever (including interest, penalties, attorneys' fees
and amounts paid in settlement) imposed on, incurred by or asserted against the
Indemnified Parties growing out of or resulting from any Credit Document or any
transaction or event contemplated therein (except that such indemnity shall not
be paid to any Indemnified Party to the extent that such loss, etc. is caused
in whole or in part by the negligence or willful misconduct of any Indemnified
Party). Any amount to be paid under this Paragraph by Borrower to Lender shall
be a demand obligation owing by Borrower to Lender and shall bear interest from
the date of expenditure until paid at the Past Due Rate.
20. Amendments in Writing. This Agreement shall not be changed orally
but shall be changed only by agreement in writing signed by Borrower and Lender.
Any waiver or consent with respect to this Agreement shall be effective only in
the specific instance and for the specific purpose for which given. No course
of dealing between the parties, no usage of trade and no parol or extrinsic
evidence of any nature shall be used to supplement or modify any of the terms or
provisions of this Agreement.
21. Notices. Any notice, request or other communication required or
permitted to be given hereunder shall be given in writing by delivering it
against receipt for it, by depositing it with an overnight delivery service or
by depositing it in a receptacle maintained by the United States Postal
Service, postage prepaid, registered or certified mail, return receipt
requested, addressed to the respective parties at the addresses shown herein
(and if so given, shall be deemed given three (3) Business Days after mailing).
Borrower's address for notice may be changed at any time and from time to
time, but only after thirty (30) days' advance written notice to Lender and
shall be the most recent such address furnished in writing by Borrower to
Lender. Lender's address for notice may be changed at any time and from time
to time, but only after thirty (30) days' advance written notice to Borrower
and shall be the most recent such address furnished in writing by Lender to
Borrower. Actual notice, however and from whomever given or received, shall
always be effective when received.
22. Gender; "Including" is Not Limiting; Section Headings. The
masculine and neuter genders used in this Agreement each includes the masculine,
feminine and neuter genders, and whenever the singular number is used, the same
shall include the plural where appropriate, and vice versa. Wherever the term
"including" or a similar term is used in this Agreement, it shall be read as if
it were written "including by way of example only and without in any way
limiting the generality of the clause or concept referred to." The headings
used is this Agreement are included for reference only and shall not be
considered in interpreting, applying or enforcing this Agreement.
28
<PAGE> 29
23. Venue. This Agreement is performable in Travis County, Texas,
which shall be a proper place of venue for suit on or in respect of this
Agreement. Borrower irrevocably agrees that any legal proceeding in respect of
this Agreement shall be brought in the district courts of Travis County, Texas
or the United States District Court for the Western District of Texas, Austin
Division (collectively, the "Specified Courts"). Borrower hereby irrevocably
submits to the nonexclusive jurisdiction of the state and federal courts of the
State of Texas. Borrower hereby irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of venue of any suit, action or proceeding arising out of or relating to any
Credit Document brought in any Specified Court, and hereby further irrevocably
waives any claims that any such suit, action or proceeding brought in any such
court has been brought in an inconvenient forum. Nothing herein shall affect
the right of Lender or Borrower to serve process in any manner permitted by
applicable law. Borrower and Lender agree that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
As used in the preceding sentence, "final judgment" shall mean a judgment
entered by a court which is final as contemplated by the Texas Rules of Civil
Procedure or the Federal Rules of Civil Procedure, as applicable, and which is
subject to no further appeal. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE APPLICABLE LAWS OF THE STATE OF TEXAS AND THE UNITED
STATES OF AMERICA FROM TIME TO TIME IN EFFECT.
24. Security Agreement Ratification. Borrower hereby ratifies and
confirms that the following documents are in full force and effect: (a) that
certain Security Agreement-Accounts dated April 29, 1994, executed by and
between Borrower and Lender; and (b) that certain Security Agreement-Accounts &
Equipment dated April 29, 1994, by and between Borrower and Lender (it being
understood by the parties hereto that said Security Agreement-Accounts &
Equipment shall only be deemed to be effective in accordance with the
provisions of Paragraph 6 of this Agreement). Borrower also hereby confirms
that the Revolving Note referred to in the above-described Security
Agreement-Accounts and Security Agreement-Accounts & Equipment is hereafter
deemed to refer to that certain promissory note of even effective date herewith
in the original principal amount of $10,000,000.00, executed by Borrower,
payable to the order of Lender. Borrower additionally confirms that any
reference to Advance Notes contained in the above-described Security
Agreement-Accounts & Equipment shall hereafter be deemed to refer to any and
all of the Advance Notes now or hereafter executed and delivered by Borrower to
Lender pursuant to the provisions of this Agreement. Finally, Borrower and
Lender hereby agree that all references to Paragraphs 10 and 16 of this
Agreement in Sections 2.1(c) and 4.1(a) of said Security Agreement-Accounts and
said Security Agreement-Accounts and Equipment shall hereinafter be deemed to
refer to Paragraphs 13 and 19 of this Agreement.
25. Loan Agreement References. The term "Loan Agreement" as used in
the other Credit Documents or any other instrument, document or writing
furnished to Lender by Borrower shall mean this Agreement.
26. Rights Cumulative; Delay Not Waiver. Lender's exercise of any
right, benefit or privilege under any of the Credit Documents or any other
papers or at law or in equity shall not preclude the concurrent or subsequent
exercise of Lender's other present or future rights, benefits or privileges.
The remedies provided in this Agreement are cumulative and not exclusive of any
remedies provided by law, the Credit Documents or any other papers. No failure
by Lender to exercise, and no delay in exercising, any right under any Credit
Document or any other papers shall operate as a waiver thereof.
27. Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws, the legality,
validity and enforceability of the remaining provisions of this Agreement shall
not be affected thereby, and this Agreement shall be liberally construed so as
to carry out the intent of the parties to it. Each waiver in this Agreement is
subject to the overriding and controlling rule that it shall be effective only
if and to the extent that (a) it is not prohibited by applicable law and (b)
applicable law neither provides for nor allows any material sanctions to be
imposed against Lender for having bargained for and obtained it.
29
<PAGE> 30
28. Entire Agreement. This Agreement, the Notes and the other Credit
Documents together embody the entire agreement and understanding between
Borrower and Lender with respect to the subject matter hereof and supersede all
prior conflicting or inconsistent agreements, consents and understandings
relating to such subject matter. Borrower acknowledges and agrees that there
is no oral agreement between Borrower and Lender which has not been
incorporated in this Agreement, the Notes and the other Credit Documents.
30
<PAGE> 31
THIS AGREEMENT, THE NOTES, THE OTHER CREDIT DOCUMENTS AND ALL
OTHER LOAN DOCUMENTS EXECUTED BY ANY OF THE PARTIES SUBSTANTIALLY
CONCURRENTLY HEREWITH CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH
REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND LENDER AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES AND LENDER. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES AND LENDER.
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION
By:/s/Cindy M. Matula
----------------------------------
Name: Cindy M. Matula
--------------------------------
Title: Vice President
-------------------------------
Lender's Address:
700 Lavaca
Post Office Box 550
Austin, Texas 78789
Attention: Manager, Metropolitan Lending Group
MAXSERV, INC., a Delaware corporation
By: /s/Neil A. Johnson
----------------------------------
Name: Neil A. Johnson
----------------------------------
Title: Sr. Vice President
----------------------------------
Borrower's Address:
8317 Cross Park Drive,
Suite 350
Austin, Texas 78754
EXHIBITS:
A - Borrowing Base Certificate
B - Compliance Certificate
C - Request for Extension of Credit
D - Rate Selection Notice
31
<PAGE> 32
BORROWING BASE CERTIFICATE
The undersigned hereby certifies that (s)he is the
____________________________ of MAXSERV, INC., ("Borrower"), a Delaware
corporation, and that as such is authorized to execute this Borrowing Base
Certificate on behalf of Borrower pursuant to the Amended and Restated Loan
Agreement (as it may be amended, supplemented or restated from time to time,
the "Loan Agreement") dated September 30, 1996, by and between Borrower and
TEXAS COMMERCE BANK NATIONAL ASSOCIATION. On behalf of Borrower, the
undersigned further certifies, represents and warrants as follows (each
capitalized term used herein having the same meaning given to it in the Loan
Agreement unless otherwise specified herein):
As of ___________________, 19____, the following was true and correct
with respect to the calculation of the Borrowing Base:
a. Total Accounts Receivable Per Balance Sheet $_______________
- Less accrued receivables and adjustments ($______________)
- Plus allowance for bad debt $_______________
Total Trade Receivables per attached aging $_______________
b. Total Accounts $_______________
(other than Sears, Roebuck)
- Less ineligible accounts ($______________)
Total Eligible Accounts $_______________
(other than Sears, Roebuck)
c. 80% of item (b) $_______________
d. Total Receivables $_______________
from Sears, Roebuck
e. 90% of item (d) $_______________
f. Applicable Borrowing Base
[Sum of items (c) and (e)] $_______________
Dated _______________________, 199___.
MAXSERV, INC., a Delaware corporation
By:
--------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
EXHIBIT A
Page 1
<PAGE> 33
COMPLIANCE CERTIFICATE
The undersigned hereby certifies that he is the
______________________________ of MAXSERV, INC. ("Borrower"), a Delaware
corporation, and that as such is authorized to execute this certificate on
behalf of Borrower pursuant to the Amended and Restated Loan Agreement (the
"Loan Agreement") dated as of September 30, 1996 by and between Borrower and
TEXAS COMMERCE BANK NATIONAL ASSOCIATION; and that a review of Borrower has
been made under his supervision with a view to determining whether Borrower has
fulfilled all of its obligations under the Loan Agreement and the other Credit
Documents; and on behalf of Borrower further certifies, represents and warrants
as follows (each capitalized term used herein having the same meaning given to
it in the Loan Agreement unless otherwise specified):
(a) Borrower has fulfilled its respective obligations under the
Credit Documents.
(b) The representations and warranties made in each Credit Document
are true and correct in all respects on and as of the time of delivery
hereof, with the same force and effect as if made on and as of the time of
delivery hereof.
(c) The financial statements delivered to Lender concurrently with
this Compliance Certificate have been prepared in accordance with GAAP
consistently followed throughout the period indicated and fairly present
the financial condition and results of operations of Borrower as at the
end of, and for, the period indicated.
(d) No Default has occurred and is continuing. In this regard, the
compliance with the provisions of Section 9(c) of the Loan Agreement is as
follows:
Section 9(c)(1) -- Current Ratio
actual Current Ratio for Borrower as of the date hereof:
____.______ : 1.00
required Current Ratio for Borrower as of the date hereof:
1.25 : 1.00
Section 9(c)(2) -- Debt to Tangible Net Worth Ratio
actual Debt to Tangible Net Worth Ratio for Borrower as of the date
hereof:
____._______ : 1.00
required Debt to Tangible Net Worth Ratio for Borrower as of the date
hereof:
1.25 : 1.00
Section 9(c)(3) -- Cash Flow Coverage Ratio
actual Cash Flow Coverage Ratio for Borrower as of the date hereof:
____._______ : 1.00
required Debt Coverage Ratio for Borrower as of the date hereof:
1.25 : 1.00
EXHIBIT B
Page 1
<PAGE> 34
Section 9(c)(4) -- Tangible Net Worth
actual Tangible Net Worth for Borrower as of the date hereof:
$________________
required Tangible Net Worth for Borrower as of the date hereof:
$12,000,000 through May 31, 1997
(e) There has occurred no material adverse change in the assets,
liabilities, financial condition, business or affairs of any Obligor since
the date of the Loan Agreement.
DATED as of ____________________, 199___.
MAXSERV, INC.,
a Delaware corporation
By:________________________________________
Name:______________________________________
Title:_____________________________________
EXHIBIT B
Page 2
<PAGE> 35
[Company Letterhead]
REQUEST FOR EXTENSION OF CREDIT
Date:
Texas Commerce Bank
National Association
700 Lavaca
Austin, Texas 78701
Attention: Ms. Cindy Matula
Re: Revolving Loan requested under Amended and Restated
Loan Agreement dated as of September 30, 1996, by and among
MaxServ, Inc., a Delaware corporation, and Texas Commerce
Bank National Association, a national banking association (as
the same may have been amended, modified and/or restated from
time to time, the Loan Agreement")
Ladies and Gentlemen:
Capitalized words and phrases used herein but not defined herein which are
defined in the Loan Agreement are used herein with the same meanings as are
ascribed to them in the Loan Agreement.
Borrower requests that a Revolving Loan be made under the Loan Agreement
in the amount of $ and that such Revolving Loan be made on _____________, 19__,
which is a Business Day, or in the case of a LIBOR Rate Borrowing, a LIBOR
Business Day (unless this request for a Revolving Loan is received by Lender
after 10:00 a.m. in which case, then on the next to occur Business Day, or in
the case of a LIBOR Rate Borrowing, the next to occur LIBOR Business Day,
hereafter).
The Revolving Loan is to be an (CHECK ONE) [ ] Alternate Base Rate
Borrowing [ ] LIBOR Rate Borrowing. If the Revolving Loan is to be a LIBOR
Rate Borrowing, the LIBOR Interest Period is to be (CHECK ONE) [ ] one [ ] two
[ ] three [ ] six months.
[Borrower further requests that simultaneously with the making of
the Revolving Loan described above, the current LIBOR Rate Borrowing which
matures on the same day that said Revolving Loan is to be made (i) be converted
to a LIBOR Rate Borrowing with the same Interest Period selected for such
Revolving Loan and (ii) have its unpaid principal balance be combined with the
new Revolving Loan so that the aggregate thereof is treated as a single LIBOR
Rate Borrowing for the LIBOR Interest Period designated for the new Revolving
Loan above and for all other purposes in the Loan Agreement.]
[Borrower further requests that simultaneously with the making of
the Revolving Loan described above, a portion of the current Alternate Rate
Borrowing in the amount of $ be converted to a LIBOR Rate Borrowing with the
same LIBOR Interest Period selected for such Loan and that such portion of the
Alternate Base Rate and the new Revolving Loan be combined and treated as a
single LIBOR Rate Borrowing for the LIBOR Interest Period designated above for
all purposes in the Loan Agreement.]
Borrower hereby represents and warrants as follows:
(i) each representation or warranty of Borrower contained
in the Loan Agreement is true in all material respects on and
as of the date hereof with the same effect as though such
representations and warranties had been made on and of this
date;
EXHIBIT C
Page 1
<PAGE> 36
(ii) no Event of Default or Default under the Loan Agreement
has occurred and is still continuing (except for any event of
default or default which may have been expressly waived in
writing by Lender);
(iii) Borrower is not in default in the due performance of any
covenant on its part in the Loan Agreement;
(iv) so far as is known to or is ascertainable after a reasonable
and diligent investigation by the officers of Borrower, the
business and operations of Borrower as conducted at all times
relevant to the transactions contemplated by the Loan Agreement
to and including the close of business on the date hereof have
been and are in compliance with all applicable Legal
Requirements materially affecting the business and operations
of Borrower.
The undersigned person executing this Request for Extension of Credit on
behalf of Borrower is the duly elected, qualified and acting *____________.
MAXSERV, INC., a Delaware corporation
By:____________________________________
Name:__________________________________
Title:_________________________________
________
* Must be the chief executive officer, president, chief operating officer
or chief financial officer of Borrower.
EXHIBIT C
Page 2
<PAGE> 37
RATE SELECTION NOTICE
MaxServ, Inc., a Delaware corporation, and Texas Commerce Bank National
Association, a national banking association, executed and delivered that
certain Amended and Restated Loan Agreement (as amended, supplemented and
restated, the "Loan Agreement") dated as of September 30, 1996. Any term used
herein and not otherwise defined herein shall have the meaning herein ascribed
to it in the Loan Agreement.
In accordance with the Loan Agreement, Borrower hereby notifies Lender of
the exercise of a Revolving Loan Interest Option.
A. Current borrowing
-----------------
1. Revolving Loan Interest
Option now in effect: _______________
2. Amount: $______________
3. Expiration of current Interest
Period, if applicable: ________, 199_
B. Proposed borrowing
------------------
1. Amount: $______________
2. Date Revolving Loan Interest Option
is to be effective: ________, 199_
3. Revolving Loan Interest Option to be applicable
(check one):
[ ] Alternate Base Rate
[ ] LIBOR Rate
4. LIBOR Interest Period (check one if applicable):
[ ] 1 month [ ] 3 months
[ ] 2 months [ ] 6 months
Borrowers represents and warrants that the Revolving Loan Interest Option
and the LIBOR Interest Period (if applicable) selected above comply with all
provisions of the Loan Agreement and that there exists no Event of Default or
any event which, with the passage of time, the giving of notice or both, would
be an Event of Default.
MAXSERV, INC., a Delaware corporation
By:_______________________________________
Date:___________, 199_ Name:_____________________________________
Title:___________________________________*
_______
* Must be the chief executive officer, president, chief operating officer
or chief financial officer of Borrower
EXHIBIT D
Page 1
<PAGE> 38
Austin, Texas
$10,000,000.00 September 30, 1996
FOR VALUE RECEIVED, MAXSERV, INC., a Delaware corporation, promises to pay
to the order of TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a national banking
association at its banking house in the City of Austin, Travis County, Texas
(or such other place as the holder hereof may hereafter designate in writing),
in immediately available funds and in lawful money of the United States of
America, the principal sum of TEN MILLION DOLLARS ($10,000,000.00) (or the
unpaid balance of all principal advanced against this note, if that amount is
less), together with interest on the unpaid principal balance of this note from
time to time outstanding until the Maturity Date at the rate or rates provided
for in the Loan Agreement and interest on all past due amounts, both principal
and accrued interest, from the respective due dates thereof until paid at the
Past Due Rate; provided, that for the full term of this note the interest rate
produced by the aggregate of all sums paid or agreed to be paid to the holder
of this note for the use, forbearance or detention of the debt evidenced hereby
(including, but not limited to, all interest on this note at the Stated Rate)
shall not exceed the Ceiling Rate.
1. Definitions. As used in this note, the following terms shall have
the respective meanings indicated:
(a) "Business Day" means a day when Payee is open for all of its
commercial lending activities.
(b) "Ceiling Rate" means, on any day, the maximum nonusurious rate
of interest permitted for that day by whichever of applicable federal or Texas
laws permits the higher interest rate, stated as a rate per annum. On each
day, if any, that Chapter One establishes the Ceiling Rate, the Ceiling Rate
shall be the "indicated rate ceiling" (as defined in Chapter One) for that day.
Payee may from time to time, as to current and future balances, implement any
other ceiling under Chapter One by notice to Maker, if and to the extent
permitted by Chapter One. Without notice to Maker or any other person or
entity, the Ceiling Rate shall automatically fluctuate upward and downward as
and in the amount by which such maximum nonusurious rate of interest permitted
by applicable law fluctuates.
(c) "Chapter One" means Chapter One of Title 79, Texas Revised Civil
Statutes, 1925, as amended.
(d) "Credit Documents" means any and all papers now or hereafter
governing, evidencing, guaranteeing or securing or otherwise relating to all or
any part of the indebtedness evidenced by this note, including without
limitation this note.
(e) "Debt" means the indebtedness evidenced by this note and the
indebtedness to Payee incurred under or evidenced by the Credit Documents.
(f) "Loan Agreement" means the Amended and Restated Loan Agreement
dated effective September 30, 1996, executed by and between Maker and Payee, and
as the same may hereafter be further amended, supplemented, restated or replaced
from time to time.
(g) "Maker" means MaxServ, Inc., a Delaware corporation.
(h) "Maturity Date" means the date September 30, 1998 maturity date
of this note, or any earlier day this note is hereafter accelerated by Payee
pursuant to the provisions of this note or any of the other Credit Documents.
(i) "Obligor" means any person or entity now or hereafter primarily
or secondarily obligated to pay all or any part of the Debt.
(j) "Past Due Rate" means, on any day, a rate per annum equal to the
Ceiling Rate for that day, or only if applicable law imposes no maximum
nonusurious rate of interest for
INITIALLED FOR
IDENTIFICATION:_____
Page 1 of 5 Pages
<PAGE> 39
that day, then the Past Due Rate for that day shall be a rate per annum equal
to the Prime Rate for that day plus five percent (5%).
(k) "Payee" means Texas Commerce Bank National Association, a
national banking association, and any other holder or holders of this note from
time to time and, upon acquisition of this note by any holder or holders other
than the named payee, effective as of the time of such acquisition, the term
"Payee" shall mean all of the then holders of this note, to the exclusion of all
prior holders not then retaining or reserving an interest in this note, to the
end that all the rights, powers, remedies, liens, benefits and privileges
accruing and to accrue hereunder to Payee, as such term is used herein, shall
inure to the benefit of and be owned and held by the holder or holders of this
note from time to time, whether such holder acquires this note through
succession to or assignment from a prior Payee.
2. Loan Agreement; Advances; Security. This note has been issued
pursuant to the terms of the Loan Agreement, and is the Revolving Note referred
to in the Loan Agreement. Advances against this note by Payee or other holder
hereof shall be governed by the terms and provisions of the Loan Agreement.
Reference is hereby made to the Loan Agreement for all purposes. Payee is
entitled to the benefits of and security provided for in the Loan Agreement.
The unpaid principal balance of this note at any time shall be the total of all
amounts lent or advanced against this note less the amount of all payments or
permitted prepayments made on this note and by or for the account of Maker. All
loans and advances and all payments and permitted prepayments made hereon may be
endorsed by the holder of this note on a schedule which may be attached hereto
(and thereby made a part hereof for all purposes) or otherwise recorded in the
holder's records; provided, that any failure to make notation of (a) any advance
shall not cancel, limit or otherwise affect Maker's obligations or any holder's
rights with respect to that advance, or (b) any payment or permitted prepayment
of principal shall not cancel, limit or otherwise affect Maker's entitlement to
credit for that payment as of the date received by the holder.
3. Revolving Loan. Subject to the terms and provisions of the Loan
Agreement, Maker may use all or any part of the credit provided to be evidenced
by this note at any time before the Maturity Date. Maker may borrow, repay and
reborrow hereunder, and except as set forth in the Loan Agreement, there is no
limitation on the number of advances made hereunder so long as the total unpaid
principal amount at any time outstanding hereunder does not exceed the lesser
of (a) the Revolving Commitment (as defined in the Loan Agreement) or (b) the
Borrowing Base (as defined in the Loan Agreement). Pursuant to Article
15.10(b) of Chapter 15 ("Chapter 15") of Title 79, Texas Revised Civil
Statutes, 1925, as amended, Maker and Payee expressly agree that Chapter 15
shall not apply to this note or to any loan evidenced by this note and that
neither this note nor any such loan shall be governed by or subject to the
provisions of Chapter 15 in any manner whatsoever.
4. Computation of Interest. Interest on the amount of each advance
against this note shall be computed on the amount of that advance and from the
date it is made. Interest at the Stated Rate shall be computed for the actual
number of days elapsed in a year consisting of 360 days unless the Ceiling Rate
would thereby be exceeded, in which event, to the extent necessary to avoid
exceeding the Ceiling Rate, interest at the Stated Rate shall be computed on
the basis of the actual days elapsed in the applicable calendar year in which
accrued. Interest at the Past Due Rate shall be computed for the actual number
of days elapsed in a year consisting of 365 or 366 days, as the case may be.
5. Mandatory Payments of Principal and Interest.
(a) Accrued and unpaid interest on the unpaid principal balance of
this note shall be due and payable on the Interest Payment Dates (as defined in
the Loan Agreement).
(b) The principal of this note shall be due and payable on the
Maturity Date.
(c) All payments hereon made pursuant to this Paragraph shall be
applied first to accrued interest, the balance to principal.
INITIALLED FOR
IDENTIFICATION:_____
Page 2 of 5 Pages
<PAGE> 40
6. No Usury Intended; Spreading. Notwithstanding any provision to the
contrary contained in this note or any of the other Credit Documents, it is
expressly provided that in no case or event shall the aggregate of (i) all
interest on the unpaid balance of this note, accrued or paid from the date
hereof and (ii) the aggregate of any other amounts accrued or paid pursuant to
this note or any of the other Credit Documents, which under applicable laws are
or may be deemed to constitute interest upon the indebtedness evidenced by this
note from the date hereof, ever exceed the Ceiling Rate. In this connection,
Maker and Payee stipulate and agree that it is their common and overriding
intent to contract in strict compliance with applicable usury laws. In
furtherance thereof, none of the terms of this note or any of the other Credit
Documents shall ever be construed to create a contract to pay, as consideration
for the use, forbearance or detention of money, interest at a rate in excess of
the Ceiling Rate. Maker or other parties now or hereafter becoming liable for
payment of the indebtedness evidenced by this note shall never be liable for
interest in excess of the Ceiling Rate. If, for any reason whatever, the
interest contracted for, charged or received on this note during its full term
produces a rate which exceeds the Ceiling Rate, the holder of this note shall
credit against the principal of this note (or, if such indebtedness shall have
been paid in full, shall refund to the payor of such interest) such portion of
said interest as shall be necessary to cause the interest paid on this note to
produce a rate equal to the Ceiling Rate. All sums paid or agreed to be paid
to the holder of this note for the use, forbearance or detention of the
indebtedness evidenced hereby shall, to the extent permitted by applicable law,
be amortized, prorated, allocated and spread in equal parts throughout the full
term of this note, so that the interest rate is uniform throughout the full
term of this note. The provisions of this Paragraph shall control all
agreements, whether now or hereafter existing and whether written or oral,
between Maker and Payee.
7. Default. If any Event of Default occurs under the Loan Agreement,
then that shall automatically constitute default under this note, whereupon the
obligation (if any) of Payee to make further advances against this note shall
cease and terminate and the owner or holder hereof may, at its, his or her
option, exercise any or all rights, powers and remedies afforded under any
Credit Document and by law, including the right to declare the unpaid balance of
principal and accrued interest on this note at once mature and payable.
8. No Waiver by Payee. No delay or omission of Payee or any other
holder hereof to exercise any power, right or remedy accruing to Payee or any
other holder hereof shall impair any such power, right or remedy or shall be
construed to be a waiver of the right to exercise any such power, right or
remedy. Payee's right to accelerate this note for any late payment or Maker's
failure to timely fulfill its other obligations hereunder or under the other
Credit Documents shall not be waived or deemed waived by Payee by Payee's having
accepted a late payment or late payments in the past or Payee otherwise not
accelerating this note or exercising other remedies for Maker's failure to
timely perform its obligations hereunder or under the other Credit Documents.
Payee shall not be obligated or be deemed obligated to notify Maker that it is
requiring Maker to strictly comply with the terms and provisions of this note
and the other Credit Documents before accelerating this note and exercising its
other remedies hereunder or under the other Credit Documents because of Maker's
failure to timely perform its obligations under this note and the other Credit
Documents.
9. Costs and Attorneys' Fees. If any holder of this note retains an
attorney in connection with any default or to collect, enforce or defend this
note or any of the Credit Documents in any lawsuit or in any probate,
reorganization, bankruptcy or other proceeding, or if Maker sues any holder in
connection with this note or any of the Credit Documents and does not prevail,
then Maker agrees to pay to each such holder, in addition to principal and
interest, all reasonable costs and expenses incurred by such holder in trying
to collect this note or in any such suit or proceeding, including reasonable
attorneys' fees.
10. Waivers by Maker and Others. Except to the extent, if any, that
notice of default is expressly required by the terms of the Loan Agreement,
Maker and any and all co-makers, endorsers, guarantors and sureties severally
waive notice (including, but not limited to, notice of intent to accelerate and
notice of acceleration, notice of protest and notice of dishonor), demand,
presentment for payment, protest, diligence in collecting and the filing of
suit for the purpose of fixing liability and consent that the time of payment
hereof may be extended and re-extended from time to time without notice to any
of them. Each such person agrees that his, her or its liability on or with
respect to this note shall not be affected by any release of or change in any
guaranty or
INITIALLED FOR
IDENTIFICATION:_____
Page 3 of 5 Pages
<PAGE> 41
security at any time existing or by any failure to perfect or to maintain
perfection of any lien against or security interest in any such security or
the partial or complete unenforceability of any guaranty or other surety
obligation, in each case in whole or in part, with or without notice and
before or after maturity.
11. Paragraph Headings. Paragraph headings appearing in this note are
for convenient reference only and shall not be used to interpret or limit the
meaning of any provision of this note.
12. Venue; Choice of Law. This note is performable in Travis County,
Texas, which shall be a proper place of venue for suit on or in respect of this
note. Maker hereby irrevocably agrees that any legal proceeding in respect of
this note shall be brought in the district courts of Travis County, Texas, or
in the United States District Court for the Western District of Texas, Austin
Division (collectively, the "Specified Courts"). Maker hereby irrevocably
submits to the nonexclusive jurisdiction of the state and federal courts of the
State of Texas. Maker hereby irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of or relating to
this note or any of the Credit Documents brought in any Specified Court, and
hereby further irrevocably waives any claims that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.
Maker further irrevocably consents to the service of process out of any of the
Specified Courts in any such suit, action or proceeding by the mailing of
copies thereof by certified mail, return receipt requested, postage prepaid, to
Maker. Nothing herein shall affect the right of Payee to commence legal
proceedings or otherwise proceed against Maker in any jurisdiction or to serve
process in any manner permitted by applicable law. Maker agrees that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE APPLICABLE LAWS OF THE STATE OF TEXAS AND THE UNITED STATES OF AMERICA
FROM TIME TO TIME IN EFFECT.
13. Successors and Assigns. This note and all the covenants and
agreements contained herein shall be binding upon, and shall inure to the
benefit of, the respective legal representatives, heirs, successors and assigns
of Maker and Payee.
14. Severability. If any provision of this note is held to be illegal,
invalid or unenforceable under present or future laws, the legality, validity
and enforceability of the remaining provisions of this note shall not be
affected thereby, and this note shall be liberally construed so as to carry out
the intent of the parties to it. Each waiver in this note is subject to the
overriding and controlling rule that it shall be effective only if and to the
extent that (a) it is not prohibited by applicable law and (b) applicable law
neither provides for nor allows any material sanctions to be imposed against
Payee for having bargained for and obtained it.
15. Sale and Assignment. Payee reserves the right, exercisable in its
sole discretion and without notice to Maker or any other person, to sell
participations or assign its interest, or both, in all or any part of this note
or any loan evidenced by this note.
16. Prepayment. Subject to the limitations set forth in Paragraph 5 of
the Loan Agreement, Maker may at any time pay the full amount or any part of
this note without the payment of any premium or fee. All prepayments shall be
applied first to accrued interest, with the balance to be applied to principal.
17. Business Loans. Maker warrants and represents to Payee and all
other holders of this note that all loans evidenced by this note are and will be
for business, commercial, investment or other similar purpose and not primarily
for personal, family, household or agricultural use, as such terms are used in
Chapter One.
18. Renewal. This note is given in part in renewal, extension and
rearrangement, and not in extinguishment, of the unpaid principal balance of
the promissory note (the "Renewed Note") dated February 17, 1995, in the
original principal amount of $4,000,000.00, executed by Maker, payable to the
order of Payee. All liens, assignments and security interests securing the
Renewed
INITIALLED FOR
IDENTIFICATION:_____
Page 4 of 5 Pages
<PAGE> 42
Note are hereby ratified, confirmed, renewed, extended, rearranged and
brought forward as security for this note, in addition to and cumulative of all
other security.
19. Entire Agreement. This note and the other Credit Documents embody
the entire agreement and understanding between Payee and Maker and other parties
with respect to their subject matter and supersede all prior conflicting or
inconsistent agreements, consents and understandings relating to such subject
matter. Maker acknowledges and agrees that there is no oral agreement between
Maker and Payee which has not been incorporated in this note and the other
Credit Documents.
MAKER:
MAXSERV, INC.,
a Delaware corporation
By: /s/Neil A. Johnson
----------------------------------------
Name: Neil A. Johnson
--------------------------------------
Title: Sr. Vice President
-------------------------------------
INITIALLED FOR
IDENTIFICATION:_____
Page 5 of 5 Pages
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A)
CONDENSED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED NOVEMBER 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) CONDENSED FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> NOV-30-1996
<CASH> 3,517
<SECURITIES> 0
<RECEIVABLES> 4,813
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,351
<PP&E> 20,016
<DEPRECIATION> 9,376
<TOTAL-ASSETS> 22,224
<CURRENT-LIABILITIES> 4,082
<BONDS> 0
<COMMON> 109
0
0
<OTHER-SE> 18,033
<TOTAL-LIABILITY-AND-EQUITY> 22,224
<SALES> 0
<TOTAL-REVENUES> 28,531
<CGS> 0
<TOTAL-COSTS> 24,357
<OTHER-EXPENSES> 2,090
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (64)
<INCOME-PRETAX> 2,148
<INCOME-TAX> 816
<INCOME-CONTINUING> 1,332
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,332
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
